Proposed Changes Would Make It Harder, More Expensive for Behavioral Defendants to Beat FCA Claims

As the behavioral health industry garners more national attention and funding, it’s also seeing more audits and repayment requests from payers.

For example, in fiscal year (FY) 2020, the space saw a “marked uptick” in False Claims Act (FCA) settlements, according to Bass, Berry & Sims’ annual Healthcare Fraud & Abuse Review, which was released earlier this year.

Rather than an admission of guilt, a settlement is often a way for innocent providers to avoid the lengthy, expensive legal process associated with payer enforcement actions. It’s usually easier and cheaper for providers to pay the settlement than to prove their innocence in court.


And soon, it could become even harder for providers to defend themselves when hit with FCA lawsuits if newly proposed changes to the federal law are passed.

Sen. Chuck Grassley (R-Iowa) and a group of bipartisan senators introduced The False Claims Amendments Act of 2021 late last month in an effort to be “to beef up the government’s most potent tool to fight fraud,” according to a press release announcing the news. If approved, the changes would make “FCA cases harder to defeat, more costly to litigate and more difficult to secure DOJ-initiated dismissals,” the national law firm Polsinelli said in a briefing on the proposed changes.

First enacted back in 1863 to combat goods suppliers from defrauding the Union army during the Civil War, the FCA is the federal government’s primary tool in combating fraud and abuse. While the law has been amended several times since then, the idea remains the same: It allows the federal government to go after those who submit false claims, with damages and penalties these days frequently costing providers several million dollars.


However, the rule isn’t perfect. Because it allows whistleblowers to notify the government of provider wrongdoing and initiate the FCA process, disgruntled employees have the opportunity to take revenge on previous employers who might not have done anything wrong. Plus, whistleblowers can receive a portion of FCA recoveries for helping the prosecution.

“The incentives given to private whistleblowers or relators to the False Claims Act are absolutely staggering,” Polsinelli shareholder Asher Funk previously told Behavioral Health Business. “The fact that … someone within an organization can observe what they perceived to be fraud against the government and bring an action in the name of the government … and ultimately receive a substantial portion of any recovery — you just can’t underestimate the power of that.”

The newly proposed changes would complicate things even further.

First and foremost, they would shift the burden of proof for materiality to defendants — a move that would make it much harder for defendants to defeat FCA lawsuits by arguing that the claim in question is not material to the government’s payment decision.

“The False Claims Amendments Act of 2021 seeks to add an unusual burden-shifting mechanism whereby once the relator or government proves materiality by a preponderance of the evidence, defendants may then ‘rebut’ this initial materiality showing by proving with ‘clear and convincing evidence’ that the violation was not in fact material to the government’s payment of the claims,” Polsinelli wrote in its update brief.

On top of that, the proposed changes would shift the costs of government discovery to defendants and change the case dismissal process.

While a federal lawsuit is already expensive for providers to deal with, the FCA Act of 2021 would add to their costs by making it more pricey for defendants to get discovery documents from the government.

“Specifically, the proposed legislation would require courts to order defendants to pay the government’s costs and attorneys’ fees for responding to discovery requests unless the defendant proves that the information sought is ‘relevant, proportionate to the needs of the case, and not unduly burdensome,’” Polsinelli explained. “This change would effectively require defendants to pay for the costs of government discovery in nearly every case because of the practical impossibility of proving a negative – the absence of an undue burden on the government.”

Additionally, the rule changes would make it harder for the Department of Justice (DOJ) to dismiss FCA suits that lack merit by adding another step to the process, which would require an evidentiary hearing to approve the DOJ’s dismissal motion.

Finally, the FCA changes would apply prospectively and retroactively to any pending FCA cases if approved.

In a press release announcing the FCA Act of 2021, Sen. Grassley said the proposed rule was important because it will clear up confusion around current FCA rules and allow the government to recoup even more money.

“In light of the trillions of dollars that Congress has appropriated recently for COVID relief, these bills are needed, more than ever, to fight the significant amounts of fraud that we are already seeing,” he said.

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