Federal Deficit Reduction Act: Employee Information Requirements

The Federal Deficit Reduction Act requires health care providers to establish and distribute written policies for all employees (including management), contractors, and agents about federal and state fraud and abuse laws and whistleblower protections.*   The requirement applies to providers and entities that receive or make annual payments of at least $5 million under a state’s Medicaid program. 

The federal mandate goes into effect January 1, 2007.  Each state must incorporate this requirement into its provider enrollment agreement for Medicaid.  If the state has not amended its plan by January 1, 2007, the requirement will be retroactive back to this date once it does. 

The federal law requires  the agency to provide “detailed information” about:

• the federal False Claims Act

• the federal Fraud Civil Remedies Act;

• state laws pertaining to civil or criminal penalties for false claims and statements; any whistleblower protections provided under such laws; and policies and procedures of the provider for preventing and detecting fraud, waste and abuse.

The written policies may be on paper or in electronic form, but they must be readily available to all your employees (and contractors or agents).   The policies may be incorporated into our  employee handbook, if an employee handbook already exist, but the law does not require us  to create one if none already exists.  This policy will be posted on our internal website.

Attached is a model policy to comply with the new law based on recent guidance by the Centers for Medicare and Medicaid Services.  Please contact Ms. Ana Benitez-Wiggins at ndadm@bellsouth.net or (305) 635-0366 with any questions.

New Horizons

Community Mental Health Center, Inc.

Policy to Provide Education About False Claims Liability, Anti-Retaliation Protections, and Detecting and Responding to Fraud

Purpose:  To satisfy the requirements of Section 6032 of the Deficit Reduction Act of 2005 by setting forth certain federal and state laws relating to liability for false claims and statements; protections against reprisal or retaliation for those who report wrongdoing; and New Horizons CMHC, Inc. policies and procedures to detect and prevent fraud, waste and abuse.

Scope:  This policy applies to all directors, officers, administrators, managers, staff, employees, contractors and agents of New Horizons CMHC, Inc.. The agency has long established as its policy that the agency will comply with all relevant federal and state law and regulations including, but not limited to, those laws and regulations related to billing and coding practices. No New Horizons staff has the authority to direct, participate in, approve, or tolerate any violation of any of the laws described in this Policy.

Policy:  It is the policy of New Horizons CMHC, Inc. to obey all federal and state laws, to implement and enforce procedures to detect and prevent fraud, waste, and abuse with respect to payments to New Horizons CMHC, Inc. from federal or state health care programs, and to provide protections for those who report wrongdoing.

Distribution:  This Policy shall be distributed to all current and new Board members, officers, administrators, managers, staff, employees, contractors and agents of New Horizons CMHC, Inc.  The agency shall make this information available in written or web based material in the following manner: (1) this Policy, and (2) any Employee Handbook published for employees of the agency or similar manual.

Explanation of Laws:  Set forth below are summaries of certain statutes that provide liability for false claims and statements.  These summaries are not intended to identify all applicable laws but rather to outline some of the major statutory provisions as required by the Deficit Reduction Act of 2005.

Federal False Claims Laws:

1.  Federal Civil False Claims Act; 31 U.S.C. §§ 3729 - 3733

Congress enacted the federal civil False Claims Act in 1982.  The act is designed to enhance the government’s ability to identify and recover losses due to fraud. 

A.  Prohibitions

The federal civil False Claims Act makes it a crime for any person or organization to knowingly make a false record or file a false claim with the government for payment.

“Knowingly” means that a person (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard for whether the information is true or false.  Based on this guidance, specific intent to defraud is not required for there to be a violation of the law. 

The False Claims Act is enforced by the filing and prosecution of a civil complaint.  Under the act, civil actions must be brought within six years after a violation or, if brought by the government, within three years of the date when material facts are known or should have been known to the government, but in no event more than ten years after the date on which the violation was committed.

B.  Penalties

A person or entity found to have violated the civil False Claims Act is subject to a civil money penalty of not less than $5,500 and not more than $11,000, plus three times the amount of damages the federal government sustained. 

C.  Qui Tam and Whistleblower Protection Provisions

The False Claims Act authorizes the U.S. Attorney General to bring legal actions alleging violations of the statute.  The statute also allows private citizens to file a lawsuit in the name of the United States for false or fraudulent claims submitted by individuals or companies that do business with, or are reimbursed by, the United States. Commonly known as a qui tam action, a lawsuit brought under the act by a private citizen begins with the filing of a civil complaint in federal court. 

As an incentive to bring these cases, the law provides that whistleblowers who file a qui tam action may receive a percentage of the money recouped as a reward.  This reward may be reduced, however, if for example the court finds the whistleblower planned and initiated the violation.  The act also provides that “whistleblowers” who prosecute clearly frivolous qui tam claims can be held liable to a defendant for its attorneys’ fees and costs.

Whistleblowers are given certain protections under the act from retaliation for bringing an action under the law, such as being discharged, demoted, or harassed.

2.  The Federal Program Fraud Civil Remedies Act; 31 U.S.C. §§ 3801 -  3812

The Program Fraud Civil Remedies Act (“PFCRA”) creates administrative remedies against persons who make, or cause to be made, false claims or statements to certain federal agencies (including the U.S. Department of Health and Human Services).  This act was created as a way to to address lower dollar frauds and generally applies to claims of $150,000 or less.

The Program Fraud Civil Remedies Act imposes civil money penalties on any person who makes, presents, or submits, or causes to be made, presented, or submitted, a claim that the person knows or has reason to know is false, fictitious, or fraudulent.  If found liable, the person is subject to civil money penalties of up to $5,000 per false claim or statement and up to twice the amount claimed in lieu of damages.

Reported violations are investigated by the Office of the Inspector General within the U.S. Department of Health and Human Services.  The U.S. Attorney General must approve any enforcement actions.

3.  Federal Sarbanes-Oxley Act of 2002

The federal Sarbanes-Oxley Act of 2002 focuses on corporate accountability.  The law contains important whistleblower protections.  

Section 806 of the law creates whistleblower protection for stock company employees who provide information to investigators or file complaints or other notices with their superiors, corporate executives, or government entities.

Section 1107 of the law makes it a crime for anyone to retaliate, including interfering with employment or livelihood, against someone for “providing to a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense.”   This protection applies to employees of nonprofit corporations as well as stock companies.

Florida State False Claims Act:

Florida, like many states, has enacted a statute like the federal FCA that provides a civil remedy for the submission of false and fraudulent claims to state health care programs, including primarily Medicaid. Other states continue to deliberate enactment of similar provisions as well. Like the federal FCA and several of these statutes, the Florida False Claims Act includes whistleblower provisions that allow enforcement through qui tam actions, and protect whistleblowers from retaliation. As of November 2006, Florida and twenty-two other states had enacted civil false claims prohibitions. Of these, the statutes of Florida and sixteen other states contain qui tam provisions: California, Delaware, District of Columbia, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Montana, New Hampshire, New Mexico, Nevada, Tennessee, Texas and Virginia. The remaining six prohibit false claims, but do not contain similar qui tam provisions: Arkansas, Colorado, Nebraska, North Carolina, Utah, and Washington.

Several states, including Florida, also impose criminal penalties for the submission of false claims to a state health care program.

Program Fraud Civil Remedies Act

The Program Fraud Civil Remedies Act of 1986 (PFCRA)¹, provides for administrative remedies against persons who make, or cause to be made, a false claim or written statement to certain federal agencies, including the Department of Health and Human Services. PFCRA was enacted as a means to address lower dollar frauds, and generally applies to claims of $150,000 or less. PFCRA provides that any person who makes, presents, or submits, or causes to be made, presented or submitted a claim that the person knows or has reason to know is false, fictitious, or fraudulent is subject to civil money penalties of up to $5,000 per false claim or statement and up to twice the amount claimed in lieu of damages. Violations are investigated by the Inspector General and enforcement actions must be approved by the Attorney General. PFCRA enforcement can begin with a hearing before an administrative law judge. Penalties may be recovered through a civil action brought by the Attorney General or through an administrative offset against clean claims. Because of the availability of other criminal, civil and administrative remedies, cases are not routinely prosecuted under PFCRA; however, the Department of Health and Human Services, Office of Inspector General has asserted its administrative authority under PFCRA in settlement agreements that resolve cases arising under the federal FCA or other federal fraud and abuse statutes.

Policies and Procedures for Detecting and Preventing Fraud, Waste, and Abuse

New Horizons Corporate Compliance program is responsible for the proactive prevention of fraud and abuse through education and training of New Horizons staff. Similarly, New Horizons staff will always have a responsibility to report concerns about actual or potential wrong-doing and are not permitted to overlook such actual or potential wrong-doing. The agency has several policies aimed at protecting fraud, waste, and abuse. These include:

1.         Billing Compliance Assurance Information;
2.         Billing Compliance Investigation Guidelines;
3.         Agency Corporate Compliance Plans;

New Horizons CMHC, Inc. is committed to providing an environment of honesty, integrity and trust. Whenever a agencystaff member has any question or concerns about the possible application of the above laws to any activities, s/he should consult with the departmental compliance officer or contact the Human Resource Department at (305) 635-0366.