Fraud, Waste, and Abuse Potential During COVID-19 Signals Increase in Qui Tam Actions Against Healthcare Providers

Written by: Ricky C Benjamin, Esq., and Leanne Livingston, Esq.

Increases in federal stimulus funding from Congress under Acts like the Provider Relief Fund, pose a real threat of Qui Tam actions under the False Claims Act against those in the healthcare industry or life sciences fields. Given the fast-paced nature of recent federal spending for public health and safety, hospital systems are likely targets for whistleblower Qui-Tam actions in the coming months. These cases are likely currently in the works by Relators’ counsel. Providers need to take action now to protect themselves against the Department of Justice’s increased commitment to pursue litigation in light of the COVID-19 pandemic.

Congress’ recent passage of the Coronavirus Preparedness and Response Act, Families First Coronavirus Response Act, CARES Act, and PPP and Healthcare Enhancement Act has funneled trillions of taxpayer dollars into the healthcare industry. Because disaster relief funding is a rapid response to an immediate crisis, there is often little oversight of dollars distributed. This leads to increased opportunities for fraud, and large targets for False Claims Act investigations. Likely targets in the healthcare industry include: hospitals, nursing homes, PPE suppliers, COVID-19 testing labs, and Life Sciences companies to name a few.

On March 17, 2020, the DOJ announced a mandate to pursue all manner of fraud in federal healthcare programs due to COVID-19, including violations disclosed by whistleblowers under the False Claims Act. The DOJ has backed this commitment by launching the “National Center for Disaster Fraud Hotline” and increasing scrutiny and enforcement of federal healthcare regulations by federal agencies including Health and Human Services and the Office of the Inspector General. Lay-offs in the healthcare industry as a result of financial difficulties resulting from COVID-19 create a larger pool of disgruntled former employees. These former employees turn into whistleblowers, increasing the probability of government fraud investigations – even if unfounded.  Against the backdrop of colorable allegations or if the DOJ discovers violations, healthcare providers could face civil fines and even criminal penalties under the False Claims Act and Anti-Kickback Statute.

Healthcare providers should prepare now and protect themselves in the face of this increased scrutiny. COVID-19 changes and waivers have spurred deviations from hospital policy. Real-time documentation of any deviations, along with maintaining diligent, contemporaneous records regarding accounting and spending of federal funds, will help healthcare providers demonstrate regulatory compliance. Updating and revising policies and procedures to address changing circumstances under COVID-19 is also essential. Incorporation of effective audit functions to monitor COVID-19 related claims before submission should be reflected in Corporate Compliance Plans. Bottom line: all policy changes should be meticulously documented, and spending of federal stimulus dollars should be in alignment with the specifically delineated purposes of the funding.

The COVID-19 pandemic has brought much uncertainty to the healthcare industry. However, providers need not be unprepared if they find themselves the subject of a DOJ investigation. Implementing these recommendations will protect healthcare providers and ensure compliance with federal regulation through this time of emergency.