The Florida False Claims Act:
A New Solution to Medicaid Fraud and Abuse

by William F. Sutton, Jr., Assistant General Counsel,
Office of the General Counsel, Tallahassee

Introduction
     The relatively recent explosion of qui tam actions filed by private citizens and affirmative civil enforcement actions initiated by the U.S. Department of Justice has prompted much commentary regarding the Federal Civil False Claims Act.1 These comments, coupled with the federal government’s successful use of civil actions to reap huge settle-ments, have caught the attention of several state attorneys general, regulatory officials, and enforcement agencies, all of whom in-creasingly recognize the benefits of handling fraud and abuse matters via the civil route. As they continue to grapple with a myriad of fraud and abuse issues concerning the pro-grams they fund and administer, state gov-ernments will undoubtedly seek false claims remedies against state fund recipients who fail to accurately bill for products and services.
     The Florida False Claims Act,2 closely patterned after the Federal Civil False Claims Act, provides a separate civil remedy for false claims for state funds. Given the successes enjoyed by the federal government in combating health care fraud, this law was heralded as a new weapon in the fight against Medicaid fraud in Florida.3 Against this backdrop, this article provides a brief overview of the Florida False Claims Act, and explores the practical applications of this law regarding cases of false, fraudulent and abusive Medicaid payments.

Overview
     The Florida False Claims Act borrows several key provisions from its federal counterpart. First, the Florida law incorporates a scienter requirement which is identical to the federal law. The terms "knowing" and "knowingly" as used in the context of a false claim presented to the government for payment, are defined to include actual knowledge, deliberate ignorance, and reckless disregard.4 More important is the inclusion of the provision that the government is not required to prove that the defendant acted with the specific intent to defraud the government.5 Though the Florida False Claims Act, unlike the federal statute, includes a defense of "innocent mistake" to any action brought under this law, the inclusion of this defense would not allow a defendant to escape liability once a finding of deliberate ignorance or reckless disregard is made. It does, however, serve to protect those whose conduct, under the circumstances, was merely negligent. Second, the Florida False Claims Act provides for treble damages and civil penalties of not less than $5000 and not more than $10,000 per false claim.6 Case law,7 coupled with Congressional affirmation in the 1986 amendments to the Federal Civil False Claims Act, established that each false claim or bill is a distinct violation and generates liability for one penalty. This interpretation of the damage and penalty provisions carries serious consequences for health care providers, who generally submit large numbers of claims in seeking reimbursement from government- funded health care programs. To mitigate the potentially ruinous effects of these sanctions, the Florida False Claims Act provides for a reduction of damages and monetary penalties if the defendant voluntarily discloses the wrongdoing, or fully cooperates during an investigation of the purported violations.8

Finally, the Florida False Claims Act, like the federal statute, contains a provision allowing private persons, known as qui tam relators, to file actions on behalf of the government.9

Should the state successfully settle or ultimately prevail in such actions, the relator is entitled to a share of the proceeds recovered, as well as attorney's fees and costs. Unlike the federal law, however, Florida's statute allows the government to voluntarily dismiss a qui tam action over the relator's objections without the requirement of a hearing on the motion. 10 This section provides the state with a mechanism to quickly rid itself of frivolous, vexatious or otherwise unsuitable actions. This provision should not go unnoticed by health care providers who, upon learning that they have been named as defendants in such actions, could conceivably convince the government that the suit is without merit and should be dismissed.

A New Approach
     Without question, one of the problems the Florida False Claims Act was designed to address was fraud in Florida's Medicaid program.11 Prior to passage of this law, amounts identified as improper payments to Medicaid providers would be recouped via administrative actions initiated by the Agency for Health Care Administration ("AHCA").12 AHCA is designated by statute as the single state agency charged with the administration of Florida's Medicaid program. Prior to the initiation of such actions, targeted Medicaid providers may have been investigated by the Medicaid Fraud Control Unit ("MFCU") for the submission of fraudulent Medicaid claims. The MFCU is the entity charged under state law to conduct criminal investigations of fraud in Florida's Medicaid program.13 The focus of the MFCU's investigation would necessarily include: (1) whether the improper payments were the result of a scheme to defraud Florida's Medicaid program; and (2) the total amount of fraudulent dollars paid to the health care provider. In the absence of any evidence indicating that a Medicaid provider submitted false claims with the intent to defraud, the MFCU would return the case to AHCA for the initiation of an administrative action.14

Pursuant to Chapter 120, Florida Statutes, a provider could request a formal administrative hearing to contest AHCA's assertion that the provider improperly received, in whole or in part, certain Medicaid payments.15 In the event of an adverse decision at hearing, a Medicaid provider could submit written exceptions to the hearing officer's findings in an effort to dissuade the agency from adopting the recommended order.

On July 1, 1994, two laws that would dramatically change the resolution of cases involving false, fraudulent and abusive Medicaid payments went into effect. First, the MFCU was transferred to the Office of the Attorney General,16 >thus providing the MFCU with an immediate resource of legal expertise in the areas of white collar criminal and civil law. Second, the Florida False Claims Act took effect and provided the Attorney General with a powerful new weapon to fight health care fraud.17

As a result, the Attorney General's office was given the option of handling the case as a civil action rather than returning the case to AHCA for administrative disposition, in the event that a criminal prosecution was not warranted. Subsequent to the passage of these laws, cases investigated by the MFCU were no longer limited to a determination of whether a provider's actions were the product of a scheme to defraud the government. Now, the analysis included a determination as to whether: (1) the claims were submitted in deliberate ignorance of the truth or falsity of the information represented by the claim; or (2) the provider acted in reckless disregard of the truth or falsity of such information. This analysis, which utilizes the multifaceted definition of "knowingly" under the Florida False Claims Act, was incorporated into case assessments performed at the conclusion of each investigation. If an investigation concluded that a Medicaid provider's submission of false claims was the product of something more than mere mistake (though not a scheme to defraud), a civil demand letter would be issued to the provider and settlement discussions would begin. A determination that such action was appropriate, however, depended on the facts and circumstances surrounding the submission of false Medicaid claims. To illustrate, Florida law places an affirmative duty on a Medicaid provider to present a claim which is not only accurate, but is in accord with applicable provisions of all Medicaid rules, regulations, program handbooks and policies.18 With this in mind, a Medicaid provider arguably violates the false claims law by failing to read applicable program handbooks and, as a result, submits claims that are wholly inconsistent with payment policies contained in the handbooks. Moreover, providers who fail to institute some form of review on claims prepared by their billing staff may be viewed as having acted recklessly if such claims turn out to be false.19 Though neither of the aforementioned examples present a situation where the provider acted with a specific intent to defraud the government, a lack of attention to proper billing necessarily implicates the Florida False Claims Act given the level of intent needed to establish liability under this law.

Charting New Courses
     Given the rather expansive definition of "claim" contained in the Florida and federal statutes,20 innovative actions are being filed to address health care problems traditionally handled through other mediums. For example, the first qui tam suit settled under the Florida False Claims Act concerned a Medicaid managed care company whose marketing representatives, in violation of the company's Medicaid contract, falsified application dates on the forms used to enroll Medicaid recipients.21

Since these forms were used as a basis to enroll Medicaid recipients, the company ultimately received Medicaid payments for persons who were improperly enrolled. Though the enrollment forms were not claims per se, the Florida False Claims Act attaches liability for the use of a false record or statement to get a false claim paid.22 Consequently, any document (e.g., medical records, prescriptions, plans of care) used to support a claim for payment may invite false claims liability should the supporting document prove to be false. In a case filed under the Federal Civil False Claims Act, the United States sued a long-term care facility, alleging that the facility failed to render adequate wound and nutritional care to its residents.23 The government contended that continued billing to the Medicare and Medicaid programs for inadequate care was tantamount to the submission of false and fraudulent claims, since the facility's provider agreement contained a provision that the submission of claims for payment constitutes certification that the services were actually provided to the nursing home residents. Though this case settled shortly after suit was filed,24

it signals the government's willingness to use the false claims laws to redress inadequate quality of care allegations against health care providers. 25

Also emerging are false claims cases stemming from improper contractual arrangements between health care providers. In United States ex rel. Pogue v. American Healthcorp. Inc.,26 the relator (a former employee of one of the defendants) filed suit alleging that certain health care providers, through various contractual relationships, violated the Medicare and Medicaid antikickback statute,27 which prohibits the payment or receipt of remuneration in return for the referral of Medicare and Medicaid patients. Though the relator conceded that the services ultimately rendered to Medicare and Medicaid patients were medically necessary and appropriately billed, he maintained that the Federal Civil False Claims Act was implicated since the claims were the product of an illegal arrangement. In denying defendant's motion to dismiss, the court reasoned that the defendant's failure to disclose these prohibited contractual relationships demonstrated an intent to cause the government pay claims it would not have paid had the truth been known.28 Given the Pogue court's reasoning, health care providers should be aware that the false claims laws not only cover claims which are inherently false, but otherwise proper claims which are the product of prohibited business transactions. 29

Preventive Measures
     Given the obstacles associated with proving intent to defraud, the Florida False Claims Act will be used increasingly to effect resolutions of cases involving false, fraudulent and abusive Medicaid payments. As it is the responsibility of health care providers to ensure that claims submitted to Medicaid for payment are accurate, 30 it is inevitable that any investigation involving improper Medicaid payments will focus on what the provider did to ensure that proper claims were submitted. Therefore, in order to avoid liability under the false claims laws, health care providers should do the following:

If investigated for the submission of improper Medicaid claims, consider full cooperation and complete disclosure, particularly if the claims identified as improper are not the product of a scheme to defraud the government. The Florida False Claims Act provides for reduction of damages and avoidance of monetary penalties in the event of such cooperation (in fact, it is the only avenue available for such mitigation). Moreover, experienced investigators recognize that health care providers occasionally make honest billing errors, and that these errors do not warrant an assessment of enhanced penalties.

Conclusion
     As those government entities charged with the administration, regulation and policing of publicly-financed health care programs continue to increase their efforts to combat health care fraud and abuse, it will become increasingly important for counsel representing health care providers to familiarize themselves not only with the relevant federal criminal and civil statutes, but all state laws which could be used to exact large damages and penalties. Health care providers who receive both state and federal funds should be particularly cognizant of an increasing awareness among states that the use of false claims laws provide an effective means of resolving cases, while creating the potential for large monetary recoveries. As demonstrated by the highly visible results obtained by the federal government through the use of the Federal Civil False Claims Act, the potential impact of similar state laws cannot be ignored.

Endnotes

1 31 U.S.C. §3729-3733.
2 FLA. STAT. §68.081-092.
3 See Florida House Committee on Judi-ciary, Bill Analysis and Economic Statement: CS/HB 1155, at 7 (hereinafter Bill Analysis).
4 FLA. STAT. §68.082(1)(c).
5 Id.
6 Id. §68.082(2).
7 See United States v. Bornstein, 423 U.S. 303 (1976).
8 FLA. STAT. §68.082(3).
9 Id. §68.083(2).
10 Id. §68.084(2).
11 See Bill Analysis, supra note 3, at 7, 9.
12 FLA. STAT. §409.335(2) (1993). Prior to the transfer of the Medicaid program to AHCA, the Department of Health and Reha-bilitative Services sought recoupment of Med-icaid overpayments.
13 FLA. STAT. §409.920(9) (1993).
14 Id. §409.920(9)(e).
15 FLA. STAT. §409.335(2)(1993).
16 1994 Fla. Laws ch. 251.
17 1994 Fla. Laws ch. 316.
18 FLA. STAT. §409.913(7)(e).
19 See United States v. Krizek, 859 F. Supp. 5 (D.D.C. 1994), aff'd in relevant part, 111 F.3d 934 (D.C. Cir. 1997).
20 See FLA. STAT. §68.02(1)(b) and 31 U.S.C. §3729(c). Generally, claim is defined as any request or demand, under contract or oth-erwise, for money, property, or services made to any employee, officer, or agent of the gov-ernment.
21 State of Florida ex rel. Franzoni v. CareFlorida Healthplan, Inc., No. 95-3063 (Fla. 2d Cir. Ct. 1996).
22 FLA. STAT. §68.082(2)(b).
23 United States v. GMS Management-Tucker, Inc. No. 96-1271 (E.D. Pa. 1996).
24 U.S. Attorney Charges Philadelphia Nursing Home Management Company with Violating Federal False Claims Act, QUALITY CARE ADVOCATE, January-March 1996, at 5.
25 See also United States ex rel. Aranda v. Community Psych. Ctrs. of Okla., Inc., 945 F. Supp. 1485 (W.D. Okla. 1996).
26 914 F. Supp. 1507 (M.D. Tenn. 1996).
27 42 U.S.C. §1320a-7b.
28 Pogue, 914 F. Supp. at 1513.
29 Cf. United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F. 3d 899 (5th Cir. 1997).
30 FLA. STAT. §409.913(7).