Settlement Shows FCA Risks Posed by Non-Traditional Relators

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On July 19, 2019, Myriad Genetics disclosed a $9.1 million settlement agreement to resolve a False Claims Act (FCA) qui tam lawsuit alleging that it engaged in a scheme to fraudulently bill Medicare for certain hereditary cancer tests.

Notably, the qui tam relator in the case was not a Myriad corporate insider, but rather a medical director for Palmetto GBA, the Medicare Administrative Contractor (MAC) responsible for overseeing the program through which Myriad’s tests are covered by Medicare. In this way, the settlement illustrates the often overlooked risk that individuals other than conventional corporate whistleblowers—including even government employees or employees of government administrative contractors—may serve as FCA relators.

Settlement Resolves Allegations of Fraudulent Billing for Hereditary Cancer Tests

The qui tam lawsuit resolved by the settlement agreement was filed in the U.S. District Court for the District of South Carolina in October 2017. According to the complaint, in 2013, Myriad introduced a new Molecular Diagnostic Test (MDT) called myRisk, which is used to identify genetic features associated with an elevated risk for developing certain hereditary cancers. Shortly after introducing myRisk, Myriad began phasing out several similar, but more limited, genetic tests it had marketed since 1996.

Like other MDTs, myRisk is covered by Medicare through the Molecular Diagnostic Services Program (MolDX), a program charged with evaluating new and existing MDTs and developing applicable coverage standards and requirements. The complaint alleges that MolDX assigned particular billing codes to Myriad’s legacy hereditary cancer tests that typically resulted in Myriad receiving reimbursement of approximately $2,700 per test. After Myriad first introduced myRisk in 2013, it billed and received reimbursement from Medicare for the new test using these same legacy codes. In 2015, however, MolDX assigned myRisk a new billing code that reduced Myriad’s reimbursement to only $925 per test. According to the complaint, rather than billing Medicare for myRisk using this new code, Myriad instead continued to use the codes associated with its phased-out legacy tests, resulting in millions of dollars in excess reimbursement to which Myriad was not entitled.

After the qui tam complaint was filed, the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) served Myriad with a subpoena related to the allegations, which Myriad publicly disclosed in March 2018. Ultimately, however, the government declined to intervene in the qui tam action.

On July 19, 2019, the parties notified the court that Myriad had agreed to settle the claims for $9.1 million without admitting wrongdoing. As of the date of this post, government approval of the settlement is pending.

Potential Qui Tam Relators Not Limited to Corporate Insiders

Unlike the typical relator who “blows the whistle” after learning about improper conduct by his or her employer, the relator in the Myriad case, Elaine Jeter, was not a corporate insider at all. Rather, at the time she filed her qui tam action, Jeter was employed by Palmetto GBA, the MAC responsible for operating the MolDX program, the requirements of which the complaint accuses Myriad of flouting. In fact, according to the complaint, Jeter herself “founded and directed” MolDX. Although the complaint does not specifically describe how Jeter learned about Myriad’s alleged misconduct, it seems almost certain that she did so at least in part through her professional capacity as MolDX director.

It is perhaps somewhat counterintuitive that a government employee—or, in this case, an employee of a government administrative contractor—could serve as an FCA relator with respect to conduct they learned about through their official capacity. The relevant text of the FCA, however, does not clearly foreclose that scenario. Although the heading to the statute’s qui tam provision, 31 U.S.C. § 3730(b), refers to “actions by private persons,” the operative text of that provision provides only that a “person may bring a civil action … for the person and for the United States Government.” (Emphasis supplied.) It does not include any express limitation on the “person’s” identity.

In the absence of any such limitation—and despite the government’s arguments to the contrary—nearly every court to have addressed the issue has concluded that a “person” entitled to pursue a qui tam suit under Section 3730(b) may be a government employee. While other provisions of the FCA—such as the public disclosure bar or applicable government ethics regulations—may in some cases provide separate grounds for fending off a qui tam suit filed by a government employee, the individual’s employment status, by itself, usually will not suffice. See, e.g., Little v. Shell Exploration & Production Co., 690 F.3d 282 (5th Cir. 2012) (holding that employees of the U.S. Department of Interior had statutory standing to bring qui tam action but remanding for additional consideration as to the application of the public disclosure bar).

Interacting with the Government or Its Contractors Can Equate to Interacting with Prospective Relators

As the Myriad settlement illustrates, the upshot for entities doing business with the government—including healthcare providers interacting with government administrative contractors—is that information they disclose may potentially be used against them, and not just by the government itself. Rather, individual government or contractor employees, including both the well-meaning and the more opportunistic, may seize on such information as fodder for a qui tam action, even when—and perhaps because—they possess only a portion of the relevant information. Although, as a practical matter, there might be little that a business organization can do to mitigate such a risk, it can (and perhaps should) be a relevant consideration in deciding whether or how to address conflicts or misunderstandings with government officials.

At a minimum, organizations should remain cognizant that the universe of potential FCA relators is not limited to their own employees, but may instead include the very officials and contractors with whom they interact when submitting claims for payment to the government.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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