From a corporate risk perspective, if your company is in the financial industry, healthcare, or defense industry, your greatest legal and compliance risk has to be the False Claims Act.

I know that is heresy to all the legal “marketing/fear” publications focused on the FCPA, but for many companies, the FCA is a greater risk. Add to the FCA mix a well-established whistleblower scheme – qui tam relators – and there is your recipe for disaster.

In the healthcare industry, the government is focused on providers, particularly hospitals. The government’s motivation is easy to discern – they want to keep medical costs down and hospitals are the biggest factor in this payment mix. Healthcare clinics, home health services and skilled nursing facilities are other providers on the government hit list.

Community Health Systems, the largest operator of acute care hospitals, paid $98 million to settle seven lawsuits brought by qui tam relators, and entered into a five-year Corporate Integrity Agreement with HHS. Community Health Systems engaged in a deliberate strategy to increase inpatient admissions of patients who entered emergency departments. The relators in these cases included nurses, billing personnel, and emergency room physicians.

Another significant hospital case was brought against Halifax Hospital Medical Center, which is based in Florida, that agreed to pay $85 million to resolve Stark law violations.

In the home healthcare services area, Amedisys, one of the largest home healthcare providers agreed to pay $150 million to resolve a number of qui tam relator lawsuits, along with a five-year CIA with HHS. Amedisys billed Medicare for nursing and therapy services that were medically unnecessary or were for services to patients who were not limited to home residence.

The government is aggressively prosecuting FCA cases based on claims that a service was medically unnecessary or unreasonable. Along this same line, the government has been advocating another, related doctrine, of worthless services, meaning that the provider’s services were so deficient that they were worth nothing.

The government suffered a setback in arguing this theory in the Seventh Circuit where the Court of Appeals rejected the government’s theory of worthless services to cover a situation where the defendant operated a nursing facility that was understaffed and lacked basic supplies. In rejecting the claim in this case, the Seventh Circuit limited the “worthless service” doctrine to situations in which the services are the equivalent of no service at all.

Another significant development in FCA litigation this year was the continuing use of FCA cases based on anti-kickback violations or Stark violations. AKS violations constitute a “false or fraudulent” claim under the FCA. The government settled AKS cases against a number of dialysis service providers for a total of $350 million. The providers entered into joint venture agreements with physicians to encourage the physicians to refer patients to the provider’s dialysis centers.

In the Halifax Hospital case mentioned above, the government alleged that the hospital entered into illegal agreements with physicians that based incentive bonuses on the drugs and medical tests ordered by a physician.

Finally, FCA cases against hospitals and clinics often depend on court-approval of sampling techniques. The government cannot review every claim submitted for Medicare services and often resorts to statistical sampling strategies to develop such information. Courts are sanctioning these techniques so long as there is a valid statistical analysis and support for the sampling.   This technique raises real significant enforcement concerns and risks for major hospital providers.