North America

HEALTH REFORM: Medicaid Drug Rebate Program ‘Reform’: Key Considerations and Implementation Tips for Pharmaceutical and Biotech Manufacturers

On March 23, 2010, President Obama signed H.R. 3590, the “Patient Protection and Affordable Care Act” (“PPACA”), into law. This legislation includes significant revisions to Section 1927 of the Social Security Act (42 U.S.C. § 1392r-8), which governs the Medicaid Drug Rebate Program (“MDRP”). Following the enactment of PPACA, H.R. 4872, the “Health Care and Education Reconciliation Act of 2010” was enacted into law on March 30, 2010, “reconciling” and revising portions of PPACA. The term “PPACA” used herein shall refer to PPACA as amended by H.R. 4872. We have set forth below some key considerations and implementation tips to assist pharmaceutical and biotech manufacturers in understanding the impact of this legislation with respect to the MDRP. In addition, we have outlined the significant changes to the MDRP in the sidebars, organized by their respective effective dates.

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Supreme Court Holds That County and State Reports, Not Only Federal Ones, Trigger The Public Disclosure Bar of the Federal False Claims Act

Suits in the name of the United States under the Federal False Claims Act (“FCA”) brought by private individuals known as qui tam relators are among the most common forms of whistleblower action in the federal system. The Supreme Court today rendered its much-anticipated decision in Graham County Soil and Water Conservation District et al. v. United States ex rel. Wilson, No. 08-304. 2010, imposing a significant limitation on the ability of these relators to satisfy an important jurisdictional bar.

The FCA authorizes both the Attorney General and private qui tam relators to bring actions against persons who make or facilitate fraudulent claims for payment from the United States. However, in the absence of the government, a relator will be barred from proceeding on his own if the action is based upon the public disclosure of allegations or transactions in, inter alia, “a congressional, administrative, or Government Accounting Office [(GAO)] report, hearing, audit, or investigation.” 31 U. S. C. §3730(e)(4)(A). TheGraham County case involved federal contracts and funding for the repair of flood damage. The relator, Wilson, a local government employee, alerted both federal and county and state officials to irregularities in performance. Both the county and the state issued reports making findings about these potential irregularities and Wilson thereupon filed a qui tam action against the county conservation districts administering the contracts. The District Court dismissed for lack of jurisdiction because the allegations publicly disclosed in the county and state reports constituted “administrative” reports under the FCA’s public disclosure bar. The Fourth Circuit reversed, holding that only federal administrative reports may trigger the public disclosure bar. 

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The Timeline for Accountable Care

Now that we have sweeping new health care legislation, the Patient Protection and Affordable Care Act (“the Act”), let’s look at the rollout of the accountable care provisions–i.e., those changes to the payment and delivery system that hold the most long-term promise of improving quality and cost-efficiency. They are discussed in my most recent article: “The Timeline for Accountable Care: The Rollout of the Payment and Delivery Reform Provisions in the Patient Protection and Affordable Care Act and the Implications for Accountable Care Organizations,” published last week in the BNA’s Health Law Reporter.  Click here to read the full article (PDF).


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What Does CMS’ Realignment Really Mean?

On March 24, 2010, the Secretary of the Department of Health and Human Services announced a major reorganization of the Centers for Medicare & Medicaid Services (CMS).[1] This announcement finalized a previous issuance dated February 16, 2010, from Charlene Frizzerra, Acting Administrator of CMS. This restructuring is CMS’ first major reorganization in approximately ten years. Its timing is no accident: with the historic passage of federal health reform, a new CMS is needed. Traditionally, CMS’ organizational chart (see below) reflected a disproportionate emphasis on operations and policy. Going forward, topics such as strategic planning and program integrity become of equal importance to operations. The realignment’s goal is to allow CMS to better focus on three areas: beneficiary services, program integrity, and strategic planning.

CMS’ restructuring established the position of Principal Deputy Administrator (formerly Deputy Administrator) and created the Office of External Affairs and Beneficiary Services as well as four centers to be led by Deputy Administrators (formerly known as Directors): the Center for Medicare, the Center for Medicaid, CHIP and Survey & Certification, the Center for Program Integrity, and the Center for Strategic Planning. CMS has not had a Senate-confirmed CMS Administrator since June 2006. President Obama is expected to nominate Donald Berwick, MD, MPP, as CMS Administrator to fill the vacant position. Dr. Berwick is a Clinical Professor of Pediatrics and Health Policy at Harvard Medical School and founder of the Institute for Healthcare Improvement (IHI). Ms. Frizzera will continue to serve as Acting CMS Administrator and Chief Operating Officer until President Obama’s nominated individual is confirmed by the Senate.

As part of CMS’ reformation, CMS hired three new senior staff:

  • In early March, Marilyn Tavenner joined CMS as the Principal Deputy Administrator. Ms. Tavenner most recently served as the Secretary of Health and Human Resources for the Commonwealth of Virginia. She spent most of her previous career with Hospital Corporation of America (HCA), starting as a staff nurse, becoming CEO of both Johnston-Willis and Chippenham hospitals, and finishing as Group President of Outpatient Services. She also served as Chairman of the Virginia Hospital Association and was a member of the Board of Trustees of the American Hospital Association.
  • CMS has hired Peter Budetti as Deputy Administrator for the Center for Program Integrity. Mr. Budetti was an aide to Rep. Henry Waxman (D-Calif.) from 1984 to 1990, when Waxman was Chairman of the Energy and Commerce Committee’s Health and the Environment Subcommittee. Mr. Budetti founded and directed the Center for Health Policy Research at George Washington University from 1990 to 1995, and most recently was Chairman of the Department of Health Administration and Policy in the College of Public Health of the University of Oklahoma Health Sciences Center. He also was formerly Chair of Taxpayers Against Fraud, a Washington, D.C., nonprofit agency that supports False Claims Act cases. Mr. Budetti is a pediatrician and a lawyer.
  • Anthony “Tony” Rodgers has been appointed Deputy Administrator for Strategic Planning. Mr. Rodgers came to CMS from Health Management Associates, Inc., where he served as the principal consultant on health system strategic planning, health information technology, and health plan and system operations. He also previously directed Arizona’s Medicaid agency, known as the Arizona Health Care Cost Containment System (AHCCCS). Prior to being appointed Director of AHCCCS, Mr. Rodgers was General Manager for WellPoint Health Networks, State Sponsored Programs. As general manager, he was responsible for both the Medicaid and the State Children’s Health Insurance Program (SCHIP) product lines.

Although not confirmed yet, the following is a brief summary of Dr. Donald Berwick.

  • In addition to his aforementioned positions of Harvard professor and founder of the Institute for Healthcare Improvement, Dr. Berwick was Chair of the Health Services Research Review Study Section of the Agency for Health Care Policy and Research (now AHRQ) and Chair of the National Advisory Council of the Agency for Healthcare Research and Quality. He served as Vice Chair of the U.S. Preventive Services Task Force and as the first “Independent Member” of the Board of Trustees of the American Hospital Association. Dr. Berwick is an elected member of the Institute of Medicine of the National Academy of Sciences and since 2002 has served on the IOM’s Governing Council and as the liaison to the IOM’s Global Health Board.

CMS Realignment

CMS’ reorganization shifts its focus from placing operational priority on traditional fee-for-service and managed care to creating five centers, all with operational significance. This effort not only aligns with the federal health reform, but it also positions CMS to implement change as quickly as possible. Additionally, the realignment supports the CMS Administrator’s office management efforts by bolstering the number of political staff members overseeing career employees. Specifically, the new structure created the following Centers and Offices:

Center for Medicare

The Center for Medicare combines the operations of Medicare fee-for-service, Medicare managed care, and the Medicare prescription drug benefit. The Center will report directly to the Administrator and be led by the Deputy Administrator, Jonathan Blum, and two Deputy Center Directors. Existing groups/staffs of the current Center for Medicare Management and Center for Drug and Health Plan Choice will be realigned intact under the new Center.

Center for Medicaid, CHIP and Survey & Certification

The Center for Medicaid and State Operations (CMSO) is renamed the Center for Medicaid, CHIP and Survey & Certification. The Center will report directly to the Administrator and be led by the Deputy Administrator, Cindy Mann, and two Deputy Center Directors. Existing groups/staffs will remain in the renamed Center except for the Medicaid Integrity Group, which will be realigned under the Center for Program Integrity.

Center for Program Integrity

The Center for Program Integrity realigns the (Medicare) Program Integrity Group of the Office of Financial Management (OFM) and the Medicaid Integrity Group of the CMSO. The consolidation of Program Integrity could suggest a sharing of insights and more standardization around fraud and abuse issues related to both programs. The Center for Program Integrity will report directly to the Administrator and be led by the Deputy Administrator, Mr. Budetti, and the Deputy Center Director. The two groups will move intact under this Center and be renamed the Medicare Program Integrity Group and the Medicaid Program Integrity Group, respectively.

Center for Strategic Planning

The Center for Strategic Planning realigns the Office of Research, Development, and Information (ORDI) and the Office of Policy (OP). This Center will report directly to the Administrator and be led by the Deputy Administrator, Mr. Rodgers. Existing groups/staffs in ORDI and OP will be realigned intact under this new Center.

Office of External Affairs & Beneficiary Services

The Office of External Affairs & Beneficiary Services realigns the Office of Beneficiary Information Services (OBIS) with the Office of External Affairs (OEA), thereby allowing CMS to integrate and better leverage its communication, call center, and Web resources; ombudsman services; and extensive network of partners to enhance service to beneficiaries. This Office will report directly to the Administrator and be led by the Office Director, Teresa Niño, and two Deputy Office Directors. Existing groups/staffs in OBIS and OEA will be realigned intact within the new Office.

Freestanding Offices

The following five Offices will remain intact and continue to report directly to the Administrator: the Office of Equal Opportunity and Civil Rights (OEOCR) responsible for issues of equal employment opportunity and civil rights; the Office of Legislation (OL) responsible for congressional and legislative interaction, evaluation and analysis; the Office of the Actuary (OACT) responsible for CMS’ actuarial program and analysis of health care financing issues; the Office of Clinical Standards and Quality (OCSQ), which serves as the focal point for all quality, clinical and medical science issues and policies; and the Office of Strategic Operations and Regulatory Affairs (OSORA), which manages CMS’ decision-making and regulatory process, and which will be renamed the Office of Executive Operations and Regulatory Affairs (OEORA) to more accurately reflect the work of that organization. In addition, the realignment formalizes the current role of the Chief Operating Officer (COO) and the Deputy Chief Operating Officer (DCOO) with responsibility over all CMS operations—namely, information systems, contracts and grants, finance, e-health standards and services, human capital management, and the Consortia.

Newly Prominent Centers

The realignment effectively elevates program integrity as well as innovation, research, and demonstration activities to an agency operational level. This change suggests an increased focus on fraud and abuse as well as demonstration efforts that could take on a new level of importance in broader CMS policymaking. With the newly appointed political leadership, these Centers can anticipate greater political oversight.

CMS’ choice to lead the Center for Program Integrity, Mr. Budetti, an individual with extensive health care fraud experience and a background that includes formerly chairing Taxpayers Against Fraud, demonstrates that the Center’s activities may shift emphasis from education to combating fraud and abuse.

Furthermore, CMS’ selection for leadership of the Center for Strategic Planning, Mr. Rodgers, correlates with language in the federal health reform legislation authorizing CMS to develop innovative payment models and pilots under the Medicare program. These new pilot arrangements are very similar to traditional Medicaid waivers, providing for customization and budget neutrality. As someone experienced with and instrumental to state-based efforts to develop novel Medicaid payment and delivery arrangements, Mr. Rodgers’ expertise is expected to help guide CMS as it works to implement new Medicare payment models.

Before and After

To depict these changes, below are the former and current CMS organizational charts.(Click the images to enlarge.)

CMS Former Organization



CMS New Organization










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This Client Alert was authored by Lynn Shapiro Snyder, Leslie Norwalk and Stephanie Fox. For additional information about the issues discussed in this Client Alert, please contact one of the authors or contributors or the EpsteinBeckerGreen attorney who regularly handles your legal matters.

The EpsteinBeckerGreen Client Alert is published by EBG’s Health Care and Life Sciences practice to inform health care organizations of all types about significant new legal developments.


Lynn Shapiro Snyder, Esq.


If you would like to be added to our mailing list or need to update your contact information, please contact, Kristi Swanson, at or 202-861-4186.


[1] 75 Fed. Reg. at 14,176


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The Federal HIRE Act: It Can Pay To Hire The Unemployed

On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act (the “HIRE Act”) PL111-147—a possible precursor to other legislation in the pipeline to decrease unemployment.

In brief, under the HIRE Act, an employer that hires a new “qualified employee” will be able to save on certain payroll taxes for each such new hire who:

1. Begins employment after February 3, 2010, and before January 1, 2011;

2. Certifies, by a signed affidavit, that he or she has not been employed for more than 40 hours during the 60-day period prior to the beginning of employment; and

3. Is not hired to replace another employee (unless that former employee voluntarily quit or was fired for cause).

If an employer (other than a governmental employer) hires a qualified employee who commences employment on or after February 4, 2010, and not later than December 31, 2010, the employer need not pay the employer’s portion of the FICA (Social Security) tax (6.2 percent of the first $106,800 of earnings per year) during the employment period from April 1, 2010, to January 1, 2011. From the period of February 4, 2010, through March 31, 2010, an employer must continue to pay its portion of the FICA tax on wages paid to a qualified employee. Such payments, however, will be credited against the employer’s portion of the FICA tax due in the second quarter relating to all of its employees.

It is also important to note that employers will still need to withhold the employee’s portion of the FICA tax. Further, the employer and employee share of Medicare taxes will still be due on all wages paid to qualified employees.

In addition, if the qualified employee is retained for at least 52 consecutive weeks, the employer may be entitled to an additional tax credit of the lesser of $1,000 or 6.2 percent of the wages paid to the individual during the 52-week period. But to qualify for this credit, the employee’s wages for the last 26 weeks must equal at least 80 percent of his/her wages during the first 26 weeks of the 52-week period. This tax credit would be taken on the employer’s 2011 tax return.

What the HIRE Act Means to Employers

The HIRE Act is intended to encourage employers to hire the unemployed, and the savings can be significant. An employer who hires a qualified new hire can save thousands of dollars in taxes. Assume that a qualified employee is hired effective April 1, 2010, at a salary of $60,000 per annum. Between April 1, 2010, and January 1, 2011, the employee’s earnings will be $45,000 and the employer will save 6.2 percent of $45,000 in FICA contributions (or $2,790). In addition, if the employee remains steadily employed with the employer after April 1, 2011 (a full year), the employer will be entitled to an additional $1,000 credit against payroll taxes.

What Should Employers Do Now?

1. Ascertain whether any new hire who starts work on or after February 4, 2010, had been out of work more than 60 days prior to employment and/or was not employed for more than 40 hours during that period;

2. Have the employee sign an affidavit to that effect;

3. Confirm that the new employee did not replace an employee who was terminated “without cause” or otherwise involuntarily left his or her position; and

4. Alert your Payroll Department or payroll service to take the following actions with respect to qualified new hires:

a) do not to pay the employer-paid portion of FICA with respect to each such new hire for the period April 1, 2010, through December 31, 2010; and
b) take a credit for the employer-paid portion of FICA paid for the period February 4, 2010, through March 31, 2010, in the second quarter of 2010.

We fully expect that there will be future guidance that interprets the HIRE Act, but employers should begin to document their qualification for these credits and benefits, and perhaps consider whether they are able to structure their hiring needs to take advantage of these incentives.

For more information about this Client Alert, please contact:

Peter M. Panken
New York

Scott M. Drago
New York

Susan Gross Sholinsky
New York

Steven Swirsky
New York


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March 25, 2010 – Boston, MA
For more information contact: Jeanie Griggs
(617) 589-3895;

On March 23, Davis Malm attorney David Rapaport led a Boston Bar Association Continuing Legal Education program titled, “Current Challenges In Disability Discrimination Cases And The Interrelationship Between Disability Benefits And Discrimination Claims.” In this roundtable discussion, Mr. Rapaport focused on challenges facing plaintiffs in disability discrimination cases and the effects of recent changes in the Americans with Disabilities Act.

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March 25, 2010 – Boston, MA
For more information contact: Jeanie Griggs
(617) 589-3895;
On March 11, Davis Malm attorney James E. Gallagher acted as a mock trial judge at the Boston Regional National Appellate Advocacy Competition sponsored by the American Bar Association’s Law Student Division. Student competitors participated in a hypothetical appeal to the United States Supreme Court, which required them to write a brief, as either respondent or petitioner, then argue their case in front of the mock court. Mr. Gallagher judged oral arguments of four teams. The NAAC is one of the largest moot court competitions in the country and emphasizes the development of oral advocacy skills through a realistic appellate advocacy experience. This year’s competition was the largest in its history, with 198 teams from 119 schools throughout 15 states competing.
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March 25, 2010 – Boston, MA
For more information contact: Jeanie Griggs
(617) 589-3895;

On March 22, Davis Malm attorney David Rapaport spoke on a panel with Justice Giles of the Massachusetts Superior Court, along with other experience trial lawyers, at a Boston Bar Association program titled “Is the Civil Justice System in Need of Serious Repair: Part II.” The program focused on the Final Report of the American College of Trial Lawyers Task Force on Discovery, which recommended significant changes to the rules of discovery in civil cases, and the basis for its conclusions, as well as two of the more controversial recommendations. Mr. Rapaport discussed problems presented by the proposed new rules for employment plaintiffs who need full and fair discovery in order to prove their cases.

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Honoring Iranian Bloggers’ Freedom of Expression

I would like to applaud the Iranian women bloggers at who recently received the “Net Citizen” award. Because of their strength and determination, these bloggers were able to issue reports online about the unrest in Iran after last year’s election, despite being detained by the Iranian government for their reporting. The blog now plays an important role in disseminating information about women’s rights in Iran. Yes, blogging can become a powerful tool!

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HITECH Act HIGH ANXIETY: Electronic Health Records Development May Expose Entities to ARRA Employee Whistleblowing

Any person or entity receiving funds under the American Recovery and Reinvestment Act of 2009[1] (“ARRA”) is also subject to its wide-reaching enforcement provisions. Given the government’s recent focus on combating fraud,[2] attention to the breadth of ARRA’s provisions is both timely and important. The Attorney General specifically focused on ARRA in a recent statement, pointedly noting, “[t]he department’s improved ability to…prosecute fraud will likely have high rates of return on the federal government’s investment of resources through the American Recovery and Reinvestment Act of 2009. This request will enable the department to help protect American savers and investors, the national financial market, and the U.S. Treasury.” [3]

The government’s recent focus on fraud enforcement in conjunction with the specific emphasis on protecting ARRA funds means both direct and indirect recipients of ARRA funds should be aware of certain provisions within ARRA that may unwittingly cause Office of Inspector general (“OIG”) scrutiny or employee claims. One such area is ARRA’s unprecedented whistleblowing protection provisions and the risk they pose to recipients of Health Information Technology for Economic and Clinical Health Act (“HITECH Act”) funds.

ARRA Whistleblower Protections

The ARRA whistleblower protection provisions[4] protect employees of non-federal employers receiving ARRA funds from being discharged, demoted, or otherwise discriminated against for disclosing information that the employee reasonably believes is evidence of:

(1) a gross mismanagement of an agency contract or grant relating to covered funds;

(2) a gross waste of covered funds;

(3) a substantial and specific danger to public health or safety related to the implementation or use of covered funds;

(4) an abuse of authority related to the implementation or use of covered funds; or

(5) a violation of law, rule, or regulation related to an agency contract (including the competition for or negotiation of a contract) or grant awarded or issued relating to covered funds.

The Act broadly defines non-federal employers to include (1) contractors, subcontractors, grantees or recipients of ARRA funds; (2) professional membership organizations, certification or other professional bodies, agents or licensees of the federal government; and (3) state and local governments with respect to covered funds. The provisions have a broad scope of prohibited retaliatory acts beyond discharge or demotion. Other discrimination or negative effects on terms and conditions of employment or any action that would dissuade a reasonable person from engaging in whistleblowing are covered.

The whistleblower provisions protect employees against any reprisal for disclosing information, including disclosures made in the ordinary course of business, to any person having supervisory authority over the employee, or to a designated compliance officer or other individual who has authority to perform internal investigations. The incorporation of protections for disclosures in the ordinary course of business in ARRA contrasts with interpretations of whistleblower protections under other statutes. Beyond the protections for internal disclosures, employee disclosures to a member of Congress or government personnel, including an inspector general or state or federal regulatory or law enforcement agency member, are protected. Given that ARRA whistleblowers can make protected disclosure to a wide array of entities and individuals, employers will want to foster an open dialogue with employees to encourage employees to report any perceived mismanagement or waste internally.

How HITECH and ARRA’s Whistleblower Provisions Interrelate

The whistleblower provisions in ARRA pose significant risk to those persons or entities receiving money under the HITECH Act provisions of ARRA. Those at risk include entities receiving grants and loans from the federal government under the HITECH Act to assist them in the implementation of electronic health record (“EHR”) technology. HITECH was touted as a way to improve and facilitate the implementation of EHRs, which, it is believed, will result in overall cost savings and better quality health care. Because of the nature of the technology and the revolutionary concepts in evolving health information technology, it is likely that the EHR infrastructure and integration will go through many iterations before efficiently and effectively being implemented. It is becoming clear that current versions of EHR have unique properties that may not integrate and fully operate with other current and future technologies. Different entities working with EHRs have different platforms, and the development of the wider enterprise integration anticipated by the HITECH Act will require ongoing revisions and modifications to current strategies. Because of the broad nature of the whistleblower protections in ARRA, many of these first generation attempts in EHR may fall prey to ARRA’s undefined terms of “gross mismanagement” or “waste of funds,” as noted above. This could be a particular risk area for those entities trying to incorporate existing systems with those contemplated under the HITECH Act. It is only natural that these transitions will be neither smooth nor flawless and the extent to which problems in this process may be deemed “gross mismanagement” or “waste” potentially opens up opportunities for employees to attract government scrutiny through the use of ARRA’s whistleblower protections.

If a report of gross waste or mismanagement or abuse of authority in connection with ARRA funds is made, the inspector general of the agency having jurisdiction over the ARRA funds is required, within 180 days, to investigate and make a determination regarding the employee’s complaint of reprisal. An employee alleging a reprisal must only prove that a protected disclosure was a “contributing factor” in the reprisal. It is important to note that circumstantial evidence including “(i) evidence that the official undertaking the reprisal knew of the disclosure; or (ii) evidence that the reprisal occurred within a period of time after the disclosure such that a reasonable person could conclude that the disclosure was a contributing factor in the reprisal” is permitted.[5] An employer’s rebuttal must demonstrate with clear and convincing evidence that they would have taken the action in the absence of the employee’s disclosure where the Inspector General finds a disclosure was “a” contributory factor in a reprisal. If, after reviewing the OIG report, the agency concerned with the ARRA funds finds that the employee was the victim of a reprisal, it has the authority to require the employer to (1) take affirmative steps to stop the reprisal; (2) reinstate the employee with back pay; and/or (3) pay compensatory damages, employment benefits or other awards to restore the employee to a position as if no reprisal had occurred. The employer may also be required to pay the costs and expenses associated with the complaint, including reasonable fees for the employee’s attorneys and experts. In addition, there are no expressed caps on damages, making employer liability under this section largely unknown. If the agency decides not to take action, the whistleblower may proceed against the employer in court.

Considerations for HITECH Fund Recipients

Because of the lack of clarity regarding how the expansive whistleblower protections will be implemented and enforced, recipients of HITECH funds should consider the following:

  • There are specific posting requirements for entities receiving ARRA funds. Each entity must post a notice to employees of ARRA whistleblower rights and remedies.
  • The whistleblower protections protect disclosures regardless of whether there was a claim of fraud or intentional misuse of ARRA funds. Therefore, any time an employee reasonably believes that a HITECH fund recipient has “grossly mismanaged” or “wasted” government funds, their disclosures or complaints are protected.
  • Gross mismanagement or gross waste of ARRA funds can be highly subjective. The lack of definitions generally and specifically related to the “gross mismanagement” and “waste” provisions leave much more room for dispute over the appropriate use of ARRA funds or abuse of authority related to the use of the ARRA funds. Because of the nature of EHR and dramatic changes in the technology and processes, the lack of definitional guidance creates a situation ripe for an entity using HITECH funds to become scrutinized by an agency for gross management or waste or for the complaint of an employee about trial and error efforts.
  • Organizations that may not have been on the OIG’s radar for fraud and abuse matters may suddenly become the target of a broader investigation. Once the OIG has gained access to an entity’s records in connection with a whistleblower’s complaint, there is nothing to prevent it from reviewing the records for other potential violations, including overpayments, fraud, and compliance with regulatory conditions of participation. Those entities developing EHR using HITECH Act funds are especially susceptible to this, given the government’s announced enforcement efforts directed at health care fraud and integrity in ARRA spending.

There are no express statutory provisions for an evidentiary hearing with cross examination or an administrative appeal. This is very different from procedures before the U.S. Department of Labor, which provide for hearings before administrative law judges and the Administrative Review Board under Sarbanes-Oxley and other statutes with whistleblower provisions. Because of this, it appears that an agency can take unilateral administrative action which could ultimately put an entity’s HITECH funds at risk and expose the entity to other sanctions including qui tam actions and claims under state law. This again strongly suggests prompt attention to internal complaints and prompt and thorough responses in any whistleblower complaints and investigations.


For those entities using HITECH funds to develop EHR systems, the broadness of the ARRA whistleblower provisions make it clear that entities must be thinking both from a fraud and abuse and an employment law perspective to develop prevention and protection safeguards. Going forward, employers receiving HITECH funds may want to take specific actions to foster an open environment to ensure that employees feel that their complaints and concerns are heard and meaningfully addressed. In addition, the environment should be one that cultivates EHR development without focusing on blame for ineffective or unworkable technologies while maintaining performance standards. Good documentation of performance problems will be important in many cases. Specific actions should focus on (1) developing or reinforcing effective compliance and ethics programs; (2) enhancing corporate code of conducts; (3) establishing and publishing a system for handling and investigating internal reports of misconduct or complaints of retaliation; (4) developing strategies to respond properly to any governmental inquiry or investigation; and (5) implementing structures for how to intake and investigate allegations of waste or mismanagement, even those that come in the ordinary course of business. Because of the broadness of the ordinary course of business inclusion, supervisors must be trained to recognize potential whistleblowers and to take these more general day-to-day complaints seriously.


For more information about this Client Alert, please contact:


Frank C. Morris, Jr.
Washington, DC
Patricia M. Wagner
Washington, DC

Associates Anjali Downs and Karen Schandler assisted in the preparation of this Client Alert.



[1] American Recovery and Reinvestment Act of 2009, Publ. L. No. 111-5 (2009).

[2] In a recent DOJ statement, Attorney General Eric Holder discussed the Department of Health and Human Services (HHS) request for a $60.2 million increase in the HHS budget, “specifically for DOJ components involved in the investigation and litigation of health care fraud cases. This increase will further the efforts of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative…” available at, (February 1, 2010).

[3] DOJ Press Release, available at (February 1, 2010).

[4] American Recovery and Reinvestment Act of 2009, Publ. L. No. 111-5 (2009), at §1553.

[5] American Recovery and Reinvestment Act of 2009, Publ. L. No. 111-5 (2009), at § 1553(c)(1)(A)(ii).


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