Healthcare industry hit most by FCA in 2016

The Department of Justice obtained more than $4.7 billion in settlements and judgments from cases involving fraud against the government—the third highest annual recovery in the history of the False Claims Act (FCA). The lion’s share ($2.5 billion) of the total amount was recovered from the healthcare industry, according to a DOJ announcement.

Whistleblowers were responsible for over 60% of total FCA recoveries last year. The FCA’s whistleblower (“qui tam”) provisions are used in virtually every sector of the economy, from fighting healthcare fraud in Medicare to government procurement contracting fraud. If the government prevails in the action, the whistleblower is eligible to receive up to 30% of the monies recovered.

In the heavily regulated and litigated healthcare industry, qui tam lawsuits typically revolve around the measurement of the fair market value of physician compensation. When valuing a business arrangement or transaction between a healthcare entity and physicians, the valuation must not include a consideration of anticipated referrals. If it does, the entity making payments under the arrangement could face huge penalties for making illegal kickbacks to physicians under the Stark Law and FCA.

In addition to fraud, valuation issues such as intangible assets, personal and professional goodwill, and noncompete agreements, among others, often take center stage in court. BVR’s new Business Valuation and Healthcare Case Law Compendium features the most discussed and the most recent court cases involving business valuation disputes in the healthcare industry.