Texas False Claims Act Violations
Our legal team, experienced in all areas of health care law, can assist you if you are facing charges of health care fraud. We defend our clients in all types of health care fraud cases, including Texas False Claims Act violations.
False Claims Act allegations and qui tam cases can be large, complex investigations that can involve state and federal law enforcement. With your professional future at stake, you need the strongest team on your side
We will vigorously defend you against any charges and guide you every step of the way through the process.
Texas False Claims Act (“FCA”)
2 Texas Human Resources Code § 36.002
The Texas False Claims Act (FCA), 2 Texas Human Resources Code § 36.002, serves to prosecute Medicaid fraud and outlines the specific actions that are considered illegal.
The law outlines specific types of fraud, including claims for services performed by unlicensed personnel, using one person’s Medicaid coverage for the benefit of another, and receiving additional remuneration for services reimbursed by Medicaid.
A person or entity is vulnerable, regardless of their knowledge of the fraudulent activity.
7 Texas Penal Code § 35.02
A person or entity may be prosecuted under 7 Texas Penal Code § 35.02 in Texas for filing a Medicaid claim that has a false statement or a misrepresentation.
What is Considered Illegal Under the Texas False Claims Act?
Potential charges under the FCA may be brought for:
(1) failure to provide care;
(2) failure to provide information to Medicaid;
(3) fraud in marketing to or enrolling Medicaid-eligible individuals.
It is also a crime to engage in a conspiracy to commit any of the crimes under the Medicaid Fraud Prevention Act.
Example
For example, a health care provider submits a claim to Medicaid that overstates the services he or she rendered. The provider either knew that there was a misrepresentation or should have known that the claim for the higher cost services was false. In this case, the health care provider would be at risk of prosecution under the Texas FCA.
Managed Care Organizations (MCOs)
Managed Care Organizations (MCOs) have additional ways they may be at risk under the Texas False Claims Act. Specifically, the FCA outlines charges for an MCO that contracts with Texas Medicaid to provide services or arrange for care.
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Federal False Claims Act
The federal False Claims Act makes it a crime to fraudulently receive money from the government or take actions that provide false support for a claim. Actual receipt of money from the government is not required for prosecution under the FCA.
The federal statute is similar to the Texas False Claims Act and creates seven categories of violations.
Under the federal FCA, it is a crime to:
(1) submit a claim that is fraudulent
(2) make a false statement to support a fraudulent claim
(3) claim the government received due property without knowing that was true
(4) pay or deliver less property to the government than promised
(5) buy government property or use it to secure a loan from a government if actor unauthorized to do so
(6) improperly reduce a payment due to the government or making a false statement to attempt to do so
(7) conspire to commit any of the other crimes
To be in violation of the Texas False Claims Act, a person must perform the actions aforementioned regardless of intent. The violation can be mitigated if the government is notified in a timely manner and the person cooperates with the investigation. However, these mitigating actions do not get rid of the charges but only lessen their impact.
The federal FCA applies to anyone that transacts with the government. It affects all types of people or entities, including healthcare professionals that submit healthcare claims to the government or provide medical supplies to patients in federal healthcare programs.
What Are Some Related Crimes?
The Texas False Claims Act and the federal False Claims Act are related to a number of other crimes that address health care fraud. At the state level, some of the related crimes are insurance fraud and fraud related to state assistance programs. At the federal level, there is a general health care fraud statute, as well as the laws related to patient referrals.
Texas law defines insurance fraud as intentionally deceiving or defrauding an insurer, and is committed through a direct or indirect statement that is false or otherwise a misrepresentation. Similar to the state and federal FCA, no payment needs to be made by the insurer for there to be prosecution of insurance fraud under the Texas statute.
2 Tex. Hum. Res. § 32.039.
2 Tex. Hum. Res. § 32.039 covers fraud in state assistance programs. It is similar to the Texas False Claims Act, but it relates to fraudulent activity against financial and medical assistance programs in Texas.
18 U.S. Code § 1347
The federal health care fraud statute, 18 U.S. Code § 1347, makes it a crime to defraud or attempt to defraud any public or private health care program, and includes obtaining anything of value from a health care program on the basis of fraud or misrepresentation. It is a general statute that offers a means of prosecuting any action that can be perceived as fraudulent.
42 U.S.C. § 1320a-7b
Federal law also criminalizes certain patient referrals under federal health care programs. The Federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, targets paid patient referrals.
42 U.S.C. § 1395nn
The federal Stark Law, 42 U.S.C. § 1395nn, targets referrals that otherwise have a financial benefit to the physician or an immediate family member.
What Are Some Of The Essential And Impactful Cases?
False Claims Act prosecutions have been shaped by various state and federal cases. One of the key issues is what entities may be vulnerable under the statute. In 2000, the U.S. Supreme Court heard the case of Vermont Agency of Natural Resources v. U.S. ex rel. Stevens. The case explored whether or not a state government agency or entity can be subject to liability under the FCA. The Supreme Court interpreted that the False Claims Act does not include the state government actors in its definition of “person” and cannot be prosecuted under that statute.
In 2013, another case further explored the issue of excluding a government agency from liability under United States ex rel. King v. Univ. of Texas Health Science Center-Houston. The Houston-based hospital was subject to a whistleblower lawsuit under the False Claims Act. The suit was dismissed because the hospital is considered to be an “arm of the state.” In determining whether an entity is an arm of the state, but is not explicitly a state government agency, courts consider a number of factors. These include if the money for paying for an FCA violation will come from state funds and if the entity exercises autonomy from the state.
The exclusion of state entities from liability does not extend to local government- A 2003 case, Cook County v. United States ex rel. Chandler, considered a suit against a county hospital. As this hospital was not controlled by the state government, it was not exempt from prosecution under the False Claims Act.
What Are The Statutory Penalties If You Are Convicted Of This Crime?
Under the criminal statute for Medicaid Fraud in Texas, being prosecuted for false claims will result in a penalty corresponding to the level of the fraud. If the value of the false claim submitted to Medicaid is under $2,500, it is a misdemeanor. At most, a misdemeanor charge is subject to a fine of up to $4,000 and one year in jail if it is a Class A misdemeanor.
If the value of the false claim submitted to Medicaid exceeds $2,500, it becomes a felony that is subject to jail time and up to a $10,000 fine. The punishment starts at a minimum of 180 days in jail for a third-degree felony. The maximum punishment is for a first-degree felony if the value of the false claims is $300,000 or more. With a first degree felony, there is a sentence of five to 99 years in jail.
What Are Some Of The Additional Consequences To Being Convicted?
False Claims Act convictions are costly, but there are consequences beyond the immediate economic ramifications of fines and damages. Under federal law,[7] an individual or entity that has been convicted fraud against Medicaid or Medicare is excluded from participating in any federal health care program. This will prevent future professional work in this business segment. Moreover, an individual cannot just get employment with another entity. Another entity would still be liable for fraud if it allowed the previously convicted individual to submit a claim to a federal health care program.
Future earnings may also be impacted through licensing actions and reputational damage. State licensing boards may levy additional punishments as severe as disbarment for a criminal conviction of this nature. Additionally, even if a person or entity continues to operate, their reputation will forever be blemished. Records of civil and criminal actions will likely remain public and available on the internet for others to see in the future.
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What Are The Statutory Penalties If You Are Convicted Of This Crime?
Under the criminal statute for Medicaid Fraud in Texas, being prosecuted for false claims will result in a penalty corresponding to the level of the fraud. If the value of the false claim submitted to Medicaid is under $2,500, it is a misdemeanor. At most, a misdemeanor charge is subject to a fine of up to $4,000 and one year in jail if it is a Class A misdemeanor.
If the value of the false claim submitted to Medicaid exceeds $2,500, it becomes a felony that is subject to jail time and up to a $10,000 fine. The punishment starts at a minimum of 180 days in jail for a third-degree felony. The maximum punishment is for a first-degree felony if the value of the false claims is $300,000 or more. With a first degree felony, there is a sentence of five to 99 years in jail.
What Are Some Of The Additional Consequences To Being Convicted?
False Claims Act convictions are costly, but there are consequences beyond the immediate economic ramifications of fines and damages. Under federal law,[7] an individual or entity that has been convicted fraud against Medicaid or Medicare is excluded from participating in any federal health care program. This will prevent future professional work in this business segment. Moreover, an individual cannot just get employment with another entity. Another entity would still be liable for fraud if it allowed the previously convicted individual to submit a claim to a federal health care program.
Future earnings may also be impacted through licensing actions and reputational damage. State licensing boards may levy additional punishments as severe as disbarment for a criminal conviction of this nature. Additionally, even if a person or entity continues to operate, their reputation will forever be blemished. Records of civil and criminal actions will likely remain public and available on the internet for others to see in the future.
Which Federal Agencies Detect And Investigate This Crime?
The Texas False Claims Act is also known as the Medicaid Fraud Prevention Act, which is investigated through the Medicaid Fraud Control Unit. The Medicaid Fraud Control Unit is a group within the Office of the Texas Attorney General. However, as Medicaid fraud also impacts federal dollars, federal agencies likely also get involved in the investigation.
Within the U.S. Department of Health and Human Services (HHS), there are several offices that conduct investigations and audits. The primary investigation unit for potential fraud is the Office of the Inspector General (OIG). Within the OIG, there are several divisions that conduct related functions: First, the Office of Investigations conducts the primary investigation in conjunction with law enforcement groups such as the Federal Bureau of Investigations (FBI); Second, the Office of Audit Services focuses on auditing Medicaid, Medicare, and other programs that are regulated by HHS. Audits may help uncover additional cases of potential fraud.
Which Federal Agencies Are Involved In Prosecuting These Crimes?
If investigations result in recommended enforcement actions, the HHS OIG Office of Investigations will refer those cases to the U.S. Department of Justice (DOJ). The DOJ has a unit dedicated to health care fraud enforcement. Similarly, under state law, investigations by the Medicaid Fraud Prevention Unit would be referred to the Texas Attorney General for prosecution. These cases can be a joint federal-state prosecution effort as Medicaid fraud often impacts state and federal programs.
Prosecution of False Claims Act violations may actually begin as a lawsuit initiated by a non-government whistleblower. In such cases, the whistleblower would bring a qui tam action on behalf of the government against the potentially fraudulent person or entity. The DOJ and the U.S. Attorney have the option to intervene in the case and prosecute, and the whistleblower is entitled to a portion of any money recovered through the qui tam suit.
False Claims Act Violations In The News
Largest Recoveries from False Claims Act Cases in 2017
The Department of Justice recovered over $3.7 billion from False Claims Act cases in Fiscal Year 2017. These cases covered claims beyond health care, but health care fraud recoveries were responsible for over $900 million. The biggest recoveries were against Shire Pharmaceuticals, Mylan, and eClinicalWorks (ECW).
Shire Pharmaceuticals was accused of, among other things, using false statements to help inflate the price of their skin substitute product. The company settled for $343.9 million in federal payments and $6.1 million in state Medicaid payments.
Mylan ran afoul of the statute by underpaying the government what was owed under the Medicare Drug Rebate Program. Mylan did so by making a fraudulent misrepresentation of EpiPen, claiming it was a generic so higher rebates would not have to be paid. Mylan paid $465 million, split roughly evenly between state and federal governments.
ECW created a flawed electronic health records software and fraudulently represented that it met certification standards. As a result, ECW caused physicians to submit false claims based on incorrect coding. The company paid $155 million to settle the charges.
Improper Off-Label Marketing
The Texas Attorney General recovered $110 million from AstraZeneca for alleged fraud related to two of the company’s drugs. AstraZeneca was accused of improper off-label marketing of Seroquel, labeled as an antipsychotic, and Crestor, labeled for lowering cholesterol. This improper off-label marketing resulted in fraud to the Texas Medicaid program.
Specifically, AstraZeneca incentivized the use of these drugs through illegal payments to two doctors who were working in a state hospital at that time. The doctors influenced the use of Seroquel among Medicaid providers in Texas. These providers worked with children and adolescents, and Seroquel was not approved for use in these populations.
With Crestor, AstraZeneca also worked to target providers in the Texas Medicaid program to push the use of the drug outside of its approved uses. AstraZeneca also misrepresented or concealed the risk of diabetes for some that take Crestor.
This case began with whistleblowers. Former AstraZeneca employees came forward to report the suspected fraud to the Attorney General. After the initial information and lawsuits, the case was settled with the pharmaceutical company.
Illegal Kickbacks and False Claims Act Violation
Reliant Rehabilitation Holdings, headquartered in Plano, was facing allegations of violating the False Claims Act and paid $6.1 million to settle those charges.
Reliant provides rehabilitation therapy services and works with other providers to offer care to Medicare beneficiaries. Over the course of four years, Reliant paid improper kickbacks to nursing homes. The kickbacks were effectuated through Reliant employees working at the nursing homes for free or discounted rates. In exchange, the nursing homes used Reliant to provide rehabilitation therapy.
The improper arrangement was potentially an issue under the Anti-Kickback Statute, but the case was brought under the False Claims Act. By virtue of the remuneration provided to nursing homes, the claims submitted to Medicare may have been inappropriate. The claims were submitted on the basis of facts that may have been misrepresented or unduly influenced by the illegal financial incentives at play between Reliant and the nursing homes.
This suit was also brought as a whistleblower action by a doctor with knowledge of the relationships. As a result of the settlement, the doctor received $915,000 from the total recovery.
Improper Reciprocal Referral Arrangements
A Pennsylvania-based company that operates long-term care and rehabilitation hospitals around the country was alleged to have violated the False Claims Act. Post Acute Medical faced claims of submitting claims to Medicare and Medicaid on the basis of inappropriate referral relationships.
Beginning in 2006, Post Acute Medical paid a number of doctors and contracted with them to have roles with the company. On paper, it appeared that these physicians were being paid to be retained as medical directors, or serve in other administrative or medical positions. However, the suit alleged that these arrangements were to incentivize referrals to Post Acute Medical’s facilities.
Post Acute Medical also engaged in reciprocal referral arrangements with providers of other services such as home health. These arrangements cause the parties to send patients to one another. As a result, additional claims for services are filed that may not have been if the relationship did not exist.
The claims that are filed on the basis of inappropriate referral relationships are the source of the alleged False Claims Act violations. In order to settle the case, Post Acute Medical agreed to pay over $13 million to the U.S., Texas, and Louisiana. Of that money, approximately $2.3 million went to the whistleblower that initiated the action.
Anonymous Tip to Texas Medicaid Fraud Hotline
The Texas Medicaid Fraud hotline received an anonymous tip that sent the Civil Medicaid Fraud Division and the Medicaid Fraud Control Unit investigating. A Medicaid rehabilitation therapy group in the Dallas-Fort Worth area was accused of conspiracy to avoid paying Medicaid fraudulently.
Advanced Therapy Services of Dallas and Advanced Therapy Services of Fort Worth were overpaid by $2.7 million that needed to be repaid to Medicaid. The providers worked together to attempt not to repay that money. However, the investigation and following case resulted in a $15.2 million settlement to resolve these allegations.
In addition, three of the individuals accused in this conspiracy are permanently barred from Texas Medicaid reimbursement. Two other alleged co-conspirators are not permitted to have any ownership, control, or management stake in an entity that serves Medicaid.
Overall, this case involved six individuals and four entities. The Attorney General pointed to this case as an example of ramifications for attempting to defraud Medicaid.
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What Are Some Of The Essential And Impactful Cases?
False Claims Act prosecutions have been shaped by various state and federal cases.
Can a State Government Agency or Entity Be Subject to Liability Under the FCA?
Vermont Agency of Natural Resources v. U.S. ex rel. Stevens.
One of the key issues is what entities may be vulnerable under the statute. In 2000, the U.S. Supreme Court heard the case of Vermont Agency of Natural Resources v. U.S. ex rel. Stevens. The case explored whether or not a state government agency or entity can be subject to liability under the FCA. The Supreme Court interpreted that the False Claims Act does not include the state government actors in its definition of “person” and cannot be prosecuted under that statute.
United States ex rel. King v. Univ. of Texas Health Science Center-Houston.
In 2013, another case further explored the issue of excluding a government agency from liability under United States ex rel. King v. Univ. of Texas Health Science Center-Houston. The Houston-based hospital was subject to a whistleblower lawsuit under the False Claims Act. The suit was dismissed because the hospital is considered to be an “arm of the state.” In determining whether an entity is an arm of the state, but is not explicitly a state government agency, courts consider a number of factors. These include if the money for paying for an FCA violation will come from state funds and if the entity exercises autonomy from the state.
The exclusion of state entities from liability does not extend to local government – A 2003 case, Cook County v. United States ex rel. Chandler, considered a suit against a county hospital. As this hospital was not controlled by the state government, it was not exempt from prosecution under the False Claims Act.
What Are Some Defenses To Violations Of The Texas False Claims Act?
A defense attorney has several avenues to help fight allegations under the Texas False Claims Act.
First, there has to be intent to perform the action. If a person made a genuine mistake such as a typo or a mixed file, a defense attorney could help show that there was an error rather than fraud.
Second, the prosecutor has to show that the defendant knew or should have known of the fraud. In an office setting, there may be multiple actors with different levels of autonomy where certain roles are more or less supervised than others. If there were an individual that had expertise in billing, others in the office would likely have relied on him or her to submit claims correctly. A defense attorney could help argue that others in the office did not know and could not have known that there were allegedly fraudulent claims filed by the billing expert.
Finally, depending on the specific type of Medicaid fraud that is being alleged, the prosecutor has to prove additional elements. For example, one category of fraud requires a material fact to be misrepresented. If there is something inaccurate in the claim that does not impact the substance of the submitted claim, a defense attorney would argue that it does not rise to the level of fraud. In every possible version of Medicaid fraud, a defense attorney can explore a possible argument to demonstrate a misunderstanding rather than misconduct.
Why Do I Need A Lawyer?
Any criminal prosecution or civil lawsuit can be stressful, and a lawyer can help you navigate the process. From the first stages of communicating with investigators and prosecutors, a lawyer can work with you to determine the best option for your situation. Disclosure and cooperation within a certain window of time can reduce the fines and prosecution impacts, and a lawyer can evaluate if this option is right for your situation. If you have to face a trial, a lawyer can provide a vigorous defense. Understanding of the statutes and experience with these cases equip a skilled legal team to fight for you.