An economic model to analyze the impact of false claims act cases on access to healthcare for...

I. INTRODUCTION

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In 1964 President Lyndon B. Johnson declared a "War on Poverty.", By 1965 Congress had enacted several key weapons in that war,2 including two massive revisions to the Social Security

Act designed to provide broad access to healthcare for the elderly, the disabled and poor, uninsured pregnant women and infants. The current Medicare3 and Medicaid4 health insurance programs, along with the State Children's Health Insurance Programs provide health insurance and thus, access to healthcare, for 60% of people living in poverty.6 Medicaid alone pays for half of all nursing home care in this country.7 Medicare pays for hospital care for over 32.4

million elderly Americans, and for 3.7 million disabled Americans.8 Medicare and Medicaid have been called the "lynch pin" in the nation's strategy to assure access to healthcare for low income Americans.9 In short, the War on Poverty is not effective without the access to healthcare Medicare and Medicaid afford to the poor, elderly and disabled.10

Soon after their enactments, the cost of administering Medicare and Medicaid programs increased11 so dramatically that a new war gradually emerged. In the words of one commentator, "One of the U.S. Department of Justice's . . . highest priorities for the past several years has been to conduct a 'war on health care fraud."'12 Unfortunately, the methods used in this new war on healthcare fraud contradict and compromise the healthcare access goals central to the original War on Poverty.

Cost containment, not universal access, is the objective of the war on healthcare fraud. A key strategy in this fight is to eliminate the amount of money the government spends on Medicare and Medicaid fraud. As early as 1978 the Department of Justice (DOJ) announced that the prosecution of Medicare and Medicaid fraud was one of its top priorities.13 This offensive was reaffirmed by the Reagan administration in 1986,14 but the war against Medicare and Medicaid fraud began in earnest during the early 1990s.

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First, state Medicare and Medicaid fraud control units initiated legislation to combat fraud, naming this objective a "top priority."15 Then the Clinton Administration announced its strategy of "focusing . . . unprecedented attention on the fight against fraud, abuse, and waste in the Medicare and Medicaid programs."16 In 1993 the Department of Health and Human Services (DHHS), the Inspector General (OIG), the Health Care Financing Administration (HCFA),17 the FBI and the DOJ all combined efforts to "focus on fraud and abuse."18 "Operation Restore

Trust," a partnership of federal and state agencies, was launched by the Clinton Administration in May 1995; this program was designed to guarantee funding for fraud and abuse enforcement efforts within DHHS and local fraud control units.19 HCFA enlisted the help of Medicare and Medicaid beneficiaries, providers and contractors in the effort to combat fraud in addition to federal and state government efforts.20 The government began to use citizen-based programs such as "Seniors Organized to Restore Trust"21 to encourage patients to report fraud. The offensive also included programs aimed at encouraging Medicare and Medicaid providers to report fraud voluntarily in exchange for the possibility of reduced penalties.22

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Congress' contribution to the anti-fraud war effort has been substantial. Between 1990 and 2000 Congress almost annually passed stricter laws to combat healthcare fraud.23 Currently over thirty federal statutes address healthcare fraud.24 However, the Civil False Claims Act (FCA)25 is by far the most potent and frequently used weapon in the government's arsenal to combat fraud.26 Under the FCA, a government contractor may not knowingly submit, or cause to be submitted, a false or fraudulent claim for payment to the U.S. Government.27 If an FCA violation is proven, not only may the government recover penalties and damages from the defendant, but the qui tam28 provision of the FCA creates a private cause of action so

that a private plaintiff may also earn a substantial share of those funds.29 This is especially appealing to government and qui tam plaintiffs in medical fraud cases where each and every reimbursement, for each and every patient visit, over a number of years, may represent a fine or penalty plus treble damages.30 It is no wonder that the FCA has been aggressively used by both the government and private plaintiffs.

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This article discusses "false certification claims," an aggressive and arguably abusive application of the FCA to medical fraud cases.31 False certification claims

differ from ordinary FCA actions because they do not allege that a defendant directly violated the FCA by filing a false or fraudulent claim for payment. Instead, a defendant can be held liable in these cases even if the claims filed were true and fair. FCA liability in false certification cases turns on a finding that the defendant expressly or impliedly certified compliance with all Medicare and Medicaid rules, regulations and requirements, but that certification turned out to be false.

To date these false certifications fall into two distinct categories. The first and larger category includes cases in which the defendant either expressly or impliedly certified compliance with all Medicare and Medicaid regulations, and then requested payment from the government while the defendant was in fact in violation of a separate and unrelated statute or regulation. This article refers to this first group of false certification claims as "statutory false certification cases." The second and smaller category of FCA cases base liability on a finding that the defendant provided medical care that somehow fell below the standard of care. This second category of false certification cases is less well defined because the breach of the standard of care may be due to providing medically unnecessary care, inferior care or even overpriced care. Because these cases generally involve an alleged breach of a professional standard of due care, this article designates these cases as "tort false certification claims." Both categories of false certification cases involve post hoc determinations that the provider's express or implied certification of compliance, and not the submitted claim itself, was false and thus satisfied the FCA's "false and fraudulent" element. This article explores the substantive problems with these two types of false certification claims, and analyzes these claims' effects upon the ability of the elderly, disabled and poor to access healthcare.

Part II analyzes false certification claim case law. Part III summarizes two doctrinal flaws in applying the false certification theory to medical fraud cases. This article argues that private enforcement of statutory false certification claims is preempted, while tort false certification actions exceed the courts' federal common law making authority. Part IV of the article examines the key role of Medicare and Medicaid in providing access to healthcare for this country's poor and underserved. This section suggests an economic model that may be used to analyze the potentially damaging effect of false certification cases on the nation's healthcare safety net. The article concludes that as long as false certification cases continue to proliferate, the healthcare access goals of the War on Poverty may be the greatest casualty of the war against medical fraud.

II. FALSE CERTIFICATION CASES IN THE COURTS

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Medical fraud is an expensive waste of public funds. The government has sought increasingly aggressive methods of attacking dishonest providers as healthcare costs have escalated.32 There is no shortage of federal statutes to address the problem of medical fraud.33 For example, criminal provisions recently enacted in the Health

Insurance Portability and Accountability Act (HIPAA)34 increase the number of criminal law provisions targeting healthcare fraud. These new laws, in addition to the Criminal False Claims Act,35 mail fraud and wire fraud statutes,36 money laundering statutes,37 the Racketeering Influence and Corrupt Organizations Statute38 and the Criminal Anti-Kickback and False Claims Statutes,39 all provide criminal sanctions for fraudulently billing the government for Medicare or Medicaid services. Yet these statutes have fallen into relative disuse as the more attractive FCA option enjoys increasing success in the courts.40

A. THE ADVANTAGES AND ABUSES OF PROSECUTING FRAUD UNDER THE CIVIL FALSE CLAIMS ACT

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The FCA is an attractive anti-fraud weapon for several doctrinal reasons. First, it provides plaintiffs with an evidentiary advantage over proving claims based upon underlying criminal or civil fraud statutes. A prima facie case under the FCA requires no showing that the government incurred loss due to the defendant's violation of the statute.41 Second, the civil burden of proof relieves plaintiffs of the burden of proving criminal fraud beyond a reasonable doubt as required, for example, under the Medicare and Medicaid Anti-Kickback Act.42 Third, some jurisdictions require no causal link between the defendant's alleged violation of the FCA and any alleged injuries.43 Fourth, even the smallest financial overpayments are actionable under the FCA because the statute contains no materiality element.44 Finally, the FCA requires no showing of a specific intent to defraud, unlike criminal statutes.45

The FCA also offers several pragmatic advantages over other statutes. It is a useful prosecutorial tool because its terms are relatively simple and straightforward. It can be applied generally to all types of healthcare providers, and to a wide variety of fraudulent billing practices. False certification claims have succeeded in cases against providers ranging from individual physicians,46 nursing homes,47 hospitals48 and medical equipment manufacturers.49

The magnitude of defendants' potential exposure in false certification cases serves as a powerful incentive to compromise claims.50 Moreover, the potential for private qui tam plaintiffs to share in sizeable recoveries provides financial incentive to government and private prosecutors to work together to use the FCA.51

Other financial considerations exist that make the FCA a weapon of choice in what one commentator has called an "uphill battle against healthcare fraud."52 Providers who face increasing costs and declining utilization and reimbursement rates also face pressure to compete in increasingly more creative and complex ventures. Fraudulent schemes may become attractive to more desperate providers and are more difficult to discern.53 Even with enhanced financial and personnel resources such as those provided under HIPAA,54 medical fraud is difficult to detect.55 Therefore, the FCA's qui tam provision enhances the enforcement effort by allowing the government to enlist the assistance of private plaintiffs as qui tam relators,56 thereby expanding the government's ability to prosecute fraud. For example, of the nearly 2,300 civil claims pending against healthcare providers in 1999, 21% were filed by qui tam plaintiffs.57 In addition, between 1986 and September of 2000, qui tam plaintiffs had filed over 3,300 FCA cases.58

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In light of its strengths the FCA does have a place in combating fraud. Its usefulness is in cases of "true" fraud and falsity, in which the facts of a given case

directly satisfy the elements of the statute. These may include cases in which providers (1) billed for services never rendered;59 (2) altered certificate of need documents to misrepresent their qualifications to participate in Medicare and Medicaid programs;60 and (3) "upcoded" or "unbundled" fees.61 However, the exact features that can make the FCA an attractive prosecutorial weapon in such cases of actual fraud are also the features that have allowed unchecked government prosecutors and qui tam plaintiffs to overuse and abuse the FCA.

The DOJ's overzealous use of the FCA to prosecute health fraud is well documented. One troublesome example is the DOJ's practice of mounting nationwide "initiatives," which prompted Congress to consider revising the FCA.62 The initiatives, massive investigations targeting Medicare and Medicaid providers, are not based on evidence of actual fraudulent or suspicious activity by a particular institution, but rather upon the probability of fraud based on the size and number of Medicare or Medicaid billings submitted.63 By 1997 the DOJ had developed an intense program of issuing blanket threats of FCA litigation against hospitals without supporting evidence of fraud, armed only with the powerful threat of prolonged and expensive litigation in federal court.64 In this way the government could invest relatively few resources in investigation efforts. This practice created incentives for these providers to pay large settlements by "inviting" them to prove their innocence. The payoff was huge. In July 1998, the GAO reported that 2,400 hospitals had settled in the 72 Hour-Window initiative project alone.65

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In response to evidence of the government's abuse of the FCA, congressional representatives introduced legislation to revise the statute in a manner that would raise the government's burden of proof.66 Fearing a change in the statute, the DOJ issued guidelines in June 1998 to control the government's misuse of the FCA in healthcare fraud cases.67 Rather than amend the FCA, Congress passed a statute in 1998 requiring the GAO to monitor the DOJ's compliance with the guidelines.68 As

of August 1999, however, the evidence suggested that compliance is still spotty. While improvements have been made, the government continues to overreach and misuse the FCA in the fight against healthcare fraud.69 Moreover, while the GAO will continue to monitor the government's procedural misuses of the FCA, current case law suggests that substantive applications of the statute provide another example of FCA overuse.

I. False Certification Cases Alleging Statutory Violations

Statutory false certification claims assert liability under the FCA based on evidence that the defendant submitted a claim for payment to the government while violating a separate and possibly unrelated underlying federal or state statute. While the plaintiff must prove the elements of the underlying statute, this theory does not require the plaintiff to satisfy the elements of the FCA itself.70 For example, the plaintiff need not show that the claim for payment itself was false or fraudulent in order to make out a prima facie false certification case. Rather, the plaintiff may meet the burden to prove the fraud or falsity element of the FCA merely by showing that the defendant violated another requirement. The defendant is assumed to have certified that no underlying violation existed at the time the defendant filed a claim for payment and, in light of the proven violation, that certification is allegedly false. The defendant's certification may be found either in an express promise to comply with certain laws, or in more general annual cost report or claim forms. Courts may even imply certifications merely by a provider's participation in the Medicare or Medicaid program. Perhaps the most difficult concern raised by statutory false certification cases is the use of a private cause of action under the FCA, where the underlying statute allegedly violated may have expressly excluded or failed to provide such relief. This occurs when false certification cases are based upon violations of the Medicare and Medicaid Anti-Kickback statute,71 or the Stark antiself-referral laws.72

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The Fifth, Sixth and Ninth Circuits, as well as state courts in Tennessee, Maryland, Louisiana, Massachusetts and Pennsylvania73 have approved such statutory false certification claims. In these cases the FCA became a tool for private parties to bring Anti-Kickback and Stark I and II claims where none could be brought under those statutes directly. For example, in United States ex rel. Pogue v. American Healthcorp, Inc.,74 the qui tam plaintiff alleged that the defendantphysicians referred Medicare and Medicaid patients to centers in which they owned a financial interest in violation of both the federal Anti-Kickback statute and the Stark

laws. The Pogue court found these referrals had violated the underlying anti-fraud statutes and, therefore, also stated a prima facie case under the FCA.75 The court concluded that the plaintiffs statutory false certification claims action was colorable because the defendants had impliedly certified that they were in compliance with Medicare and Medicaid rules, including the Anti-Kickback and Stark laws, when they filed their claims for payment. Even if the claims themselves were not intentionally false, they were actionable to the extent that they derived from conduct intended to defraud the government.76

In 1998 the plaintiff-physician in Thompson v. Columbia HCA Healthcare Corp.77 alleged that the defendants, healthcare providers, submitted annual cost reports containing false certification of compliance with Medicare statutes and regulations. The plaintiff alleged that the defendants had received referrals of Medicare patients from physicians who also had financial relationships with the healthcare corporations. The Thompson court held that these referrals violated the Stark and Anti-Kickback statutes, and that three distinct statutory violations could provide the basis for FCA liability under the statutory false certification claims theory.78 First, claims based on violations of Stark II were held per se actionable under the FCA.79 Second, false certification claims based on underlying violations of either the Anti-Kickback or Stark prohibitions were also held actionable.80 Finally, the Thompson court approved statutory false certification claims based on any violation of any underlying statute, for which the defendants expressly stated compliance with Medicare and Medicaid requirements.81

In United States ex rel. Joslin v. Community Home Health of Maryland, Inc.,82 the plaintiff alleged that a defendant home healthcare provider had violated Maryland's state certificate of need (CON) regulations. The key question in Joslin was whether the defendant had failed to comply with Maryland's state licensing laws by not obtaining a CON. The previous owner of the home healthcare agency had incorporated at a time when an exemption under Maryland law did not require home health agencies to have a CON to operate.83 However, by the time the defendant acquired the agency's stock, Maryland had repealed the exemption.84 The relator argued that the acquisition triggered a violation of Maryland law actionable under the FCA because the defendant only participated in the Medicare program based upon its certification that the facility was "in compliance with all applicable federal, state and local laws and regulations."85 The Joslin court disagreed.

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First, the court concluded that the defendant's license to operate home health services was valid under Maryland law.86 The court then reasoned that the defendant-provider's acquisition of the home health services did not constitute a

change in services that triggered Maryland's new CON requirements.87 Even if the defendants had violated Maryland's CON law, summary judgment for the defendants would still be appropriate, because Joslin had failed to convince the court that such underlying violations compelled liability under the FCA.

Citing Thompson, the Joslin court distinguished cases in which the government based its reimbursement on the defendant's certified compliance with underlying state law.88 The court concluded that the general certification that the defendants submitted on Form HCFA-1450 contained no express certification that the defendants complied with state law.89 Moreover, the Joslin court declined to find liability based on an implied false certification theory. The court concluded that the mere submission of claim forms, without more, does not constitute implied certification of compliance with state law.90 Concluding that the qui tam relator's allegations "seriously undermined" the intended role of the FCA, the Joslin court refused to imply liability based on broad, general assurances.91 While the Joslin court's restraint provides some comfort that statutory false certification claims may not be indiscriminately applied to any statutory violation, that single court's ruling is insufficient to address the fundamental substantive flaw in this category of claims. Joslin is certainly not controlling law.

In United States ex rel. Wright v. Cleo Wallace Ctrs.,92 a Colorado District Court approved an implied certification theory of FCA liability. The Wright defendants operated psychiatric in-patient hospitals and residential treatment centers for children and adolescents. They were licensed pursuant to Medicare and Title IV(e) to operate a certain number of residential treatment beds and a certain number of in-patient psychiatric hospital beds at each of its facilities.93 The plaintiff in Wright alleged that the defendants' policy of assigning residential treatment patients to in-patient psychiatric beds violated state licensing requirements.94 Accordingly, the plaintiff argued that when the defendants sought reimbursement for services provided to residential clients unlawfully placed in in-patient psychiatric beds, they submitted false and fraudulent claims in violation of the FCA.95 The Wright court agreed.

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According to the court, the defendants had impliedly certified their compliance with state licensing laws when they submitted invoices to the government for reimbursement.96 Relying on a recent defense contractor case decided by the Tenth Circuit,97 the Wright court concluded that FCA liability may arise even in the absence

of express or affirmative false statements by a defendant.98 The court found support for this conclusion in the legislative history of the FCA. Citing a 1986 Senate Judiciary Committee report, the Wright court determined that false and fraudulent claims may occur "without the additional element of a false record or statement."99 Thus, the defendants could be found liable under the FCA for knowingly submitting claims for reimbursement while not in compliance with all relevant laws, rules and regulations, even without an affirmative or express false statement of such compliance.100

2. False Certification Cases Alleging Tort Violations

The second growing category of false certification cases involves claims that would otherwise be state tort claims, but are pled in federal court as violations of the FCA. Instead of relying upon state common law definitions of the standard of care, courts measure the defendant's conduct against promises to provide quality care or professional standards in practice or other objective guidelines. Providers who certify that they are in compliance with these standards by submitting claims for reimbursement to the government violate the FCA.

The U.S. Government's first success in pleading such a tort claim under the FCA was in United States ex rel. Aranda v. Community Psychiatric Centers.101 In Aranda the government alleged that the defendant's psychiatric hospital failed to provide its patients with a "reasonably safe environment."102 This constituted a FCA violation because the defendant hospital submitted bills to the federal government for psychiatric care that it had "implicitly certif[ied]" was provided in accordance with applicable statutes, rules and regulations requiring "appropriate quality of care and a safe and secure environment."103

In Aranda the facts showed that the defendant's patient care was egregious. The government alleged that the hospital was understaffed, used inadequate monitoring equipment, inappropriately assigned patients' housing arrangements and had failed to take adequate precautions to protect patients against physical injury, sexual abuse and the risk of suicide.104 The government therefore argued that it was improper for the hospital to both admit patients and bill Medicaid for care rendered in this environment. 105

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The Aranda court agreed that the government stated a colorable claim under the FCA. First, the court rejected the defendant's arguments that the standards allegedly violated were vague.]06 The government cited requirements that Medicaid providers must assure the government that patient services met certain quality of care standards.107 Secondly, the Aranda court declined to hold that the existence of a regulatory scheme for the enforcement of these Medicaid provisions precluded concurrent enforcement of statutory violations under the FCA. 108

The plaintiff-physician in United States ex rel. Mikes v. Straus' alleged that the defendant providers were liable under the FCA because they failed to follow the American Thoracic Society (ATS) standards for performing spirometry tests, used improperly calibrated instruments and inadequately trained personnel.110 The plaintiff further posited that the defendants could only qualify to participate in the Medicare program based on their assurances that they provided quality medical services.111 By failing to meet the ATS standard, the plaintiff argued, the defendant's assurance was false.112 The Mikes court rejected this argument, concluding that the "FCA is not an appropriate vehicle for policing technical compliance with administrative regulations."113 Leaving the door open for future cases, the Mikes court suggested that FCA liability might follow a breach of professional duty in an "exceptional circumstance," in which the government would refuse to reimburse based on a provider's failure to comply with a core requirement of their agreement.] 14

The Seventh Circuit's analysis of the tort false certification claim is instructive because it highlights basic common sense problems with these actions. In United States ex rel. Luckey v. Baxter Health Care Corp.,115 a former laboratory technician alleged that the defendant falsely represented that the plasma it sold was tested, as required by federal regulations, for hepatitis and HIV before sale. According to the relator, Baxter should have used a "total protein test" for each unit of blood plasma before sale, in order to satisfy this requirement, instead of using the "viral inactivation processes" that the defendant employed.116 According to the Luckey relator, using an inferior test necessarily made the defendant's representation that blood plasma tests had been properly performed false, fraudulent and actionable under the FCA.117 Judge Easterbrook explained that the plaintiff's claim failed to satisfy either the falsity, materiality or intent requirements of an FCA action.

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Only in Humpty Dumpty's world of word games would anyone apply the label "fraud" to the kind of representations Baxter made. Perhaps Luckey could persuade the Food and Drug Administration to require more or different testing; but when a supplier complies with the existing regulations, it is entitled to represent to the Government (and to the world) that it has done so, without facing a claim of deception.... Waste is regrettable, but the cost of plasma may be measured in dollars; and if Baxter is willing to bear the expense (thinking the costs of rejected pools to be less than the costs of more comprehensive testing earlier), it is hard to see why the federal government should force it to use the total protein test on each unit - and absolutely impossible to see why Baxter's resolution of the testing issue should be called "false" or "fraudulent."118

A qui tam relator unsuccessfully attempted to prosecute an apparent medical malpractice claim against a hospital and physician under the FCA in United States ex rel. Showell v. Philadelphia AFL, CIO Hosp. Ass'n.119 The Showell relator used the FCA to challenge the defendant's record-keeping and medical decisions made in connection with treatment of the plaintiff-relator's mother.120 Based on his own lay reading of the medical record, the relator testified that the defendant's medical care was substandard and actionable under the FCA.121 The Showell court granted summary judgment to the defendant-providers in this case, citing the relator's lack of discovery, failure to obtain an expert witness and misunderstanding of the facts. 122

The court in United States v. NHC Healthcare Corp.123 tried without success to draw a sensible distinction between those medical malpractice claims that are actionable under the FCA, and those that are not. In NHC Healthcare the government alleged that the defendant nursing home and skilled nursing facility breached its contractual obligation under the Nursing Home Reform Act to "care for its residents in such a manner and in such an environment as will promote maintenance or an enhancement of a quality of life."124 The court agreed, finding the defendant's obligation to provide a certain quality of care and life for the nursing home residents was at the core of the agreement between the government and the providers, and because this "essential agreement" was grossly violated, the procedures billed for were never performed at all.125 The court sought to distinguish cases in which the plaintiff merely disapproved of the type of care provided-citing the Mikes decision with approval for the proposition that submitting a claim for payment for services that failed to meet the standard of care without more, does not render a claim fraudulent under the FCA.126 Nevertheless, the NHC Healthcare court did not distinguish this standard of care case, which it viewed as plainly actionable under the FCA, from those cases that are not.127

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At issue in United States ex rel. Kneepkins v. Gambro Health Care, Inc. 128 was the defendant laboratory's practice of dividing necessary blood tests for end stage renal disease patients into two separate "panels." Although the government readily conceded that all of the blood tests performed by the defendants were necessary, the DOJ argued that it was false and fraudulent to certify the medical necessity of drawing two separate blood tests for each of the two panels recommended, rather than taking a single blood sample which could have been used to perform all the required blood tests.129 According to the government, although the separate blood posed little

incremental inconvenience to the patient, they unnecessarily increased the cost of the services.130 The government claimed the defendant had impliedly represented that the tests were provided "economically."131 The government would not have paid for these medical services had it been aware of the panel splitting procedures that defendants used to increase their Medicare payments.132 The Kneepkins court concluded that the defendant's partnership agreement, offering below-cost routine testing in exchange for more lucrative test referrals, could have violated the AntiKickback law and therefore sufficiently stated a claim under the FCA.133

United States ex rel. Swafford v. Borgess Medical Center134 presented the issue of whether providing medically necessary tests that used expensive procedures violated the FCA. A vascular technologist filed an FCA claim against the defendant, alleging that its claims for payment for venous ultrasound studies were false and fraudulent under the FCA.135 The relator in Swafford alleged two false certification theories of recovery. First, that the defendant expressly certified that all claims for payment were for services that were "medically indicated and necessary for the health of the patient."136 The plaintiff additionally alleged that the defendants impliedly certified that their claims were for "properly billable interpretations" of the ultrasound studies, based on the standards in the Medicare Provider Handbook.137 The Swafford court rejected both theories, concluding that the plaintiff's claims amounted to no more than allegations that the physicians' usage of venous ultrasounds were substandard.138 Without more, a plaintiff's allegations that the defendant's medical care failed to conform to the standard of care insufficiently established the falsity element under the FCA.139

The body of common law based upon tort false certification claims is increasing. The government first achieved success in this area in the 1996 Aranda decision.140 By 2000 the government's allegations of both substandard quality and uneconomic care had succeeded as false certification cases. While the list of tort false certification claims discussed here is not exhaustive,141 the cases discussed demonstrate that the government appears to be achieving greater success than qui tam plaintiffs. In fact, it is the qui tam claims, whether statutory or tort false claims, that are doctrinally insupportable.

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To be sure, false certification claims appear attractive to courts and prosecutors alike because they not only combat a pervasive problem, but also because these cases solve difficult investigatory and proof problems otherwise faced in prosecuting medical fraud. However, the following section of this article argues that courts have overlooked the fact that tort-based FCA actions violate principles of federalism by replacing state law with federal common law. In addition, statutory false certification claims are most troublesome when they are brought as private causes of action

premised upon violations of the Anti-Kickback and Stark laws because these cases are arguably preempted.

III. TWO DOCTRINAL PROBLEMS WITH FALSE CERTIFICATION CLAIMS: PREEMPTION OF PRIVATE ACTIONS AND FEDERAL GENERAL COMMON LAW

Private enforcement of statutory false certification claims alleging FCA violations of the Anti-Kickback and Stark laws are preempted by federal and state governments' comprehensive legislation erecting an administrative enforcement network to address medical fraud and abuse. The tort false certification claims violate principles of federalism, by subsuming and federalizing state common law claims to create general federal common law, regardless of whether the action is brought by the government or by a qui tam relator. These two doctrinal flaws in the false certification cases are explored below.

A. PREEMPTING PRIVATE ENFORCEMENT OF STATUTORY FALSE CERTIFICATION CLAIMS UNDER THE CIVIL FALSE CLAIMS ACT

Each of the statutory false certification claims cases reviewed in the prior section were brought by private qui tam plaintiffs. Pogue and Thompson were both based on alleged violations of the Anti-Kickback and Stark laws. Similarly, although the Kneepkins tort false certification case appeared to rest on allegations of costineffective treatment, the court's holding rested on a potential violation of the AntiKickback law as a basis for the FCA claim.142 Despite the elaborate administrative and regulatory scheme that Congress has enacted to enforce its Medicare and Medicaid anti-fraud laws, qui tam plaintiffs have been attracted to bring these cases under the FCA. Clearly, they would have no standing to litigate these cases absent the FCA because none of the anti-fraud laws create a private right of action. To date no court has addressed the question of whether private enforcement of these laws under the FCA is preempted. 143 This section of the article describes five reasons why qui tam enforcement of the medical anti-fraud laws under the FCA is preempted.

As an initial matter, according to general rules of statutory construction, private enforcement of the Medicare and Medicaid anti-fraud laws is preempted.144 Moreover, Congress has not provided a private right of action in the medical antifraud laws, though it has done so in the similar, general Anti-Kickback Act.145 It is reasonable to conclude that Congress's omission of a private action in the medical anti-fraud laws was deliberate, not inadvertent. The statutory false certification actions, therefore, make a questionable "end run" around Congress's decision to delegate administration and enforcement to the government.

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The question of whether to allow private FCA enforcement of these anti-fraud

laws is complicated by the fact that there is no express preemption language in any of the statutes. However, Cass Sunstein146 and others147 have developed a paradigm to identify those cases in which the presumption against preemption of private causes of action should be abandoned. Applying the Sunstein model to the statutory false certification cases leads convincingly to the conclusion that these actions do not fit the paradigm, and that no private cause of action via the FCA should be implied under the Medicare and Medicaid Anti-Kickback and Stark laws.148

The question remains, however, whether the FCA is an appropriate vehicle to create a private right in medical fraud cases. Although the FCA was enacted prior to the anti-fraud statutes, when Congress substantially amended the FCA in 1986, one may presume that the legislature was aware of the specific provisions of the antikickback, self-referral and HIPAA statutes. Yet, Congress may not have been mindful of the alternative avenues for private prosecution of its public laws. Moreover, Congress may have intended for private remedies to be unavailable in certain medical fraud cases.

Sunstein's paradigm categorizes cases in which preemption of private rights of action is proper.149 Statutory false certification cases fit squarely within this category. First, the anti-kickback and self-referral statutes involve open-ended substantive standards not suitable for private exercises of prosecutorial discretion.150 The medical anti-fraud statutes incorporate a network of exceptions and safe harbors that provide prosecutors with wide enforcement discretion for conduct that is covered under substantive provisions of the law. Second, the medical anti-fraud statutes must be enforced in a consistent and coordinated manner in order to avoid severe disruption of the regulatory scheme and of the nation's healthcare market. Third, the detailed array of administrative sanctions available under the anti-kickback and selfreferral statutes implies that Congress intended to calibrate these sanctions with a variety of enforcement levels. The anti-fraud statutes combine a variety of civil penalties, ranging from fines to reimbursement of overpayment to exclusions from federal programs, together with a range of criminal penalties ranging from fines to incarceration. The intent elements of the civil and criminal anti-fraud statutes also vary.

Prohibited conduct under these laws is often described in such detail and precision that the penalties must be carefully matched with the egregiousness of the questionable conduct in each case. The government agencies maintain the discretionary authority to assign penalties to a virtually infinite array of economic conduct, depending upon the activity at issue.

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A fourth reason to find private actions preempted under the anti-kickback and self-referral laws is that these statutes protect collective as well as individual interests. The much celebrated collective interest in reducing medical fraud and

healthcare costs, without discouraging productive competitive behavior, stands at the core of the medical fraud statutes and therefore suggests that Congress intended exclusively public enforcement of these laws.151 Applying Sunstein's model lends strong support to the conclusion that private enforcement of statutory false certification claims should be preempted.

The Supreme Court also has sought ways to limit judicial authority to create private rights of action where Congress did not establish such rights. In Cannon v. Univ. of Chicago,152 Justice Powell vigorously dissented, articulating that judicial creation of private rights is an impermissible form of lawmaking. Since Justice Powell's dissent in Cannon, the Supreme Court has had several opportunities to adopt this dissenting view as law. In California v. Sierra Club,153 the majority cited Cannon in adopting Justice Powell's reasoning. Moreover, the Court has become increasingly aware that creating private remedies apart from the congressional structure may create conflicts with the legislature's intended enforcement scheme under federal law.

In Sunstein's words, judicially-created private remedies may result in "a different kind and degree [of enforcement] than Congress intended,"154 where, as with the anti-fraud statutes, Congress has enacted a variety of civil and criminal penalties that apply to different conduct by defendants. Felony sanctions under the anti-fraud law only apply to kickbacks,155 while misdemeanor penalties and jail terms apply to convictions for filing certain false claims.156 Other false claims or selfreferral violations may result only in civil fines, or in sanctions ranging from restitution to exclusion from the federal health insurance programs altogether.157 By contrast, under the statutory false certification claims theory of recovery, only fines and treble money damages are available as sanctions for the courts to impose.158 This single sanction may in fact undermine the legislative balance represented by the substantive provisions of anti-fraud statutes, and the commensurate sanctions.

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In Regents of the Univ. of California v. Bakke,159 Justice White summarized the Court's reasons for declining to create private actions under Title VI of the Civil Rights Act of 1964. According to Justice White, recognizing private actions would reverse procedural prerequisites that Congress created under the Title VI statute.160 Moreover, Justice White pointed to other civil rights statutes that created private causes of action, as evidence that Congress knew how to create such rights when it wished to do so.161 Justice White expressed concern that litigants might bypass administrative procedures to obtain judicial enforcement, thus disrupting agency authority to establish uniform policy. Finally, Justice White was concerned that by creating judicial remedies, Congress might be lulled into complacency, and would fail to consider the propriety of creating a cause of action for private citizens.162 Justice White's analysis is a salient warning against the private rights federal courts are creating in statutory false certification cases today.

The statutory false certification cases based upon Anti-Kickback and Stark laws threaten the legislature's purview to create remedies for private parties who would otherwise be without redress for offenses and violations of anti-fraud law. Similarly, Congress should consider whether the current administrative enforcement by DHHS is deficient or inferior, or if the level of judicial review for administrative decisions in medical fraud cases is inadequate. The legislature, not private parties acting through the courts, must repair these shortcomings. The Supreme Court has not only retreated from the position that once allowed it to create private rights where Congress had declined to do so, but the Court has developed a presumption against the creation of such private rights. This development flatly contradicts the now popular use of the FCA to prosecute Medicare and Medicaid fraud.

B. CURBING THE CREATION OF FEDERAL COMMON LAW VIA TORT FALSE CERTIFICATION CLAIMS UNDER THE CIVIL FALSE CLAIMS ACT

In Erie Railroad v. Tompkins,163 Justice Brandeis made his famous pronouncement that "There is no federal general common law." He wrote this to explain the majority's holding that federal courts may not replace state common law with federal common law rules when deciding diversity cases.164 The precise scope of this broad prohibition continues to be debated today.165 However, there is virtually no rational understanding of Erie that supports the increasingly frequent practice in tort false certification cases, in which federal courts replace malpractice, licensing, CON or other state laws with federal common law based upon the FCA.

Erie involved a classic choice of law question before a federal district court sitting in diversity: whether to apply the state law of Pennsylvania or that of New York in deciding a personal injury claim against the defendant railroad.166 Erie supports the proposition that regardless of which state's law applies, a federal court may not ignore both states' common law rules and replace them with law of its own creation.167 This does not mean, however, that no instances exist in which a federal court may disregard all state law on a particular point, in favor of reaching a judicial solution.168

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Specific examples of appropriate federal common-lawmaking authority have been suggested.169 For example, federal courts are free to create federal common law in cases involving disputes between two states.170 Also, federal common law may be applied in cases involving the rights and obligations of a federal agency,17, as well as in cases in which Congress has created rights without a specific remedy for the

breach of those rights.172 Finally, commentators agree that when Congress or the U.S. Constitution has "federalized" a particular area, the federal courts are free to create federal judge-made law.173 Despite the vigorous debate in legal literature, and the attempts to classify and catalog the limits of federal judicial authority, no commentator argues that a federal court may generally use a federal statute to displace judgments typically made by state courts with their own rules. However, courts approving tort false certification claims are doing just that, despite the fact that these claims fit none of the exceptional categories which permit federal common-law making.174

The tort false certification cases adjudicate disputes between private parties, not between two states. They do not involve an agency of the United States, neither do these cases involve rights created by the Constitution or Congress. Finally, unlike labor law cases, the malpractice and state licensing law cases that arise as tort false certification actions do not involve areas of law that have been legitimately "federalized."

In Aranda, for example, the question of whether the defendant psychiatric hospital had provided reasonable care duplicates the inquiry that a state court would encounter if a plaintiff alleged a breach of the professional standard of care under negligence law. The allegation that the defendant in Mikes used substandard equipment and technicians and the quality-of-care issues raised in NHC Healthcare would have been tested under state negligence principles if not for the plaintiff's decision to raise the identical question under the FCA. Even the state licensing issues raised in Joslin and Wright raise state, not federal, law issues that tort false certification cases merely ignore. This displacement of state law not only violates the principles of Erie, but it also contradicts the Supreme Court's clear trend toward restricting federal courts' ability to create common law. Although some commentators have argued that this trend is incorrect, it is nonetheless undeniable.175 The tort false certification cases oppose this trend and violate the foundational principles of Erie by federalizing a body of law that neither the Congress nor the U.S. Constitution have addressed.

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The Erie doctrine should suggest restraint in both statutory and tort false certification cases. Federal courts may view both types of FCA actions as overreaching by the federal courts. However, the work of legal scholars in these cases must not stop after merely outlining the theoretical shortcomings of false certification cases. These cases present "real life" implications for the poor, elderly and disabled who seek healthcare that are impossible to ignore.

IV. THE IMPACT OF FALSE CERTIFICATION CASES ON MEDICARE AND MEDICAID PROVIDERS' WILLINGNESS TO PROVIDE ACCESS TO HEALTHCARE FOR AMERICA'S RURAL, POOR, ELDERLY, DISABLED AND MINORITY POPULATIONS

Healthcare providers who serve Medicare and Medicaid patients are the only providers vulnerable to the abuses of the false certification claims discussed in this article. These providers submit claims for payment to the government that may be actionable under the FCA. Many of these same providers are primarily responsible for serving the most vulnerable and underserved patients in America. In fact, Medicare and Medicaid providers are largely the only access to healthcare that most underserved communities in this country have. To the extent that over-enforcement of the anti-fraud laws through false certification cases improperly impairs the ability of these providers to deliver healthcare, these cases also work to reduce access to healthcare for America's most underserved populations.

In 1965 the Medicare and Medicaid programs were enacted as a part of President Lyndon Johnson's "Great Society" legislation in an attempt to provide access to healthcare for America's poor, disabled and elderly.176 It was envisioned that by providing public health insurance, these laws would remove financial barriers to mainstream healthcare and thus ensure access for targeted groups.177 However, the cost of these programs has doubled every two to four years since their enactment, which has compromised access objectives.178 Now, to remain solvent at all, the federal government has had to mount a vigorous campaign to stop spiraling cost increases. In 1997 the Trustee of the Medicare Hospital Insurance Trust Fund reported that the trust would become insolvent in the year 2000.179 The continued existence of the Medicare and Medicaid programs therefore depended upon the success of cost containment.180

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In response, Congress enacted two sweeping pieces of legislation in an effort to address healthcare cost inflation. Congress passed the Balanced Budget Act of 1997 181 (BBA), which introduced a variety of managed care options for Medicare and Medicaid beneficiaries,182 granted the states increased flexibility in administering Medicaid programs183 and deeply cut Medicare reimbursements generally, and specifically to rural health clinics.184 Also, in 1996, Congress enacted HIPAA, providing substantial financial resources to HCFA, the OIG and the DOJ to enhance efforts to reduce the estimated 10% of total Medicare and Medicaid costs wasted on

fraudulent and abusive claims.185

Government and private qui tam prosecutors have responded by attacking fraud through the courts. However, given the described doctrinal flaws in the courts' current approach to statutory and tort false certification claim cases, it is possible to view the proliferation of these cases as an overzealous response to the need for cost containment in Medicare and Medicaid. The unanswered question is whether the cost of over-enforcement of anti-fraud laws, via false certifications claims, exceeds the benefit of reducing healthcare fraud using the FCA.

Several empirical studies have examined the effects of other cost constraints on providers' willingness to serve Medicare and Medicaid patients.186 However, no studies document the effect of vigorous anti-fraud efforts on access to healthcare. The following discussion takes an initial look at this empirical inquiry by suggesting that overly aggressive anti-fraud enforcement efforts are likely to detrimentally decrease access to healthcare.

A. ACCESS TO HEALTHCARE IN RURAL AND URBAN AREAS

In its February 1998 report, the Council on Graduate Medical Education (the Council) called the geographic maldistribution of healthcare providers and service "one of the most persistent characteristics of the American healthcare system."187 The report highlights a paradoxical problem: despite the fact that the United States has an oversupply of physician labor in the country overall,188 rural and inner city areas continue to be significantly underserved.189 While it is important to understand that the "availability" of health services is not the same as "accessibility" to those services,190 the basic assumption of studies and analysis reviewed in this section is that the presence of hospitals, physicians and other health providers within a geographic community will positively affect access to healthcare and vice versa. 191

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According to the Council, physician and provider shortages in inner-city and

rural communities were reported as early as 1933.192 By 1970, the federal government had instituted community and migrant health center programs to remedy local healthcare shortages.193 The government continued to target areas lacking in adequate medical resources by passing legislation designed to designate underserved areas as "Health Professional Shortage Areas" (HPSAs)194 or "Medically Underserved Areas and Populations" (MUA/Ps).195 The federal government also instituted programs to train health professionals who would be required to work in underserved areas;196 to provide economic incentives for practitioners to relocate to these communitiesl97 and to establish clinics in underserved communities.198 These efforts succeeded in increasing the number of available healthcare providers, but the disparity between physicians available to urban and rural areas continued to grow. 199 Despite the proximity to some of America's most sophisticated tertiary care facilities and teaching institutions, and the abundance of physicians in urban regions, physicians continued to shun practices in poor inner-city communities. In 1977, 855 urban areas qualified to be HPSAs.200 The most recent evidence is that 47 million people-one in every six Americans-lives in a designated shortage area.201 These shortage areas are primarily rural and inner-city poor communities. However, the reasons and remedies for shortages in these two disparate regions differ sharply.

Three reasons are cited for the persistence of physician shortages in rural areas. First, the extreme poverty of rural populations presents complex healthcare needs and little financial reward.202 Second, these areas lack "conventional physical and cultural amenities" to attract providers to these locations.203 Third, the fact that rural populations consist primarily of racial or ethnic minority groups deters physicians from locating in rural communities.204

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Although physicians do not face the same personal lifestyle constraints in urban areas that rural regions present, shortages persist in the poorest "pockets" of urban America as well. One study of ten U.S. cites reported that the number of office-based primary care physicians in poor urban communities declined 45% from 1963 to 1980.205 The factors contributing to this maldistribution of providers in urban areas are different and complex. First, physician perceptions about the urban poor affect

these providers' willingness to accept Medicaid and uninsured patients. The attitudes that deter physicians range from a reticence to accept patients with self-induced illness (i.e., substance abuse, non-compliance) to discomfort with class, cultural and racial differences, to fear of litigation and violence.206 Second, the quality of practice life in urban communities presents another deterrence to physicians. Physicians resist locating where the facilities, staffing, resources, hospital linkages, professional support and reimbursement rates all tend to be inadequate.207 Third, physicians cite clinical issues such as increased exposure to contagious diseases (i.e., tuberculosis, HIV) that dissuade them from practicing in poor urban communities.209

The lack of practicing physicians leaves rural and poor inner-city inhabitants to rely upon hospital emergency rooms and outpatient clinics for care.209 However, research indicates similar deficiencies in the distribution of hospitals to serve these communities. During the forty-year period from 1937 to 1977, 210 private hospitals with 30,000 beds closed or relocated from 52 of the country's largest cities.210 Private hospitals that remain in those cities limit their service to Medicaid patients, or close their emergency rooms altogether in order to discourage use of their facilities by low income patients.211 The increasing closure and relocation of private hospitals from poor urban and minority communities requires poor inner-city residents to rely upon teaching hospitals, which are "public" institutions accepting all Medicare and Medicaid patients, regardless of their ability to pay.212 Not only are these hospitals overcrowded and understaffed, relative to the disproportionate share of the burden to provide healthcare access to the urban poor,213 but teaching hospitals have been the target of some of the government's most zealous anti-fraud enforcement efforts. Similarly, providers serving the urban and rural poor are especially at risk of becoming the target of the government's fight against fraud due to the large numbers of Medicare and Medicaid patients who they serve. Ironically, not only do the wars against poverty and medical fraud compete in theory, but the very "foot soldiers" left standing to fight the former battle are the most likely to become its casualties.

B. MEASURING THE LIKELY IMPACT OF OVERREACHING FRAUD CONTROL ON MEDICARE AND MEDICAID PROVIDERS' SERVICE TO RURAL AND URBAN POOR COMMUNITIES

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The analytical theory this section suggests is simple. Medicare and Medicaid healthcare providers shoulder the overwhelming "lion's share" of delivering healthcare to rural and urban poor communities. While many of these providers exhibit altruistic characteristics that distinguish them from other healthcare professionals,214 they are nevertheless rational actors. When the marginal costs of delivering healthcare to Medicare and Medicaid patients persistently exceed the

marginal revenues and other benefits derived from offering care to poor, elderly and disabled patients, these providers must reduce their output. That is to say, there is a point at which Medicare and Medicaid providers will reduce or eliminate the care they provide to publicly supported patients. Assuming that the cost to defend false certification claims represents a significant increase in the marginal cost of supplying healthcare to the elderly, disabled and poor, these cases unnecessarily increase the chances that providers will cease to provide access to healthcare for patients insured by Medicare and Medicaid.215 Simply put, over-enforcement of the FCA is likely to disproportionately harm access to healthcare for the most underserved populations.

Of course, this is an empirical question. It is possible to quantify or at least estimate the correlation between providers' willingness to accept and treat Medicare and Medicaid patients-to provide access to healthcare-given their exposure to the risk and cost of defending against false certification claims. Unfortunately, no such studies exist. Nevertheless, studies do exist that demonstrate the effect of reducing or freezing physician reimbursements on access.216 These studies are instructive because they rest on similar assumptions of the studies that would correlate access to the cost of defending or anticipating false certification cases.

Some people assume that physicians treat patients according to their ability to pay, giving preference to those who can afford to pay more.217 Medicare and Medicaid patients are thought to compete with privately insured and self-paying patients for a given physician's scarce time.218 Under both the Medicare assignment and the Medicaid options, the physician agrees to accept the government's payment level as the full payment.219 Therefore, changes in Medicare or Medicaid payment levels (relative to prices charged to private patients) should affect the willingness of physicians to treat Medicare-assigned and Medicaid patients.220

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Gabel and Rice have summarized six empirical studies that examined how changes in reimbursement levels affected access to healthcare for publicly insured patients.221 A study in Maryland demonstrated that when Medicaid payments in one county increased from $7.00 per office visit to $10.00 per brief office visit and $25.00 for intermediate office visits, while a neighboring county experienced no payment increases, a difference in access patterns was apparent.222 In the former county, where payment increases occurred, all Medicaid providers continued to participate in the program during the studied period. By contrast, in the county where Medicaid payments did not increase, 9% of the Medicaid provider practices dropped out of the program.223 Moreover, the number of patient visits increased in the county with increased Medicaid payments, as compared to the county without payment increases.224

Another study examined the effect of increased Medicaid reimbursements on approximately 3,000 California physicians.225 This study looked at physician participation in Medicaid before and after a statewide fee schedule increased fee payments substantially. The statewide fee schedule raised the average reimbursement rates by 20% for primary care services, by 30% for maternity services, and by 9.5% for other services.226 This study found that increases in Medicaid reimbursements increased the likely participation of primary care physicians by 11% and of surgeons by 17%.227 The study also found that the number of Medicaid patients assigned per physician increased by 17% and 13.5% for primary care practitioners and surgeons, respectively.228 The other studies found a similar direct relationship between reimbursement rates and Medicare services, but yielded more complex results when surgical services were examined by individual procedures.229 Yet, Rice and Gabel were able to reach a definitive conclusion about the clear and direct correlation between Medicare and Medicaid reimbursement rates, and access to healthcare:

Taken together, the [first] two studies . .. clearly support the theory that increases in the level of Medicaid payments will encourage physicians to treat Medicaid patients.

Our review of the natural experiments has shown that there appears to be a direct relationship between changes in physician payments under public programs and physicians' willingness to participate in those programs. With the possible exception of the [surgical procedures] study... all studies show that more generous Medicaid payments encourage physicians to see Medicaid patients, and more generous Medicare payments encourage assignment.230

While the evidence for physician providers is clear, the reasons for changes in the healthcare access provided by hospitals are likely to be more complex. However, even assuming a direct correlation between the level of Medicare and Medicaid reimbursement and access to healthcare, this data is only suggestive of the relationship that might exist between the increased costs of false certification defense and healthcare access. The size of the cost increases due to false certification claims may not be as dramatic as the marginal cost increases due to changed reimbursement rates. Yet, the data does confirm that healthcare providers are rational actors who respond to financial incentives in much the same manner as other market suppliers of goods and services.

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By observing a directly positive relationship between reimbursement rates and access, Gabel and Rice have shown that as provider income decreases, access to healthcare decreases. Moreover, we can assume based on their evidence that increased costs will cause providers to decrease the access to healthcare they offer, as decreased revenues do. Therefore, this data serves as a basis for the hypothesis that increased costs associated with unpredictable exposure to damages and litigation

costs of false certification claims may have a negative impact on access to healthcare. The following model demonstrates this hypothesis.

Cooter and Ulen have shown that the socially optimal deterrence level may be shown on a graph in which the x-axis represents the cost of enforcement and the yaxis measures a reduction in crime.231 Socially optimal deterrence (D) is the point at which the marginal social cost (MSC) of reducing prohibited conduct further equals the marginal social benefit (MSB) derived from achieving greater reductions.232 D for any given enforcement technique depends upon the costs and benefits associated with a given approach,233 which can be compared with other approaches, if their costs and benefits are compared. The object of the model described in this section is to compare the levels of deterrence achieved by false certification prosecution and by tort or administrative law cases brought to address the same prohibited conduct.

The marginal social costs of deterrence are represented by an upward sloping curve. The curve slopes upwardly because greater reductions in prohibited conduct cost more to achieve. False certification claims further increase the marginal costs of deterrence and thus the steepness of the MSC curve as compared to tort and administrative enforcement. To the extent that providers reduce healthcare provided to the poor due to increased costs, the cost of alternate care to this population must be added to the MSC of deterrence. The cost of alternate care is likely to be higher given that studies have shown as Medicare and Medicaid patients defer their care, they become sicker and more expensive to treat.234 Moreover, providers are more likely to abstain from productive behavior in an effort to avoid prosecution for fraud, if there is a degree of uncertainty and unpredictability that prevents them from clearly identifying conduct that is prohibited. This "chilling" effect represents a further social cost of false certification prosecutions. The more aggressively false certification is pursued, the greater the chilling effect is, and the more displaced healthcare costs become. The result is that the MSC of false certification enforcement (MSC^sub FC^) may be drawn as a steep, upward sloping curve, as compared to the MSC of tort and administrative enforcement (MSC^sub TA^) that slopes upward, but at a less steep angle.

We may represent the MSB of deterrence as a downward sloping curve because initial expenditures on deterrence yield larger reductions in prohibited behavior than later expenditures. One may assume that the social benefits of pursuing fraudulent claims include a reduction in fraudulent behavior due both to general deterrence throughout the provider community and to the elimination of a particular defendant's offensive practices. One may also assume that the social benefit of prosecuting these cases includes the improved anti-fraud efforts the government may finance with fines, damages and settlements won from providers.

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However, the MSB derived from prosecuting false certification claims is very likely to be minimal. First, providers may reduce their careless behavior more readily when they receive clear signals from anti-fraud laws as to the prohibited conduct. When enforcement rules are unpredictable, they will have less of a deterrent effect. Second, much of the behavior that false certification enforcement deters is likely to

be non-fraudulent and productive behavior, rather than actual or intentional fraud. When compared to the net costs of prosecuting the underlying behavior attacked in false certification claims, the alternative enforcement mechanisms-both tort law and administrative enforcement of anti-fraud statutory violations-may prove to be more efficient forms of controlling fraudulent conduct. Thus, the MSB curve associated with false certification enforcement (MSB^sub FC^) is likely to be a more flat and downward sloping curve in comparison to the MSB curve associated with tort or administrative enforcement (MSB^sub TA^). Only small reductions in actual fraudulent behavior result from large expenditures on false certification enforcement.

This article argues that the flat curve MSB^sub FC^ intersects with a steep, upwardly sloping marginal cost curve MSC^sub FC^ at a point that is relatively expensive for the amount of actual deterrence achieved, when compared to the intersection of MSB^sub TA^ and MSC^sub TA^. Figure 1 below suggests that false certification enforcement results in less deterrence (DFC) than tort and administrative enforcement (DTA) achieve.

V. CONCLUSION

Nothing in this article should be taken to suggest that the government should not use every appropriate tool at its disposal to combat fraud and abuse by Medicare and Medicaid providers. Further, this article does not in any way suggest that because Medicare and Medicaid providers serve poor and vulnerable populations, they should be permitted to practice fraud with impunity or be held to a lesser standard. To the contrary, one can argue that Medicare and Medicaid providers should assume a higher standard as they are paid from public funds.

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Figure 1

Nevertheless, this analysis does demonstrate that permitting the government and private qui tam plaintiffs to use a flawed tool to fight against fraud is likely to have a disproportionately negative impact on the availability of healthcare to the poor. This effect, in turn, ultimately imposes significant costs on society. Both forms of the false certification claims explored in this article-the statutory false certification claims and tort false certification claims-are such flawed weapons. Continued indiscriminate use of false certification claims could mean that we lose both the healthcare objectives of the War on Poverty and the cost-containment objectives of the war against fraud.

AUTHOR_AFFILIATION

Dayna Bowen Matthew^

AUTHOR_AFFILIATION

^ Dayna Bowen Matthew, Associate Professor of Law, University of Kentucky College of Law; J.D. 1987, University of Virginia; B.A. 1981, Harvard-Radcliffe College. My sincere thanks to Professors Peter Alexander, Kim Forde-Mazuri, Phoebe Haddad, Frank McClellan, Kathleen Pearson Harold R. Weinberg and the participants of the 2001 Mid-Atlantic People of Color Legal Scholarship Conference for encouragement and thoughtful comments on earlier drafts.