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May 26, 2015

False claims lawsuits by whistleblowers against health care firms on the rise

Managers need more training to be able to know how to best handle whistleblower complaints, as nearly three quarters come through them   

Health care industry executives are very concerned about whistleblowers based on an intensive roundtable and survey recently conducted by Littler Mendelson. Fully 94 percent of respondents say they are moderately or very concerned about the federal government’s focus on health care fraud, and its use of whistleblowers as a key tool to combat it.

This concern is well-founded when you consider that in 2014 the federal government recouped $2.3 billion from False Claims Act cases against health care providers, out of a total of $5.7 billion in False Claims cases, says Greg Keating, co-chair of Littler Mendelson’s whistleblowing and retaliation practice group. Another marker of the risk the industry faces is the increasing volume of cases filed by whistleblowers who seek damages on behalf of the government. More than 700 such lawsuits were filed against health care companies for a second consecutive year in 2014, versus 782 civil health care fraud investigations conducted by the federal government.

While whistleblowing is on the rise in every industry, both the health care and financial services sectors are seeing ‘a major uptick’, Keating says. ‘Financial services is facing more whistleblowing because of Dodd Frank's false claims act-like incentives and the SEC's ramped up enforcement.’  Health care companies are in the cross hairs twice over as a result of their exposure to federal false claims cases because of their role as government contractors, as well as some state-specific whistleblower statutes that target health care, he explains.

All roundtable and survey participants were from Fortune 200 companies, including hospitals, health systems, pharmaceutical and medical device manufacturers, and health insurance providers. Combined, more than half had seen either a slight (42 percent) or significant (16 percent) increase in the rate of whistleblowing claims or lawsuits against their organizations over the past two years.

Perhaps partly in response, 95 percent of respondents say they have developed, updated and/or strengthened their internal whistleblower or compliance programs to encourage employees to report potential misconduct internally, rather than to the government or a plaintiff's lawyer. More than two thirds of the time, that work included improving anonymous reporting procedures.

Despite these compliance efforts, the survey suggests that not all companies have thoroughly institutionalized the changes. For example, less than half held training sessions for managers (42 percent) or for employees (47 percent) in order to encourage internal reporting.

‘I was surprised that the training number was not significantly over 50 percent,’ Keating says. He believes the relative lack of training indicates that ‘not enough employers are aware of the many new and evolving methods of training. Specialized firms offer training programs that make it much easier.’

Providing training for management is particularly important, given that currently 72 percent of all complaints are made through managers, not hotlines and the like. That means it’s critical that managers know what to do when an employee files a complaint with them, he notes. ‘Managers need to recognize someone is trying to make a report, and they need to know what to do with the information.’

Abigail Caplovitz Field

Abigail is a freelance writer and lawyer based in New York.