Breaking news from the front lines in Colorado has that state’s proposed false claims act (I believe it is SB 187) being amended to include the following language:
WHEN A RELATOR BRINGS AN ACTION UNDER THIS SUBSECTION (2), THE FEDERAL FALSE CLAIMS ACT, OR ANY SIMILAR PROVISION OF THE LAWS OF ANY OTHER STATE, NO PERSON OTHER THAN THE STATE MAY INTERVENE OR BRING A RELATED ACTION BASED ON THE FACTS UNDERLYING THE PENDING ACTION.
This follows on the heels of my earlier posts about Maryland’s struggles to keep frivolous detritus out of their FCA. The proposed language above seems, at first glance, similar to the language of the federal False Claims Act, except it is not. By adding the language
“or any similar provision of the laws of any state” Colorado prohibits a relator from filing a pendent state claim on behalf of Colorado as part of a nation-wide FCA case.
Needless to say, this will prevent Colorado from getting invited to many cases.
By way of background, the importance of having a state FCA goes beyond the treble damages, civil penalties, and attorney’s fees. By adding a state FCA with a qui tam provision, the state is allowed to participate in nation-wide cases alleging healthcare fraud from the early stages of the case.
It is no secret that the most lucrative healthcare fraud cases in recent years have all been brought by a qui tam relator. Such cases are normally filed in federal court, because one or more claims are brought under the federal False Claims Act. The initial sealed complaint also includes pendent state claims for each state to suffer a loss under the statute.
Once the case is sealed, an investigation begins on behalf of the federal governments, and at some point those states with qui tam statutes are brought into the mix. Only the states with qui tam statutes can be brought into the mix, however, because any disclosure to a non-qui tam state would constitute a breach of the seal.
It is these “sealed meetings” so to speak, to which states want to get an invitation. It is one of the main reasons for passing an FCA to begin with–the state then gets to participate in the process of forming the case almost from square one.
All states except Colorado, that is. The state of Colorado has seen fit to exclude itself from this process, however, because no qui tam relator in her right mind would include a pendent claim for the state of Colorado in her sealed federal complaint. Why? Because she would be providing the state with all of the information at her disposal, which is required by the statute, and she would be excluding herself from any recovery if Colorado declines to intervene.
Actually, as I now understand it, this is part of the healthcare industry’s new strategy against state false claims legislation–and it may very well signal an important shift in the battle over state FCAs.
In the past, the battle was to prevent a state from passing an FCA at all. This is a strategy that has failed of late–as more states pass state false claims acts and do not suffer any untoward effects, it becomes more difficult for the lobbyists to argue that it will be the end of the world if the legislature passes an FCA.
So, it appears that the paid guns for hire who lobby on behalf of their industry clients have adopted the strategy and tactics. Because they can no longer argue that a state FCA will be the end of the state’s economy, that it will bankrupt every hospital in the state, and so forth, they have amended their strategy.
Now, it seems, the focus of industry lobbyists is on making a number of “helpful suggestions” to the state about how they can tweak their state false claims legislation. But I am certain that this is not the end of the story.
Rather, I suspect the usual gang of industry lobbyists are making these suggestions because they know that everything they suggest will make the state’s false claims act less “user-friendly.” That is, less attractive to the lawyers who represent relators, and less attractive to the individual whistleblower who uncovers fraud. Perhaps most important, all of the changes suggested by the industry lobbyists will, without exception, preclude DRA approval. Without DRA approval of the state’s false claims act, the state is going to lose tens of millions of dollars of free money.
So here is what I am predicting–in two or three years, every single state that changes its false claims act away from the model of the federal false claims act will be visited by these same lobbyists. The pitch this time will be something like this: “We told you this false claims act statute was a bad idea. Now you tried it, and your statute hasn’t returned any money to your state treasury AND you have this annoying cumbersome law on your books. So, lets just get rid of this statute, shall we?”
We shall see.