The United States has intervened in a qui tam suit alleging that the New York City Department of Education (“DOE”) billed Medicaid for psychological counseling services never performed. According to the government’s complaint, between 2001 and 2004 the DOE claimed to have provided the requisite number of sessions for students with special needs when in fact, in many cases, students were not receiving enough sessions to qualify for Medicaid reimbursement. The complaint seeks relief in the form of treble damages and civil penalties in excess of $2 million under the federal False Claims Act. Billing for the student psychological counseling occurs monthly in the Medicaid program, and the DOE receives a flat fee of $223 a month for each student who receives at least two psychological counseling sessions during a monthly billing period. If a student only receives one or fewer sessions in a billing period, the DOE is not entitled to any compensation. As a result, the government claims that the DOE wrongfully obtained at least $693,418 in Medicaid funds through the false billing practices. These damages are then trebled under the False Claims Act, in addition to the imposition of civil penalties per violation. Each billing that was submitted for a student who in fact received fewer than two sessions in a given month is considered to be a violation of the statute.

Government investigation of the matter was prompted by a qui tam (i.e., whistleblower) complaint filed in 2007 by social worker Dana Ohlmeyer. Ohlmeyer is known as a qui tam relator, and her participation in the litigation via her private qui tam suit entitles her to a monetary award if the government prevails in its claims against the DOE.

Under the False Claims Act, individuals and entities face liability for submitting false claims for payment to the government. In addition, the statute imposes liability for false claims submitted to reduce a liability owed to the government. The law contains qui tam provisions that allow relators to sue privately on behalf of the government for fraud. In addition to treble damages, violators of the False Claims Act may be assessed civil penalties of between $5,500 and $11,000 per violation. After a relator files a qui tam complaint, the government reviews the allegations and may elect to intervene in the litigation, as it has in this case. Whether or not the government exercises its right of intervention, relators may proceed privately with their claims, and many prevail even without government intervention. Victorious relators stand to recover between 15% and 30% of any final judgment or settlement.

Recent amendments to the False Claims Act, particularly after the passage of the Fraud Enforcement and Recovery Act (“FERA”), the Dodd-Frank Financial Reform Bill, and the Patient Protection and Affordable Care Act (“PPACA”) have increased the number of claims that may be brought under the statute and strengthened the law’s robust protections against employer retaliation.




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