Whistleblowers Play Key Role in Fight Against Federal Health Insurance Fraud

November 4, 2016 | Appeals

The federal False Claims Act (FCA)1 is a powerful tool in the fight against fraud involving federal health insurance programs such as Medicare and Medicaid. Indeed, one of the greatest areas of FCA success is in the health-care industry. From 1987 to 2015, the federal government recovered more than $31.1 billion in health-care-related FCA actions.2

One significant reason for the recoveries are the lawsuits brought under the FCA by whistleblowers, often current or former employees of corporate defendants. Of the $48 billion recovered by the federal government under the FCA from 1987 to 2015 (including health-care-related recoveries), over $33 billion resulted from whistleblower-initiated litigation, also known as “qui tam” lawsuits.3


The FCA was enacted in 1863 by a Congress concerned that suppliers of goods to the Union Army during the Civil War were defrauding the army. Under the FCA, any person who knowingly submitted false claims to the government was liable for double the government’s damages plus a penalty of $2,000 for each false claim.4

Since then, the FCA has been amended several times. In 1986, there were significant changes to the FCA, including the loosening of restrictions on qui tam actions. The results have been striking: Before 1986, the Justice Department’s annual recovery under the FCA was less than $50 million.5

Generally speaking, a person who knowingly submits a false claim to the government, causes another to submit a false claim to the government, or knowingly makes a false record or statement material to a false claim paid by the government can be held liable under the FCA.6 Liability also can be imposed on one who acts improperly not to get money from the government, but to avoid having to pay money or return an overpayment to the government.7

As the U.S. Court of Appeals for the Second Circuit has explained, “All of the acts that make a person liable under [the FCA] focus on the use of fraud to secure payment from the government.”8

Qui Tam Actions

A whistleblower, also known as a “relator,” must file his or her qui tam complaint with the court under seal.9 The whistleblower must serve the complaint and a written disclosure of all the relevant information he or she knows on the U.S. Attorney for the judicial district where the action was filed and on the Attorney General of the United States.

A qui tam complaint initially is sealed for 60 days. The government is required to investigate the allegations in the complaint; if the government cannot complete its investigation in 60 days, it can seek extensions of the seal period while it continues its investigation.

The government then must notify the court that it is proceeding with the action (generally referred to as “intervening” in the action) or declining to take over the action, in which case the relator can proceed alone.10 If the government intervenes in a qui tam action, it has the primary responsibility for prosecuting it.

If the government intervenes in a qui tam action, the relator may receive between 15 and 25 percent of the amount recovered by the government through the qui tam action. If the government declines to intervene in the action, the relator’s share can increase to 30 percent. The relator’s share is paid to the relator out of the payment received by the government from the defendant.

If a qui tam action is successful, the relator also is entitled to recover attorney fees and other expenses of the action.

Recent Recoveries

Some of the recent settlements reached in FCA cases show the breadth of potential defendants, the scope of their alleged conduct, and the high cost of fraud on the federal government’s health insurance programs—as well as the potential rewards payable to whistleblowers.

Consider, for example, the recent $32.7 million settlement of an FCA action reached by Vibra Healthcare, a national hospital chain that operates freestanding long-term care hospitals (LTCHs) and inpatient rehabilitation facilities (IRFs) in 18 states. The settlement resolved claims that Vibra had billed Medicare for medically unnecessary services.

The complaint alleged that between 2006 and 2013, Vibra admitted numerous patients to five of its LTCHs and to one of its IRFs who had not demonstrated signs or symptoms that qualified them for admission. Moreover, Vibra allegedly had extended the stays of its LTCH patients without regard to medical necessity, qualification, or quality of care. In some instances, Vibra allegedly ignored the recommendations of its own clinicians, who deemed these patients ready for discharge.

Some of the allegations resolved by the settlement originally had been filed by a former health information coder at a Vibra hospital. She will receive at least $4 million from the settlement.11

In another recent case, 21st Century Oncology Inc., the nation’s largest physician-led integrated cancer care provider, and its wholly owned subsidiary, South Florida Radiation Oncology, agreed to pay $34.7 million to settle allegations that they had performed and billed for procedures that had not been medically necessary.

The settlement related to the defendants’ use of a medical procedure—called the Gamma function—to measure the exit dose of radiation from a patient after receiving radiation treatment. The complaint alleged that the defendants had knowingly and improperly billed for this procedure under circumstances where the procedure had served no medically appropriate purpose. For example, the complaint alleged that the procedure had been performed by physicians and physicists at 21st Century Oncology locations who had not been properly trained to interpret and use the Gamma function results.

As alleged, the defendants had billed for this procedure when no physician had reviewed the Gamma function results until seven or more days after the last day patients had received radiation treatment therapy. Finally, the defendants allegedly had billed for the procedure when no Gamma result had been available due to technical failures in the imaging equipment.

The lawsuit originally was filed by a former physicist at South Florida Radiation Oncology, who will receive more than $7 million from the settlement proceeds.12

Two last settlements also are worth mentioning. This past March, Olympus Corporation of the Americas, the nation’s largest distributor of endoscopes, agreed to pay $310.8 million to the federal government and various states to resolve civil claims that its payment of kickbacks had caused false claims to be submitted to federal health insurance programs. The settlement resolved a lawsuit filed by the company’s former chief compliance officer; his share of the recovery was more than $51 million.13

That settlement pales in comparison to the $784.6 million settlement reached by Wyeth and Pfizer of an action alleging that Wyeth had knowingly reported to the government false and fraudulent prices on two of its proton pump inhibitor drugs, Protonix Oral and Protonix IV.

As alleged, Wyeth hid from Medicaid bundled discounts it had given to hospitals on the two drugs and, as a result, it wrongfully avoided paying hundreds of millions of dollars in rebates to Medicaid from 2001 to 2006.

The relators—a former hospital sales representative for a pharmaceutical company and a physician—will share over $98 million from the settlement.14


Whistleblowers play a key role in fighting health insurance fraud by bringing actions under the FCA. Congress often considers tinkering with the law, but its success suggests that whistleblower actions under the FCA will be around for many years to come.


1. 31 U.S.C. §3729 et seq.

2. U.S. Cong. House Subcommittee on Constitution and Civil Justice of Committee on Judiciary. Oversight of False Claims Act. Hearings, April 28, 2016, available at https://judiciary.house.gov/wp-content/uploads/2016/04/114-72_99945.pdf (“Report”), at 12.

3. Id., at 2. “Qui tam” is from a Latin phrase meaning “he who brings a case on behalf of our lord the King, as well as for himself.”

4. See, U.S. Dept. of Justice, “The False Claims Act: A Primer,” available at https://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf.

5. Report, supra n.2, at 40.

6. 31 U.S.C. §§3729(a)(1)(A), (B).

7. 31 U.S.C. §3729(a)(1)(G).

8. United States ex rel. Stevens v. State of Vt. Agency of Natural Resources, 162 F.3d 195, 202 (2d Cir. 1998), rev’d on other grounds 529 U.S. 765 (2000).
9. The U.S. Supreme Court is considering whether a whistleblower’s claim should be dismissed for violation of the FCA’s seal requirement. State Farm Fire & Cas. Co. v. United States, ex rel. Rigsby, No. 15-513 (U.S.).

10. 31 U.S.C. §3730(b) et seq. See, U.S. Dept. of Justice, “False Claims Act Cases: Government Intervention in Qui Tam (Whistleblower) Suits,” available at https://www.justice.gov/sites/default/files/usao-edpa/legacy/2011/04/18/fcaprocess2_0.pdf.

11. See, Press Release, “Vibra Healthcare to Pay $32.7 Million to Resolve Claims for Medically Unnecessary Services,” available at https://www.justice.gov/opa/pr/vibra-healthcare-pay-327-million-resolve-claims-medically-unnecessary-services.

12. See, Press Release, “United States Settles False Claims Act Allegations Against 21st Century Oncology for $34.7 Million,” available at https://www.justice.gov/opa/pr/united-states-settles-false-claims-act-allegations-against-21st-century-oncology-347-million.

13. See, Press Release, “Medical Equipment Company Will Pay $646 Million for Making Illegal Payments to Doctors and Hospitals in United States and Latin America,” available at https://www.justice.gov/opa/pr/medical-equipment-company-will-pay-646-million-making-illegal-payments-doctors-and-hospitals.

14. See, Press Release, “Wyeth and Pfizer Agree to Pay $784.6 Million to Resolve Lawsuit Alleging That Wyeth Underpaid Drug Rebates to Medicaid,” available at https://www.justice.gov/opa/pr/wyeth-and-pfizer-agree-pay-7846-million-resolve-lawsuit-alleging-wyeth-underpaid-drug-rebates.

Reprinted with permission from the November 4, 2016 issue of the New York Law Journal.

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