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When a previously unknown area of False Claim Act litigation is brought to light, early action is crucial for a whistleblower to receive the most favorable outcome. The False Claims Act contains a so-called “first-to-file” rule, which bars a later allegation of fraud if the allegation states the same essential facts or material elements of a fraud described in an earlier whistleblower suit. The FCA provides that “no other person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” (31 U.S.C. § 3730(b)(5)). This rule is meant to fulfill the FCA’s policy goal of encouraging whistleblowers to act quickly in alerting the government of fraud, while rewarding this quick action with a large stake in the potential settlement.

In the past few months, several major False Claims Act suits have been unsealed, revealing what is expected to be the next major area for FCA suits. Healthcare-based False Claims Act suits yielded the largest government fraud recoveries last year at $2.6 billion, with large settlements in areas like mislabeling and kickback schemes. Now another area of healthcare fraud is predicted to be the next frontier of False Claims Act suits. Recently, whistleblowers are bringing light to rampant illegal reporting activity involving Medicare Advantage plans, and the payouts are expected to be substantial for those who take early action.

Medicare Advantage includes a program known as risk adjustment, in which private insurance providers are given more money for treating Medicare patients considered to be unhealthy. Allegations of extensive fraudulent diagnoses and subsequent illegal billing are now surfacing. A recently unsealed complaint against managed care provider Aveta Inc. alleges the company collected more than $1 billion in fraudulent Medicare Advantage payments through illegal risk adjustment reports. Another suit against insurance giant Humana Inc. alleges the company ignored a sudden suspicious increase in diabetes diagnoses at a Florida healthcare practice. While the area of Medicare Advantage whistleblower suits is still relatively new, the payouts so far have been substantial; SCAN Health Plan paid nearly $4 million to settle a Medicare Advantage fraud suit brought by a former employee.

It is common for fairly new areas of FCA litigation to quickly snowball into something huge as potential whistleblowers becoming more attuned to areas where fraud may occur. While the first-to-file rule bars actions related to existing suits, relatively new FCA claim areas such as this can spark many previously untouched allegations. For FCA claims with potential multi-million dollar payouts such as these Medicare Advantage fraud claims, it is very important for potential relators to take action early.