The False Claims Act and Its Impact on Federally Sponsored Research Jeff M. Seo J.D., LL.M. Director of Research Compliance Harvard Medical School

Between 1987 and 2008: Government recovered nearly $22 billion under the False Claims Act; over 6,200 qui tam FCA actions filed; $2.2 billion to whistleblowers Department of Justice Press Release December 4, 2012 “Justice Department Recovers nearly $5 billion in False Claims Act cases in Fiscal Year 2012”

History “Worse than traitors in arms are the men who pretend loyalty to the flag, feast and fatten on the misfortunes of the nation while patriotic blood is crimsoning the plains of the south and their countrymen are moldering in the dust.” -Abraham Lincoln 1863

On Behalf of the King… Qui tam pro domino rege quam pro se ipso in hac parte sequitur “who as much for [our] lord the king as for himself in this action pursues" or "follows.“ Qui tam suits under the original enactment allowed for up to 50% recovery by relator

English Law / US Law 13 th -19 th Century Fell out of favor following use to enforce Christian Sunday observance In U.S., primarily used during times of war, but law changed during WWII. To prevent “parasitic” or “copycat” lawsuits, 1943 Amendments (Roosevelt) required qui tam relator to have actual knowledge beyond what was already known by the government. Percentage of recovery also reduced drastically.

1980s

1986 Amendments

1986 Amendments (Reagan) Increased the potential for awards to 15-30% of government’s recovery $5,000-$10,000 per false claim Treble damages Attorney’s Fees Protection from retaliation Exclusion of provider or supplier from participation in federal health care programs

FCA The FCA does not require proof of a specific intent to defraud the United States government. Instead, healthcare providers can be prosecuted for a wide variety of conduct that leads to the submission of fraudulent claims to the government, such as: “knowingly” making false statements Falsifying records Double-billing for items or services Submitting bills for services never performed Submitting bills for items never furnished, or Otherwise causing a false claim to be submitted

Qui Tam Procedure: The whistleblower must file his/her lawsuit on behalf of the government in a federal district court, and kept “under seal” (confidential) during governmental review and investigation of the allegations Rights of Parties: If the government determines that the lawsuit has merit and decides to intervene, the prosecution of the lawsuit will be directed by the Department of Justice. If the government decides not to intervene, the whistleblower may continue with the lawsuit on his or her own. Awards to Qui Tam Whistleblowers: If the lawsuit is successful, and certain legal requirements are met, the whistleblower may receive an award ranging from 15 to 30 percent of the amount recovered, and may be entitled to reasonable expenses for bringing the lawsuit.

Impact on Healthcare Approximately 80% of recoveries under FCA related to healthcare Example: Over a period of six years, an Atlanta-area hospital falsely claimed — among other things — inpatient status for patients whose charts showed they were admitted and discharged on the same day. These false billings to Medicare, together with others, resulted in an out-of- court settlement of $26 million. The relator was a hospital case manager whose responsibilities included reviewing patient files for Medicare billing accuracy. For her role in bringing the fraud to light, she was awarded approximately $5 million, 19 percent of the total settlement.

FCA Triggers Qui Tam Action Report of an Informal Whistleblower Referral of a government audit or review

FCA Applied to Sponsored Research 2004 Johns Hopkins Univ Effort Certification $2.7 million 1998 University of Minnesota Misuse federal funds $32 million 1997 New York University Medical Center Inflated research grant costs $15.5 million 2005 Mayo Foundation Mischarging federal grants $6.5 million 2004 Harvard/BIDMC Costing Issues Self-Reported $3.25 million 2003 Northwestern University Committed Time/Effort $5 million 2005 Univ Alabama/Birmingham Effort Certification & Clinical Research Billing $3.4 million 1991 Stanford Inflated research grant costs $1.2 million 2004 George Washington Univ. $1.8 million 2005 Florida International Univ Effort Certification & Direct Costs $11.5 million 2005 U. Conn. service centers billing rates $2.5 million Cornell Medical (2) Clinical Research Issues Other Support/Commitments $4.4 million / $2.6 million 2008 Yale Univ. Effort Reporting Cost Transfers Subrecipient Monitoring $7.6 milliion

Lessons Learned? Inaccurate effort reporting Abusive cost transfers Meeting effort commitments Direct charging of overhead rates Grad student compensation / increasing salary in response to award Service center billing Financial status reports

Relevant Federal Climate Current Office of Inspector General (OIG), Health and Human Services (HHS) Focus – Charging clerical and admin costs – Effort certification – Cost transfers – Subrecipient monitoring – Level of commitment

Thank you! The opinions expressed in this presentation are those of the speaker personally, and do not in any way reflect the position of any institution associated with the speaker.