New Amendments to the Delaware False Claims Act May Signal More Claims Against Health Care Providers

After more than two years of trying to pass a law amending Delaware’s False Claims and Reporting Act, the House and the Senate were finally able to pass a bill in the last days of the recent legislative session. Governor Jack Markell signed the bill into law late last week. The amendments to the Act provide the State enhanced financial incentives for pursuing False Claims Act recoveries. Accordingly, we expect the Delaware Department of Justice Medicaid Fraud Control Unit to step up its False Claims Act recovery efforts.

The changes to Delaware’s False Claims and Reporting Act were brought about by the federal Deficit Reduction Act of 2005, which contained provisions that created incentives for states to enact anti-fraud legislation modeled after the federal False Claims Act. The primary incentive offered by the federal government was an increased percentage of any False Claims Act recovery, meaning the State of Delaware would receive an additional 10% of any False Claims Act recovery if it brought its Act into compliance.

It took the General Assembly over two years (and several versions) to enact a bill.

The delay was in large part due to effective lobbying efforts of several organizations representing the interests of Delaware health care providers. As a result of their work, the current bill appears to meet the requirements of the Deficit Reduction Act of 2005, but does not contain several provisions that the Delaware Department of Justice (“DOJ”) had proposed.

Gone from the bill is the controversial provision creating a DOJ False Claims Act Litigation Fund that would have required the accused to finance the costs of the government’s investigation. Also removed from the final version of the bill was a section giving the DOJ broad investigative powers that would have permitted it to demand records without any requirement of demonstrating cause.

The new bill imposes an annual reporting obligation on the DOJ. Each year the DOJ will have to report, among other things, the number of cases filed under the Act during the previous calendar year and the total amounts recovered. We will now be able to see whether the enhanced financial incentives will generate more filings against health care providers.