United States:
Washington Medicaid Fraud False Claims Act Awaits Governor’s Signature
15 March 2012
Perkins Coie LLP
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In the final hours of its regular session, the Washington
Legislature enacted the Washington Medicaid Fraud False Claims Act
(the "Act"). The Act, ESSB 5978, has been
sent to the governor's desk, and she is expected to sign it.
Washington will join 29 other states that have enacted similar
laws.
The Act creates a state system of Medicaid false claims
liability that is parallel to, and largely duplicative of, the
federal False Claims Act. Both laws contain draconian remedies,
including treble damages and civil penalties of $5,500-$11,000 per
claim; both provide financial incentives for private whistleblowers
to bring suit on the government's behalf; and both protect
whistleblowers from retaliation. The Washington Attorney
General's office has been empowered to bring such cases on the
state's behalf with a bolstered Medicaid Fraud Control
Unit.
Given that the federal system has the experience and resources
to address what tend to be nuanced and complex cases with
potentially ruinous liability for defendants, the bill was opposed
by virtually all health industry groups. The Act was promoted by
the plaintiffs' bar, apparently looking for more favorable
treatment by resource-thin state superior courts that are to this
point inexperienced in adjudicating such cases.
The Act contains additional risks for the healthcare industry
that do not exist under the federal False Claims Act:
(1) The attorney general's office
is empowered to unilaterally impose civil administrative penalties
for claims determined to violate the Act, with no clearly
established appeal mechanism.
(2) While the federal False Claims
Act has a statute of limitations that ranges between six and 10
years, the Act has none, theoretically permitting claims that
extend back farther than the federal law.
(3) The Act limits the so-called
"public disclosure" bar to disclosures to state agencies,
which opens the door to lawsuits brought by whistleblowers trading
on information publicly disclosed to federal agencies. Thus, the
Act creates the potential for liability in cases that would not
have survived in federal court because of the federal public
disclosure bar.
(4) The Act provides that the
submission of a false claim is an "intentional act" for
insurance coverage purposes, depriving defendants of insurance
coverage under policies that exclude intentional acts. This
includes a defendant who submits a false claim with actual
knowledge that the claim is false, as well as any defendant who
submits a claim in "reckless disregard" or
"deliberate ignorance" of whether the information is true
or false.
(5) The Act allows the attorney
general to subcontract the prosecution of these cases to
"private attorneys and local governments," with no
restrictions as to the contract prosecutor's experience,
qualifications or objectivity.
If, as expected, Governor Gregoire signs the bill into law, the
Washington healthcare industry that services Medicaid beneficiaries
will need to prepare itself for new and less predictable state
court adjudication of whistleblower claims.
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