First nursing homes, next managed care? Limiting liability in quality of care cases under the False Claims Act.

I. INTRODUCTION Suppose that a managed care enrollee visited his plan doctor for treatment of an injury. Next, suppose that either: (1) the doctor, through her own negligence, failed to render the appropriate standard of care, or (2) although the doctor desired to treat the injury consistent with what she believed to be professionally recognized standards of health care, the managed care organization (MCO) administrators denied coverage. Consequently, the doctor failed to render adequate treatment. In both cases, under traditional jurisprudence, the enrollee might have a medical malpractice action against his doctor.1 He also might try to hold the health plan liable under a variety of agency and direct liability theories.2 However, under the same facts, if a federal program such as Medicare paid for the enrollee's care,3 he might act as a whistleblower (or "relator") against the doctor and the organization,4 conceivably recruiting the federal government to foot the litigation and investigation bills5 and increasing his recovery.6 In the second case, even the doctor might act as a relator against the MCO.7 Unhindered by state tort reform recovery caps,8 the False Claims Act (FCA)9 creates potentially enormous liabilities and recoveries,10 thus creating equally enormous incentives for abusing its power. Quality of care suits under the FCA are likely to affect all areas of the health care industry in the near future, and the industry needs to prepare itself. "Who Pays? You Pay.11 These words ring as true for health care organizations as they do for the Medicare beneficiaries they are intended to affect. What are you paying, and why are you paying it? According to a federal multi-agency initiative, you are paying for health care fraud that your diligent reporting may help prevent.12 On February 24, 1999, the United States Department of Health and Human Services (HHS), in conjunction with the U.S. Department of Justice (DOJ) and the American Association of Retired Persons, launched a public outreach campaign titled: "Who Pays? You Pay."13 The campaign is designed to enlist the public in the mounting war the U.S. government is waging against health care fraud. 14 The federal government has a number of statutory weapons in its anti-fraud arsenal including the FCA, the Medicare and Medicaid anti-fraud and abuse provisions,15 the Health Insurance Portability and Accountability Act of 1996,16 the Stark legislation? and the Civil Rights of Institutionalized Persons Act (CRIPA).18 Despite this array of enforcement mechanisms, HHS estimates that in fiscal year 1998 alone, more than $12 billion of Medicare spending represented overpayments or wasteful spending.19 If HHS is correct that public involvement is the key to combating health care fraud effectively, then the FCA, with its whistleblower provisions and large monetary penalties, may become the statutory weapon of choice. The FCA was enacted in 1863, primarily to address the problem of civil war defense contractor fraud.20 Since then, it has evolved into the government's most powerful civil tool in combating health care fraud and abuse.21 False health care claims cases traditionally have fallen into four general categories: (1) clinical laboratory cases, (2) consultant cases, (3) physicians at teaching hospitals cases and (4) kickback cases.22 This Note focuses on the recent addition of a fifth category of FCA cases based on poor quality of medical care. Part II of this Note will discuss the theory behind quality of care claims and the significance of such claims to the health care industry. Part II analyzes the tremendous power the FCA wields in quality of care cases and hypothesizes that its power will increase exponentially as it envelops cases traditionally brought under tort theories such as malpractice. Part III surveys the existing case law in an effort to elucidate what constitutes an actionable quality of care issue under the FCA, drawing much of its information from settled claims. …