SB-1622, As Passed House, December 11, 2008

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1622

A bill to amend 1977 PA 72, entitled

"The medicaid false claim act,"

by amending sections 2, 7, 10a, 10c, 11, and 12 (MCL 400.602,

400.607, 400.610a, 400.610c, 400.611, and 400.612), sections 2 and

7 as amended by 1984 PA 333 and sections 10a and 10c as added and

section 11 as amended by 2005 PA 337, and by adding sections 14 and

15.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 2. As used in this act:

(a) "Benefit" means the receipt of money, goods, or anything

of pecuniary value.

(b) "Claim" means any attempt to cause the department of

~~social services~~ community health to pay out sums of money under the

social welfare act. ~~, Act No. 280 of the Public Acts of 1939, being~~

~~sections 400.1 to 400.121 of the Michigan Compiled Laws.~~

made under the social welfare act ~~, Act No. 280 of the Public Acts~~

~~of 1939, which~~ that contains a statement of fact or ~~which~~ that

fails to reveal a ~~material~~ fact, which statement or failure leads

the department to believe the represented or suggested state of

affair to be other than it actually is.

(d) "False" means wholly or partially untrue or deceptive.

(e) "Health facility or agency" means a health facility or

agency, as defined in section 20106 of the public health code, ~~Act~~

~~No. 368 of the Public Acts of 1978, being section 333.20106 of the~~

~~Michigan Compiled Laws~~ 1978 PA 368, MCL 333.20106.

(f) "Knowing" and "knowingly" means that a person is in

possession of facts under which he or she is aware or should be

aware of the nature of his or her conduct and that his or her

conduct is substantially certain to cause the payment of a medicaid

benefit. Knowing or knowingly ~~does not include conduct which is an~~

~~error or mistake unless the person's course of conduct indicates a~~

~~systematic or persistent tendency to cause inaccuracies to be~~

~~present~~ includes acting in deliberate ignorance of the truth or

falsity of facts or acting in reckless disregard of the truth or

falsity of facts. Proof of specific intent to defraud is not

required.

(g) "Medicaid benefit" means a benefit paid or payable under a

program for medical assistance for the medically indigent in

accordance with the social welfare act. ~~, Act No. 280 of the Public~~

~~Acts of 1939, as amended, being sections 400.1 to 400.121 of the~~

~~Michigan Compiled Laws.~~

(h) "Person" means an individual, corporation, association,

partnership, or other legal entity.

(i) "Social welfare act" means the social welfare act, 1939 PA

280, MCL 400.1 to 400.119b.

Sec. 7. (1) A person shall not make or present or cause to be

made or presented to an employee or officer of this state a claim

under the social welfare act, ~~Act No. 280 of the Public Acts of~~

~~1939, as amended, being sections 400.1 to 400.121 of the Michigan~~

~~Compiled Laws~~ 1939 PA 280, MCL 400.1 to 400.119b, upon or against

the state, knowing the claim to be false.

(2) A person shall not make or present or cause to be made or

presented a claim under the social welfare act, ~~Act No. 280 of the~~

~~Public Acts of 1939, which~~ 1939 PA 280, MCL 400.1 to 400.119b, that

he or she knows falsely represents that the goods or services for

which the claim is made were medically necessary in accordance with

professionally accepted standards. Each claim violating this

subsection ~~shall constitute~~ is a separate offense. A health

facility or agency ~~shall~~ is not be liable under this subsection

unless the health facility or agency, pursuant to a conspiracy,

combination, or collusion with a physician or other provider,

falsely represents the medical necessity of the particular goods or

services for which the claim was made.

(3) A person shall not knowingly make, use, or cause to be

made or used a false record or statement to conceal, avoid, or

decrease an obligation to pay or transmit money or property to the

state pertaining to a claim presented under the social welfare act.

(4) ~~(3)~~ A person who violates this section is guilty of a

felony , punishable by imprisonment for not more than 4 years , or

by a fine of not more than $50,000.00, or both.

Sec. 10a. (1) Any person may bring a civil action in the name

of this state under this section to recover losses that this state

suffers from a violation of this act. A suit filed under this

section shall not be dismissed unless the attorney general has been

notified and had an opportunity to appear and oppose the dismissal.

The attorney general waives the opportunity to oppose the dismissal

if it is not exercised within 28 days of receiving notice.

(2) If a person other than the attorney general initiates an

action under this section, the complaint shall remain under seal

and the clerk shall not issue the summons for service on the

defendant until after the time for the attorney general's election

under subsection (3) expires. At the time of filing the complaint,

the person shall serve a copy of the complaint on the attorney

general and shall disclose, in writing, substantially all material

evidence and information in the person's possession supporting the

complaint to the attorney general.

(3) The attorney general may elect to intervene in an action

under this section. Before the expiration of the later of 90 days

after service of the complaint and related materials or any

extension of the 90 days that is requested by the attorney general

and granted by the court, the attorney general shall notify the

court and the person initiating the action of 1 of the following:

(a) That the attorney general will proceed with the action for

this state and have primary responsibility for proceeding with the

action.

(b) That the attorney general declines to take over the action

and the person initiating the action has the right to proceed with

the action.

(4) If an action is filed under this section, a person other

than the attorney general shall not intervene in the action or

bring another action on behalf of this state based on the facts

underlying the action.

(5) If the attorney general elects to proceed with the action

under subsection (3) or (6), the attorney general has primary

responsibility for prosecuting the action and may do all of the

following:

(a) Agree to dismiss the action, notwithstanding the objection

of the person initiating the action, but only if that person has

been notified of and offered the opportunity to participate in a

hearing on the motion to dismiss.

(b) Settle the action, notwithstanding the objection of the

person initiating the action, but only if that person has been

notified of and offered the opportunity to participate in a hearing

on the settlement and if the court determines that the settlement

is fair, adequate, and reasonable under the circumstances. Upon a

showing of good cause, the settlement hearing may be held in

camera.

initiating the action. If the attorney general demonstrates that

unrestricted participation by the person initiating the action

during the litigation would interfere with or unduly delay the

attorney general's prosecution of the case or would be repetitious,

irrelevant, or unduly harassing, the court may do any of the

following:

(i) Limit the number of the person's witnesses.

(ii) Limit the length of the testimony of the person's

witnesses.

(iii) Limit the person's cross-examination of witnesses.

(iv) Otherwise limit the person's participation in the

litigation.

(6) If the attorney general notifies the court that he or she

declines to take over the action under subsection (3), the person

who initiated the action may proceed with the action. At the

attorney general's request and expense, the attorney general shall

be provided with copies of all pleadings filed in the action and

copies of all deposition transcripts. Notwithstanding the attorney

general's election not to take over the action, the court may

permit the attorney general to intervene in the action at any time

upon a showing of good cause and, subject to subsection (7),

without affecting the rights or status of the person initiating the

action.

(7) Upon a showing, conducted in camera, that actions of the

person initiating the action during discovery would interfere with

the attorney general's investigation or prosecution of a criminal

or civil matter, the court may stay the discovery for not more than

90 days. The court may extend the stay upon a further showing that

the attorney general is pursuing the investigation or proceeding

with reasonable diligence and the discovery would interfere with

the ongoing investigation or proceeding.

(8) As an alternative to an action permitted under this

section, the attorney general may pursue a violation of this act

through any alternate remedy available to this state, including an

administrative proceeding. If the attorney general pursues an

alternate remedy, a person who initiated an action under this

section shall have equivalent rights in that proceeding to the

rights that the person would have had if the action had continued

under this section to the extent consistent with the law governing

that proceeding. Findings of fact and conclusions of law that

become final in an alternative proceeding shall be conclusive on

the parties to an action under this section. For purposes of this

subsection, a finding or conclusion is final if it has been finally

determined on appeal to the appropriate court, if the time for

filing an appeal with respect to the finding or conclusion has

expired, or if the finding or conclusion is not subject to judicial

review.

(9) Subject to subsections (10) and (11), if a person other

than the attorney general or the attorney general prevails in an

action that the person initiates under this section, the court

shall award the person necessary expenses, costs, reasonable

attorney fees, and, based on the amount of effort involved, the

following percentage of the monetary proceeds resulting from the

action or any settlement of the claim:

(a) If the attorney general intervenes, 15% to 25%.

(b) If the attorney general does not intervene, 25% to 30%.

(10) If the court finds an action under this section to be

based primarily on disclosure of specific information that was not

provided by the person bringing the action, such as information

from a criminal, civil, or administrative hearing in a state or

federal department or agency, a legislative report, hearing, audit,

or investigation, or the news media, and the attorney general

proceeds with the action, the court ~~shall~~ may award the person

bringing the action no more than 10% of the monetary recovery in

addition to reasonable attorney fees, necessary expenses, and

costs.

(11) If the court finds that the person bringing an action

under this section planned , and initiated ~~, or participated in~~ the

conduct upon which the action is brought, then the court may reduce

or eliminate, as it considers appropriate, the share of the

proceeds of the action that the person would otherwise be entitled

to receive. A person who is convicted of criminal conduct arising

from a violation of this act shall not initiate or remain a party

to an action under this section and is not entitled to share in the

monetary proceeds resulting from the action or any settlement under

this section.

(12) A person other than the attorney general shall not bring

an action under this section that is based on allegations or

transactions that are ~~already~~ the subject of a civil suit ~~, a~~

~~criminal investigation or prosecution, or an administrative~~

~~investigation or proceeding~~ or an administrative civil money

penalty proceeding to which this state or the federal government is

already a party. The court shall dismiss an action brought in

violation of this section.

(13) Unless the person is the original source of the

information, a person, other than the attorney general, shall not

initiate an action under this section based upon the public

disclosure of allegations or transactions in a criminal, civil, or

administrative hearing, in a state or federal legislative,

investigative, or administrative report, hearing, audit, or

investigation, or from the news media. The person is the original

source if he or she had direct and independent knowledge of the

information on which the allegations are based and voluntarily

provided the information to the attorney general before filing an

action based on that information under this section.

(14) This state and the attorney general are not liable for

any expenses, costs, or attorney fees that a person incurs in

bringing an action under this section. Any amount awarded to a

person initiating an action to enforce this act is payable solely

from the proceeds of the action or settlement.

(15) If a person proceeds with an action under this section

after being notified that the attorney general has declined to

intervene and the court finds that the claim was frivolous, as

defined in section 2591 of the revised judicature act of 1961, 1961

PA 236, MCL 600.2591, the court shall award the prevailing

defendant actual and reasonable attorney fees and expenses and, in

addition, shall impose a civil fine of not more than $10,000.00.

The civil fine shall be deposited into the Michigan medicaid

benefits trust fund established in section 5 of the Michigan trust

fund act, 2000 PA 489, MCL 12.255.

Sec. 10c. (1) An employer shall not discharge, demote,

suspend, threaten, harass, or ~~otherwise~~ in any other manner,

discriminate against an employee in the terms and conditions of

employment because the employee ~~initiates, assists in, or~~

~~participates~~ engaged in lawful acts, including initiating,

assisting in, or participating in ~~a proceeding or court~~ the

furtherance of an action under this act or because the employee

cooperates with or assists in an investigation under this act. This

prohibition does not apply to an employment action against an

employee who the court finds brought a frivolous claim, as defined

in section 2591 of the revised judicature act of 1961, 1961 PA 236,

MCL 600.2591; the court finds to have planned , and initiated ~~, or~~

~~participated in~~ the conduct upon which the action is brought; or is

convicted of criminal conduct arising from a violation of this act.

(2) An employer who violates this section is liable to the

employee for all of the following:

(a) Reinstatement to the employee's position without loss of

seniority.

(b) Two times the amount of lost back pay.

(d) Compensation for any special damages.

(e) Any other relief necessary to make the employee whole.

Sec. 11. (1) ~~Except as provided in subsection (2), an~~ An

action brought ~~in connection with a medicaid matter~~ by the attorney

general under this act ~~shall~~ may be filed in Ingham county and may

be prosecuted to final judgment in satisfaction there.

(2) A person may bring a civil action under section 10a in any

county in which venue is proper. If the attorney general elects to

intervene under section 10a(3) or (6) and the court grants the

request, upon motion by the attorney general, the court shall

transfer the action to the circuit court in Ingham county.

(3) Process issued by a court in which an action is filed may

be served anywhere in the state.

Sec. 12. (1) A person who receives a benefit ~~which~~ that the

person is not entitled to receive by reason of fraud or making a

fraudulent statement or knowingly concealing a material fact, or

who engages in any conduct prohibited by this statute, shall

forfeit and pay to the state ~~a civil penalty equal to~~ the full

amount received, and for each claim a civil penalty of not less

than $5,000.00 or more than $10,000.00 plus triple the amount of

damages suffered by the state as a result of the conduct by the

person.

(2) A criminal action need not be brought against the person

for that person to be civilly liable under this section.

Sec. 14. (1) A person shall not bring a civil action under

section 10a after the later of the following:

(a) More than 6 years after the date on which the violation

described in section 10a was committed.

(b) More than 3 years after the date when facts material to

the right of action are known or reasonably should have been known

by the official of the state of Michigan charged with

responsibility to act in the circumstances, but in no event more

than 10 years after the date on which the violation was committed.

(2) A person may bring an action under this act for conduct

that occurred before the effective date of the amendatory act that