Even the most scrupulous HME provider should fear whistle-blower activity. Finger-pointing exposes a company to the risks of federal litigation, smeared reputations, and costly investigations. But many cases of employees reporting their employers to law enforcement can be prevented. To minimize these risks, embrace the following four whistle-blower rules:

Rule 1: Whistle-blowers Are Made, Not Born
A whistle-blower rarely joins a company in order to undermine it. He or she is not lured into the lucrative field of whistle-blowing, with a secret plan to seek wrongdoing in order to report it. Rather, the most common reason for whistle-blowing by present and former personnel is because they believe that their employer does not value their input or take seriously their concerns about company compliance. Billing questions are unanswered. Concerns about a “let’s learn the rules as we go” attitude are ignored. Discussion leads to the staffers being branded as “troublemakers.”

That belief then frequently is supplemented by whatever other factors contributed to the staff member’s perception of unfair treatment and disrespect. It is this combination of factors that will frequently encourage the staffer to seek vindication (and financial reward) by telling the government about the very problems that the staff member initially tried to discuss with the organization.

Rule 2: Anyone May Become A Whistle-blower
Many HME providers believe they face no whistle-blower dangers, because their employees are relatively happy and fulfilled. This attitude can be dangerously naive. The extent of an employee’s dissatisfaction may be hidden. The very internal problems that lead to compliance issues and whistle-blower dangers may also render management personnel out of touch with the needs, concerns, and perceptions of front-line personnel.

Also, the universe of potential whistle-blowers is broader than disgruntled current employees. In addition to your present staff, consider whether any of the following categories of potential whistle-blowers apply to your company:

• disgruntled past employees
• disgruntled independent contractors, past and present
• competitors, past, present, and future
• co-owners
• collaborators and coventurers in financial transactions
• angry spouses, relatives, and significant others
• consultants, accountants, and billing companies
• attorneys from the plaintiff’s bar
• compliance personnel who are thwarted from performing their duties

Rule 3: Whistle-blower Assistance Is Plentiful
Once someone is ready to consider whistle-blowing, attractive resources are available. First, qualified whistle-blowers may seek large financial rewards under the federal False Claims Act. This statute provides that any person who knowingly submits a false claim for payment to the federal government is liable for a civil penalty and treble damages. In 1986, Congress amended the act to add a qui tam provision, which enables a private party to bring suit against a provider who has submitted false claims. If the lawsuit is taken over by the government, the instigator (called a relator) will be entitled to a percentage of the recovery (usually 5% to 20%).

Qui tam lawsuits have increased tremendously over the past 15 years. A decade ago, fewer than 10% of qui tam recoveries related to health care actions. Now, more than 50% of all Department of Justice recoveries originate from whistle-blowers.

The Health Insurance Portability and Accountability Act (HIPAA) amended the False Claims Act. Now, if a provider demonstrates a “reckless disregard” of the accuracy of claims submission, or acts in “deliberate ignorance” of the truth of submitted claims, or allows ongoing patterns of mistakes because of lax supervision or inattention to the rules, he or she may be held accountable for submitting “false claims.”

The financial costs under the various fraud and abuse laws involve fines and penalties additional to repayment, so the potential reward for a qui tam relator can be substantial, and thus provide a strong incentive to become a whistle-blower.

Organizations such as Taxpayers Against Fraud and Internet Fraudwatch have arisen to encourage further whistle-blowing opportunities. Lawyers skilled in representing whistle-blowers advertise prominently on the Internet, further encouraging disclosure.

Pressure may also come from unusual sources. During the federal investigation of Columbia/HCA in 1997, the health care workers union distributed leaflets to its members urging them to report health fraud at Columbia facilities. The leaflet stated that workers could receive millions of dollars by filing whistle-blower claims, with specific information about procedures.

Finally, be aware that a number of states—including Florida, Illinois, and California—have false claims laws that contain qui tam provisions similar to the provisions under the federal False Claims Act.

Rule 4: Virtually All Whistle-blowing Can Be Prevented
An atmosphere of respect and concern can minimize the risk of whistle-blower activity. Here are four ideas for eliminating whistle-blower dangers:

1. Implement an effective compliance program. This can substantially reduce—and often eliminate—whistle-blower activity. Because an effective compliance program must, by definition, include a mechanism for encouraging and acting on personnel tips about compliance problems, the staff member will not be ignored when he or she brings information about internal problems to the organization’s attention. Also, because fewer problems remain unresolved, there is less motive and opportunity for qui tam action under the federal False Claims Act, or for government reporting in general.

In addition, staff members who develop negative attitudes about their company and thus seek “revenge” through qui tam actions, rarely insist that the HME provider agree with everything they say, nor implement solutions that mirror precisely their preferred solutions. Instead, most staffers want their opinions to be valued, respected, and carefully considered.

If the company has legitimate reasons for choosing a course of action that varies from the staff members’ preferences, many staffers will be content if the company truly considered their opinions, regardless of the ultimate decision. The emotional zeal that fuels most successful whistle-blower activities is often diffused and defused by an effective compliance program.

2. Train all supervisors to be sensitive to employee concerns. Employees often share their concerns with their immediate supervisors rather than using a hotline or reporting to the compliance officer. If upper management encourages reporting problems, but a supervisor three levels down ignores the matter, a frustrated employee may bring his or her concern to court. The best way to address this problem is to train supervisors and managers to listen carefully and sympathetically to employee concerns. If you take your employees seriously, listen to them, and follow through on their concerns, you will have a much better chance of avoiding whistle-blower actions.

3. Offer feedback to employees who voice concerns. Let employees know that you are taking action on their problem. Employees should be offered an opportunity to check on the status of the inquiry. For example, callers to a hotline might be given a number assigned to their complaint so they can monitor the case. While it may not be possible to provide very specific information without creating other liability problems—especially when the concerns involve the behavior of another employee—providing some form of general feedback prevents staffers from feeling ignored.

4. Use voluntary disclosure to forestall whistle-blowing. Sloppy disclosure is dangerous. Still, there are good reasons to disclose information to the government. First, when a HME provider discovers unequivocal evidence that an incorrect bill has resulted in an overpayment, no law or regulation permits the HME provider legally to retain the overpayment.

Second, a HME provider’s decision to disclose improper payment sends a clear message to its people. There may thus be reasons to disclose even in the face of uncertain rules, to show the HME provider’s commitment to ethical behavior and to demonstrate that the company is willing to “put its money where its words are” on the topic of compliance. This could be particularly important if employees have believed they were held to a standard not shared by senior executives.

Third, many HME providers opt for disclosure in order to control the timing and nature of the communication. This option can be especially attractive when the HME provider can articulate the circumstances of the problem so as to present the facts in the best light. Of course, all material facts must be disclosed fully. But attorneys know full well how presentation can affect the way information is perceived and understood. When the HME provider is able to control the disclosure, it can gain credibility with the government during the subsequent negotiations over an appropriate settlement. This credibility may also extend to subsequent discussions on other issues.

Similarly, by controlling the timing and tone of the disclosure, a HME provider will often have a better opportunity to shape and control how the problem is communicated to the media and the public. This benefit can be substantial.

All disclosure decisions and implementation should be handled under the direction of legal counsel.

Even if you feel certain you are at little risk for a lawsuit, taking these precautions is smart considering the increasing size and frequency of whistle-blower lawsuits. Last month managed care organization PacifiCare, Santa Ana, Calif, paid $87.3 million to end a whistle-blower suit filed by former employee Valerie Fletcher, who pocketed $3.5 million for her role as whistle-blower. An HME provider who takes preventive measures to reduce or eliminate whistle-blower activity is both savvy and wise.

Neil B. Caesar, JD, is president of the Health Law Center, a national health law practice in Greenville, SC. For more information, email info@healthlawcenter.com  or visit the firm’s Web site at www.healthlawcenter.com.