How Forensic Accountants Can Assist in False Claims Act (“FCA”) Litigation Matters

The U.S. Department of Justice (“DOJ”) reported its False Claims Act (“FCA”) statistics for fiscal year 2020. More than $2.2 billion was recovered from both settlements and judgments in 2020 on FCA matters and over 80% of all recoveries came from the healthcare industry.

A qui tam, or whistleblower action, under the FCA allows individuals known as “relators” to sue a company or individual who has defrauded the government. If the government feels the whistleblower’s claim has merit, it may opt to intervene and take over the case. Healthcare related recoveries in 2020 focused on cases against drug and medical device manufacturers, managed care providers, hospitals, pharmacies and physicians. Involving a forensic accountant in FCA matters is critical as they have the skillset to analyze vast amounts of data and identify patterns and irregularities and summarize and present vast amounts of data in a manner that is both understandable and supportable.

Forensic accountants can assist plaintiffs, defendants and government agencies in qui tam cases in either prosecuting or defending violations such as phantom billing, upcoding, kickbacks and billing for unnecessary services by being able to quickly and efficiently analyze large amounts of claims data and assist with the quantification of damages. Forensic accountants can help assist plaintiffs and/or government agencies by analyzing statistically sampled claims data, billing records and/or medical records to identify indicia of fraud and calculate financial damages especially when claim by claim analysis is not feasible. This involves designing and selecting a Statistically Valid Random Sample of patient records and/or billings to assess patterns in billing activity and extrapolate results of the sample. A skilled forensic accountant should be able to manage voluminous records and documents and distill the information into clear and concise schedules and/or written communications to counsel and governmental agencies.

Forensic accountants can also assist in defending medical providers who may be accused of receiving overpayments from governmental agencies by assisting in reviewing and analyzing the sampling and extrapolation methodology utilized by the government, relator and/or an opposing expert. Forensic accountants can work with defense counsel by scrutinizing the sampling process for weaknesses in the governments presumptions from the claims data. Additionally, forensic accountants should review the sample set in order to determine whether the sample was truly random as it relates to the data set analyzed. As an example, were too many high value sample claims selected in comparison to the percentage of high value claims, which would greatly impact the amount of overpayment? Additionally, was any of the sample previously audited by another governmental auditor with contradictory findings? Forensic accountants need to consider any of these factors in order to invalidate the sample set. Establishing that a sample set is improper can immediately invalidate any extrapolation methodology used.

FCA cases typically require a company to collect electronic and hard copy documents spanning multiple years and locations. Damage theories in FCA matters can be complex and may require the special skills of forensic accountants to formulate damage theories and quantify damages amounts. After assessing the damages, forensic accountants can assist with settlement and mediation negotiations. In a litigation setting, accountants can serve as an expert witness, offering opinions as to damages and calculate potential penalties and critique the opposing sides damage methodologies, assumptions and calculations.