In 2017, under the False Claim Act, the Department of Justice recovered more than $3.7 billion. Approximately, $2.4 billion derived from healthcare providers, including skilled nursing facilities. The vast majority of the $2.4 billion recovered came from whistleblower-initiated lawsuits.

Whistleblowers (technically called “relators”) can come in all shapes, sizes and identities, both within and outside of a SNF operator. In short, they are quasi-government informants, creating invasive investigations and high stakes litigation. It is critical for SNF operators to proactively manage allegations of fraud, abuse and internal improprieties.

By now, most healthcare providers, including SNFs, understand that being a provider for a federal health care program is no easy task and comes with complex rules and regulations. Technical violations of health care regulations can result in citations, civil monetary penalties, poor ratings and even being excluding from participating as a Medicare provider. The FCA allow the government to recover up to treble damages when SNFs engaged in fraud, along with other punitive measures.

The law has evolved over the years, especially with the passage of the Affordable Care Act. The FCA is very much intact and allows whistleblowers to file lawsuits against their former employers, competitors or any third party, which is also incentivized by potential monetary recoveries. Currently, hundreds of law firms around the country represent whistleblowers with this type of litigation (“qui tam” litigation).

In the past several years, these plaintiff based law firms have filed significant cases while recovering handsome financial settlements. The law firms will work in conjunction with the DOJ in an effort to seek monetary damages against healthcare providers. One example of this is the Life Care of America (Life Care) case. In that case, Life Care entered into a settlement with the DOJ for $145 million. The settlement derived from a whistleblower-generated lawsuit due to allegations that Life Care submitted false claims for therapy services to increase its Medicare and TRICARE billings.

The DOJ and whistleblower alleged that Life Care regularly placed patients in the Ultra-High reimbursement level irrespective of the clinical needs, resulting in therapy being rendered beyond medical necessity to patients, along with keeping patients longer than was necessary in order to continue billing for therapy services. Further, it was alleged that Life Care tracked therapy minutes and duration to obtain the highest level of reimbursement for the longest possible period.

This case is one of many which indicate SNFs are highly regulated and prevention strategies are necessary to manage potential whistleblowers and whistleblower cases under the FCA. Here are some pragmatic recommendations:

  1. Develop a culture of compliance. This means leadership must buy into this culture, dedicate resources and understand the practices of developing such a culture. It doesn’t mean playing tag and assigning a person with a “corporate compliance” title. Rather, develop a strategy and it may start with a risk assessment, followed by creating or updating one’s compliance policies and procedures.
  2. Own up to your vulnerabilities and identify your risk areas or “gap” areas. Risk areas tend to be broader and bigger issues, requiring more time and dedicated resources. Gap areas are generally more minor and the fix may be faster or less risky. Without owning up to your own internal problems, the issues will become bigger and more overwhelming quickly.
  3. Develop an internal whistleblower hotline program. It is a major feature within any effective corporate compliance and ethics program. This will help detect risk areas, allowing you to identify what is needed to address your vulnerabilities. Once the hotline is in place, it is important to educate employees about using the hotline, its purpose, accessibility and availability.
  4. Trusting the hotline is paramount. Many times, employees feel more comfortable when the report is anonymous. As such, consider outsourcing the hotline to be managed by a third-party provider and having an anonymity policy.
  5. It is important to consistently benchmark, measure and quantify the effectiveness of internal compliance systems such as hotlines. This can be both internal and external. Benchmarking the whistleblower hotline will tell the SNF  whether individuals are using the hotline. Usage rates may also provide insight bigger company-wide compliance issues.
  6. Employees usually report concerns if there is a sense it will be addressed. It is recommended that summary reports about the concern are generated and good faith investigations are being conducted. While SNFs are not required to provide employees any specific information, it is best practices to build a sense of efficacy within the company by providing report with aggregated information to show what was being performed to address their concerns.
  7. Employees must know that retaliation will not be instituted for reporting suspected fraud and abuse. Most employees are suspect of no-retaliation pledges so SNFs should show employees their commitment to a compliance. SNFs should consider recognizing those employees that have reported suspected problems, include compliance issues as part of the employee evaluation process and punish employees who retaliate against potential whistleblowers.
  8. To minimize whistleblowers from taking the “money bait” under the FCA, SNFs can offer financial rewards to employees who report within the organization. If cash flow is an issue, consider offering non-financial reporting incentives, such as extra vacation days or a catered lunch, which will be an opportunity to build internal collaboration.
  9. Follow-up with the whistleblower regarding any reporting. Whistleblowers often try to report internally, but turn to the government when their concerns are mitigated or ignored. SNFs should have feedback process and keep the whistleblowers looped in on the status of their reports.
  10. Ask all departing employees about any fraud and abuse concerns. It will demonstrate a good faith effort to continuous get better and the information gathered will help identify more risk areas. It is critical to ask the right questions by being very intentional in the process.

SNFs should realize governmental enforcement is unlikely to slow down. Operators should see whistleblowing as an opportunity for improvement, not a risk or burden. It’s an opportunity to gain honest feedback from employees. By being receptive to critical feedback, a SNF can effectively grow in its effort to developing a more compliance driven culture.

Richard Y. Cheng is an attorney and partner at Dykema Cox Smith, where he is a part of the Health Care Practice Group and the Cannabis Practice Group. Prior to his legal career, he worked as a licensed occupational therapist in Dallas.