When someone defauds the government, everyone collectively loses. As a measure to counter this, Qui Tam lawsuits are available as a legal tool to empower private individuals to file actions on behalf of the federal government against parties suspected of defrauding public programs. In the healthcare industry, these lawsuits brought on by whistleblowers often target providers, hospitals, pharmaceutical companies, and other entities that submit false or misleading claims to government healthcare programs, most often Medicare or Medicaid.
These lawsuits play a critical role in uncovering and combating systemic healthcare fraud, which costs taxpayers billions of dollars each year. Qui Tam lawsuits are governed by the federal False Claims Act, a statute intended to incentivize whistleblowers and increase accountability in sectors reliant on government funding.
Qui Tam and the False Claims Act
First enacted in 1863, the False Claims Act (FCA) was originally designed to combat fraud by suppliers to the Union Army during the Civil War. Today, it remains one of the most effective tools for uncovering fraud involving federal funds, especially in the healthcare sector. The FCA permits private individuals, known as “relators,” to act as whistleblowers and file Qui Tam lawsuits on behalf of the federal government when they have evidence of fraud.
A central feature of the FCA is its allowance for the government to recover treble damages, which is three times the actual damages sustained. along with civil penalties for each false claim submitted. This powerful deterrent creates significant financial liability for violators.
Once a Qui Tam complaint is filed under seal, the Department of Justice (DOJ) reviews the allegations and decides whether to intervene and take over the case. If the DOJ declines, the relator may proceed independently, though with a potentially greater burden and risk.
Common Types of Healthcare Fraud
Healthcare fraud takes many forms, and Qui Tam actions under the False Claims Act frequently involve schemes aimed at improperly maximizing reimbursements from federal healthcare programs such as Medicare, Medicaid, and TRICARE. There are several common types of this fraud encountered
Upcoding – One of the most common violations, where providers bill for more expensive services or procedures than were actually performed.
Unbundling – Another frequent abuse that occurs when providers separate services that should be billed as a package to increase overall charges.
Unnecessary Billing – Another major category of healthcare fraud, this involves billing for medically unnecessary services, such as excessive diagnostic tests or procedures performed solely to generate revenue rather than to benefit the patient.
Phantom Billing – A particularly egregious form of fraud, this involves the submission of claims for services never rendered. This can take the form of misrepresenting provider qualifications, which can involve listing an unlicensed or ineligible individual as the provider of record.
Anti-Kickback and Stark Law – Violations of the Anti-Kickback Statute and Stark Law, which prohibit financial arrangements that influence referrals or service decisions, also frequently lead to FCA liability.
How a Qui Tam Lawsuit Works
A Qui Tam lawsuit under the False Claims Act can be filed by any individual with non-public knowledge of fraud against the federal government. These individuals are known as relators or whistleblowers and are often current or former employees, contractors, or business partners. To be eligible, the relator must possess specific, credible information about fraudulent conduct that has not already been publicly disclosed, unless they are the original source.
The process begins by filing a sealed complaint in federal court. This complaint is kept confidential for at least 60 days while the U.S. Department of Justice (DOJ) investigates the allegations. During this time, the relator must also serve a copy of the complaint and a written disclosure of all supporting evidence to both the U.S. Attorney General and the local U.S. Attorney’s Office.
The DOJ then decides whether to intervene and take over prosecution of the case. If the DOJ declines, the relator may still proceed independently, although this can be more challenging. The case may result in a settlement, a dismissal, or go to trial, depending on the strength of the evidence and legal strategy.
Whistleblower Protections and Incentives
The False Claims Act includes robust anti-retaliation provisions designed to protect whistleblowers who come forward to report fraud. Individuals who file Qui Tam lawsuits are legally shielded from adverse employment actions such as demotion, harassment, suspension, or termination as a result of their participation in the case or efforts to stop the fraud. If retaliation occurs, the relator may be entitled to remedies including reinstatement, back pay, and special damages.
In addition to these protections, the FCA offers powerful financial incentives. Whistleblowers may receive between 15% and 30% of the total recovery secured by the government, depending on whether the DOJ intervenes and the whistleblower’s role in the case. This can amount to millions of dollars in large-scale healthcare fraud actions.
Timing is also critical for whistleblowers. The FCA’s first-to-file rule grants reward eligibility only to the first relator who files a claim based on a particular fraud. Furthermore, the public disclosure bar may preclude claims based on information already in the public domain unless the relator is the original source. Acting quickly with qualified legal counsel is essential to preserve both protections and the potential for a financial reward.
Legal and Procedural Challenges
Pursuing a Qui Tam lawsuit involves navigating significant legal and procedural hurdles. Under Federal Rule of Civil Procedure 9(b), fraud must be pleaded with particularity, meaning the relator must detail the who, what, when, where, and how of the alleged misconduct. This is often a high bar for insiders without access to complete records.
Additionally, if the Department of Justice declines to intervene, the whistleblower must proceed alone, assuming the full burden of litigation against often well-funded defendants. This increases both the financial risk and complexity of the case.
Given these challenges, it is essential for whistleblowers to secure experienced legal counsel with expertise in FCA litigation. Proper legal guidance can ensure compliance with procedural requirements, protect against retaliation, and maximize the chance of a successful outcome.