United States: Proposed Legislation Is The Latest In A Series Of Efforts To Increase Whistleblowing In The Healthcare Industry

Last Updated: July 3 2013
Article by Don H. Stait

Government supported (and rewarded) whistleblowing is a time-honored tradition having been a part of our common law since the first writ of Qui Tam in 13th Century England. Whistleblowing claims in the healthcare industry, however, are rising in number faster than ever before, supported by a growing number of state and federal laws, favorable case decisions, administrative rules, and even a website that promotes reporting violators. Most recently, members of the U.S. House of Representatives and Senate introduced a bipartisan bill that would, among other things, increase whistleblower rewards for reporting Medicare and Medicaid fraud.

Government and Juries Support Employee Whistleblowing in HealthCare Cases

As several recent posts to this blog confirm, recent court decisions and agency actions indicate that both government and the public favor rewarding whistleblowers in the healthcare industry. On May 24th, a New Jersey jury awarded over $2 million to a medical lab technician who claimed he was terminated following a whistleblower complaint. Doculan v. Bayonne Medical Center (No. HUD-L-6670-10) involved claims under New Jersey law in which the plaintiff, a hematology technician at a medical center, alleged he had been terminated after complaining to upper management and human resources about improper blood bank staffing and management procedures.

The plaintiff, who was terminated approximately two months after he first made his complaint, alleged he was "repeatedly disciplined, counseled, written up and otherwise dishonestly micromanaged" by his supervisor (about whom he had complained to upper management) despite having an "essentially unblemished" record over his 20-year employment with the medical center. A unanimous jury found for the plaintiff and awarded him $2.14 million.

In February, the U.S. Department of Justice settled a whistleblower case against a New York hospital for $3.5 million despite finding no evidence of criminal violations. The whistleblower, a physician employee of Cayuga Medical Center in Ithaca, New York, alleged that the hospital entered into improper physician recruitment agreements in violation of the federal False Claims Act. The settlement will be divided between the federal government, the State of New York and the individual whistleblower.

Government Turns its Attention to Medicare/Medicaid Fraud

There is no official estimate of the loss due to Medicare and Medicaid fraud each year, but the Federal Bureau of Investigation and the U.S. Government Accountability Office both put the number at about $50 billion for Medicare fraud alone. U.S. Attorney General Eric Holder suggests that the number may be $60 to $90 billion and that Medicaid fraud may match that amount. In spite of this enormous loss, the maximum that a whistleblower may recover for reporting Medicare fraud is only $1,000.1 There is no reward for reporting Medicaid fraud.

The U.S. Senate and the Department of Health and Human Services (HHS) are both determined to change that. In April, HHS announced a proposed rule to elevate the maximum payout to Medicare whistleblowers from the current cap of $1,000 to nearly $10 million. Whistleblowers would be eligible for a reward of 15% of the recovery up to $9.9 million.

Not to be outdone, on June 10, 2013, members of Congress on both sides of the aisle introduced legislation intended to curb Medicare/Medicaid loss from waste, abuse and fraud. The bill, dubbed the "Preventing and Reducing Improper Medicare and Medicaid Expenditures Act of 2013" (the PRIME Act) (H.R. 2305, S. 1123), would enact stronger penalties for Medicare and Medicaid fraud, curb improper or mistaken payments made by Medicare and Medicaid, establish stronger fraud and waste prevention strategies within Medicare and Medicaid to help phase out the practice of "pay and chase," curb the theft of physician identities, expand the fraud identification and reporting work of the Senior Medicare Patrol, take steps to help states identify and prevent Medicaid overpayments, and improve the sharing of fraud data across state and federal agencies and programs. A section-by-section analysis of the bill can be found here.

From a whistleblowing standpoint, the bill requires HHS to develop a plan to revise the incentive program under the Health Insurance Portability and Accountability Act (HIPAA) "to encourage greater participation by individuals to report fraud and abuse in the Medicare program." The plan is to include: (1) ways to enhance rewards for individuals reporting under the incentive program, including rewards based on information that leads to an administrative action; and (2) an extension of the incentive program to the Medicaid program.

If the bill is enacted, HHS will have 180 days to develop such a plan but, as stated above, HHS has already begun the groundwork to meet the requirements of the bill should it become law.

We will continue to track this bill and related whistleblower developments in the healthcare industry.


1 42 CFR 420.405(e).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Don H. Stait
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