Legal Bulletins

The federal Deficit Reduction Act (DRA) requires that health care entities which receive $5 million or more annually in payments under the Medicaid program must provide information to employees and contractors about the federal False Claims Act (FCA) and similar state statutes, as well as the whistleblower protections available under those laws. Covered employers must adopt written policies and employee handbook provisions in compliance with the law by January 1, 2007.

The FCA provides for suits against individuals or entities who submit false claims to the United States government or any of its agencies. Health care entities which receive monies under Medicare, Medicaid and other federal programs are often targets of FCA law suits. Examples of false claims against health care entities include billing for goods or services that were not rendered or for tests not performed, charging more than once for the same goods or service, and billing for brand name drugs when generic drugs were provided. According to the Department of Justice, more than $1.5 billion is recouped under the FCA each year from the heath care industry. Violators are subject to treble damages and debarment from the federal program at issue. Maryland has a similar law that prohibits entities from obtaining a payment for health care services from the state medical assistance program by means of a false representation and provides criminal and civil penalties for a violation of the law.

The DRA provisions compel employers to educate their employees about the provisions of these laws; specifically, the recoveries available and whistleblower protections. In particular, the law requires that employers do the following:

• Establish written policies for all employees, including management, which provide “detailed information” about the federal False Claims Act (FCA), any applicable state false claims law, and the administrative remedies and civil and criminal penalties available under those laws. The policies must also be given to “any contractor or agent of the entity.”

• Explain in the policies, the whistleblower protections available under the false claims laws and the role those laws have in preventing and detecting fraud, waste and abuse in federal health care programs.

• Include in the policies, detailed provisions regarding the entity’s policies and procedures for detecting fraud, waste and abuse.

• Include in its employee handbooks a specific discussion of the federal and state False Claim Act laws, the rights of employees to be protected as whistleblowers, and the entity’s policies and procedures for detecting fraud, waste and abuse.

Health care entities that fail to comply with the DRA employee education requirements risk sanctions, including the possibility that Medicaid payments will be denied for services rendered while the organization is out of compliance.

The government has not issued regulations or administrative guidance detailing what is required by the DRA. However, the Department of Health and Human Services is expected to issue such guidelines next year. In the meanwhile, health care entities should assess whether they are covered by the law and, if so, take steps to draft and implement policies that comply with the requirements of the law.