SB0133PAS

SENATE PUBLIC AFFAIRS COMMITTEE SUBSTITUTE FOR

SENATE BILL 133

51st legislature - STATE OF NEW MEXICO - first session, 2013

AN ACT

RELATING TO MEDICAID FALSE CLAIMS; AMENDING THE MEDICAID FALSE CLAIMS ACT; EXPANDING ENFORCEMENT OF THE MEDICAID FALSE CLAIMS ACT TO THE ATTORNEY GENERAL; CHANGING AND ADDING DEFINITIONS; INCREASING PENALTIES; EXPANDING LIABILITY; ALLOWING FOR RESTRICTIONS ON INDIVIDUALS INITIATING MEDICAID FALSE CLAIMS ACTIONS; PROVIDING FOR PURSUAL OF CLAIMS THROUGH ALTERNATE REMEDIES; CHANGING STANDARDS FOR ALLOWING A DEFENDANT TO OBTAIN ATTORNEY FEES AND COSTS; EXPANDING WHISTLEBLOWER PROTECTION TO INCLUDE AGENTS AND CONTRACTORS; SETTING TIME FRAMES FOR BRINGING AN ACTION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 27-14-3 NMSA 1978 (being Laws 2004, Chapter 49, Section 3) is amended to read:

"27-14-3. DEFINITIONS.--As used in the Medicaid False Claims Act:

A. "claim" means a [written or electronically submitted request for payment of health care services pursuant to the medicaid program] request or demand, whether under a contract or otherwise, for money or property, regardless of whether the federal or state government has title to the money or property, that is:

(1) presented to an officer, employee or agent of the federal or state government; or

(2) made to a contractor, grantee or other recipient if the money or property is to be spent or used on behalf of the federal or state government under the medicaid program or to advance a federal or state government program or interest within the medicaid program and if the federal or state government:

(a) provides or has provided a portion of the money or property requested or demanded; or

(b) will reimburse the contractor, grantee or other recipient for a portion of the money or property that is requested or demanded;

B. "department" means the human services department;

C. "knowing" or "knowingly" means that a person, with respect to information and regardless of whether that person has a specific intent to defraud, has actual knowledge of the information, acts in deliberate ignorance of the truth or falsity of the information or acts in reckless disregard of the truth or falsity of the information;

D. "material" means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property;

[C.] E. "medicaid" means the federal-state program administered by the human services department pursuant to Title 19 or Title 21 of the federal Social Security Act;

[D.] F. "medicaid recipient" means an individual on whose behalf a person claims or receives a payment from the medicaid program, regardless of whether the individual was eligible for the medicaid program; [and]

G. "obligation" means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation or from the retention of any overpayment; and

[E.] H. "qui tam" means an action brought under a statute that allows a private person to sue for a recovery, part of which the state will receive."

SECTION 2. Section 27-14-4 NMSA 1978 (being Laws 2004, Chapter 49, Section 4) is amended to read:

"27-14-4. FALSE CLAIMS AGAINST THE STATE--LIABILITY FOR CERTAIN ACTS.--A person commits an unlawful act and shall be liable to the state for a civil penalty of not less than five thousand dollars ($5,000) and not more than ten thousand dollars ($10,000) as provided by 31 U.S.C. Section 3729(a) plus three times the amount of damages that the state sustains [as a result] because of the act [if the] of that person when that person:

A. knowingly presents, or causes to be presented, [to the state] a false or fraudulent claim for payment under the medicaid program [knowing that such claim is false or fraudulent];

B. knowingly presents, or causes to be presented, to the state a claim for payment under the medicaid program [knowing] that the person receiving a medicaid benefit or payment is not authorized or is not eligible for [a benefit] under the medicaid program;

C. knowingly makes, uses or causes to be made or used a false, misleading or fraudulent record or statement [to obtain] that is material in the obtaining of, or in supporting the approval of, payment on a false or fraudulent claim under the medicaid program; [paid for or approved by the state knowing such record or statement is false;

D. conspires to defraud the state by getting a claim allowed or paid under the medicaid program knowing that such claim is false or fraudulent;

E.] D. knowingly makes, uses or causes to be made or used a false record or statement material to an obligation to [conceal, avoid or decrease] pay or transmit money or property to the state, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the state, relative to the medicaid program; [knowing that such record or statement is false;

F.] E. knowingly applies for and receives a benefit or payment on behalf of another person, except pursuant to a lawful assignment of benefits, under the medicaid program and converts that benefit or payment to [his] the person's own [personal] use;

[G.] F. knowingly makes a false statement or misrepresentation of material fact concerning the conditions or operation of a health care facility in order that the facility may qualify for certification or recertification required by the medicaid program; [or

H.] G. knowingly makes a claim under the medicaid program for a service or product that was not provided;

H. has possession, custody or control of property or money used, or to be used, by the state or federal government under the medicaid program and knowingly delivers, or causes to be delivered, less than all of that money or property; or

I. conspires to commit a violation of this section."

SECTION 3. Section 27-14-5 NMSA 1978 (being Laws 2004, Chapter 49, Section 5) is amended to read:

"27-14-5. DOCUMENTARY MATERIAL IN POSSESSION OF STATE AGENCY.--

A. The department and the attorney general shall have access to all documentary materials of persons and medicaid recipients to which a state agency has access. Documentary material provided pursuant to this subsection is provided to allow investigation of an alleged unlawful act or for use or potential use in an administrative or judicial proceeding.

B. Except for disclosure to any person under investigation or who is the subject of allegations made pursuant to the Medicaid False [Claim] Claims Act or as ordered by a court for good cause shown, the department or the attorney general shall not produce for inspection or copying or otherwise disclose the contents of documentary material obtained pursuant to this section to a person other than:

(1) an authorized employee of the attorney general;

(2) an agency of this state, the United States or another state;

(3) a district attorney, city attorney or county attorney of this state;

(4) the United States attorney general; or

(5) a state or federal grand jury."

SECTION 4. Section 27-14-7 NMSA 1978 (being Laws 2004, Chapter 49, Section 7) is amended to read:

"27-14-7. CIVIL ACTION FOR FALSE CLAIMS.--

A. The department or the attorney general shall diligently investigate suspected violations. If the department or the attorney general finds that a person has violated or is violating the provisions of the Medicaid False Claims Act, the [department] state may bring a civil action pursuant to [Subsection F of] this section.

B. A person may bring a private civil action [may be brought by an affected person] for a violation of the Medicaid False Claims Act on behalf of the person bringing suit and for the state. The action shall be brought in the name of the state. The action may be dismissed only if the court and the [department, pursuant to Subsection F of this section] attorney general give written consent to the dismissal and their reasons for consenting.

C. For private civil actions, a copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the [department] attorney general. The complaint shall be filed in writing and shall remain under seal for at least sixty days. The complaint shall not be served on the defendant until the expiration of sixty days or any extension approved. [Within sixty days after receiving a copy of the complaint, the department shall conduct an investigation of the factual allegations and legal contentions made in the complaint, shall make a written determination of whether there is substantial evidence that a violation has occurred and shall provide the person against which a complaint has been made with a copy of the determination. If the department determines that there is not substantial evidence that a violation has occurred, the complaint shall be dismissed.] The attorney general may intervene and proceed with the action within sixty days after the attorney general receives both the complaint and the material evidence and information.

D. The [department] attorney general may, for good cause shown, move the court for extensions of time during which the complaint remains under seal. Any such motion may be supported by affidavits or other submissions in camera. The defendant shall not be required to respond to a complaint filed pursuant to this section until twenty days after the complaint is unsealed and served to the defendant. The complaint shall be deemed unsealed at the expiration of the sixty-day period in the absence of a court-approved extension.

E. Before the expiration of the sixty-day period or any extensions obtained, the [department, pursuant to Subsection F of this section] attorney general shall:

(1) proceed with the action, in which case the action shall be conducted by the [department] state; or

(2) notify the court and the person who brought the action that [it] the state declines to take over the action, in which case the person bringing the action shall have the right to conduct the action [if the department determined that there is substantial evidence that a violation of the Medicaid False Claims Act has occurred.

F. The department shall notify the attorney general prior to filing a civil action pursuant to the Medicaid False Claims Act and shall not proceed with the action except with the written approval of the attorney general. The attorney general shall, within twenty working days from the notification by the department, notify the department whether it may proceed with the civil action. Failure by the attorney general to notify the department of its determination within the specified time period shall be construed as consent to proceed. The department shall, after filing the civil action, notify the attorney general of any proposed dismissal or settlement and the department shall not proceed with the dismissal or settlement except with the written approval of the attorney general]."

SECTION 5. Section 27-14-8 NMSA 1978 (being Laws 2004, Chapter 49, Section 8) is amended to read:

"27-14-8. RIGHTS OF THE PARTIES TO QUI TAM ACTIONS.--

A. If the [department] attorney general proceeds with the action, [it] the state shall have the [exclusive] primary responsibility for prosecuting the action and shall not be bound by an act of the person bringing the action. The person bringing the action shall have the right to continue as a [nominal] party to the action [and shall not have the right to participate in the litigation except as a witness] subject to the limitations of this section.

B. The [department] attorney general may dismiss the action, [pursuant to Subsection F of Section 7 of the Medicaid False Claims Act] notwithstanding the objections of the person bringing the action if the person has been notified by the [department] state of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.

C. The [department] attorney general may settle the action with the defendant, [pursuant to Subsection F of Section 7 of the Medicaid False Claims Act] notwithstanding the objections of the person bringing the action if the court determines, after the hearing, that the proposed settlement is fair, adequate and reasonable under all the circumstances. Upon a showing of good cause, such hearing may be held in camera.

D. If the state elects not to proceed with the action, the person bringing the action shall have the right to conduct the action. If the [department] attorney general requests, [it] the state shall be served with copies of the pleadings filed in the action and shall be supplied with copies of all deposition transcripts at the [department's] attorney general's expense. When a person proceeds with the action, the court, without limiting the status and rights of the person bringing the action, may allow the [department] attorney general to intervene at a later date upon a showing of good cause.

E. Whether or not the [department] attorney general proceeds with the action, upon a showing by the [department] attorney general that certain actions of discovery by the person bringing the action would interfere with the [department's] attorney general's investigation or prosecution of a criminal or civil matter arising out of the same facts, the court may stay such discovery for a period not to exceed sixty days. Such a showing shall be conducted in camera. The court may extend the sixty-day period upon a further showing in camera that the [department] attorney general has pursued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil action will interfere with the ongoing criminal or civil investigation or proceedings.

F. Upon a showing by the attorney general that unrestricted participation during the course of the litigation by the person initiating the action would interfere with or unduly delay the state's prosecution of the case, or would be repetitious, irrelevant or for purposes of harassment, the court may impose limitations on the person's participation, such as:

(1) limiting the number of witnesses that the person may call;

(2) limiting the length of the testimony of each witness;

(3) limiting the person's cross-examination of witnesses; or

(4) otherwise limiting the participation by the person in the litigation.

G. Upon a showing by the defendant that unrestricted participation during the course of the litigation by the person initiating the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense, the court may limit the participation by the person in the litigation.

H. Notwithstanding the provisions of Section 27-14-7 NMSA 1978, the attorney general or the state may pursue an action through any alternate remedy available to the state, including any other statutes or administrative proceeding to determine a civil money penalty. If any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in the proceeding as the person would have had if the action had continued under the Medicaid False Claims Act.

I. For the purposes of Subsection H of this section, a finding of fact or conclusion of law made in another proceeding that has become final shall be conclusive on all parties to an action under this section. A finding or conclusion is final if it has been finally determined on appeal to the appropriate court, if all 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."

SECTION 6. Section 27-14-9 NMSA 1978 (being Laws 2004, Chapter 49, Section 9) is amended to read:

"27-14-9. AWARD TO QUI TAM PLAINTIFF.--

A. If the [department] attorney general proceeds with an action brought by a person pursuant to the Medicaid False Claims Act, the person shall, subject to the limitations in this subsection, receive at least fifteen percent but not more than twenty-five percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action. Where the action is one that the court finds to be based primarily on disclosures of specific information other than information provided by the party bringing the action relating to allegations or transactions in a criminal, civil or administrative hearing or from the news media, the court shall award a sum as it considers appropriate; provided that the sum does not exceed ten percent of the proceeds and takes into account the significance of the information and the role of the person bringing the action in advancing the case to litigation. A payment to a person pursuant to this subsection shall be made from the proceeds. The person shall also receive an amount for reasonable expenses that the court finds to have been necessarily incurred, plus reasonable attorney fees and costs. [In determining the amount of reasonable attorney fees and costs, the court shall consider whether such fees and costs were necessary to the prosecution of the action, were incurred for activities that were duplicative of the activities of the department in prosecuting the case or were repetitious, irrelevant or for purposes of harassment or caused the defendant undue burden or unnecessary expense.] All such expenses, fees and costs shall be awarded against the defendant.

B. If the [department] attorney general does not proceed with an action pursuant to the Medicaid False Claims Act, the person bringing the action or settling the claim shall receive an amount that the court decides is reasonable for collecting the civil recovery and damages [recoverable by the state]. The amount shall be not less than twenty-five percent and not more than thirty percent of the proceeds of the action or settlement and shall be paid out of such proceeds. The person shall also receive an amount for reasonable expenses that the court finds to have been necessarily incurred, plus reasonable attorney fees and costs. [In determining the amount of reasonable attorney fees and costs, the court shall consider whether such fees and costs were necessary to the prosecution of the action, were incurred for activities which were repetitious, irrelevant or for purposes of harassment or caused the defendant undue burden or unnecessary expense.] All such expenses, fees and costs shall be awarded against the defendant.

C. Whether or not the [department] attorney general proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds of the action that the party would otherwise receive pursuant to Subsection A or B of this section, taking into account the role of that person in advancing the case to litigation and any relevant circumstances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising from the person's role in the violation of the Medicaid False Claims Act, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the state to continue the action represented by the [department] attorney general. If the [department] attorney general does not proceed with the action and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorney fees and costs if the defendant prevails in the action and the court finds that the claim of the party bringing the action was:

(1) [filed for an improper purpose] clearly frivolous;

(2) [not warranted by existing law or by a nonfrivolous argument for the extension, modification or reversal of existing law or the establishment of new law] clearly vexatious; or

(3) [was based on allegations or factual contentions not supported] brought primarily for purposes of harassment."

SECTION 7. Section 27-14-10 NMSA 1978 (being Laws 2004, Chapter 49, Section 10) is amended to read:

"27-14-10. CERTAIN ACTIONS BARRED.--

A. A court shall not have jurisdiction of an action brought pursuant to the Medicaid False Claims Act against a [department] state official if the action is substantially based on evidence or information known to the [department] state when the action was brought.

B. A person shall not bring an action pursuant to the Medicaid False Claims Act that is substantially based upon allegations or transactions that are the subject of a civil suit or an administrative proceeding in which the [department] state is already a party.

C. A court shall not have jurisdiction over an action pursuant to the Medicaid False Claims Act substantially based upon the public disclosure of allegations or actions in a criminal, civil or administrative hearing in which the state is a party or from the news media, unless the action is brought by the [department] attorney general or the person bringing the action is an original source of the information. For the purposes of this subsection, "original source" means the person bringing suit that has independent knowledge, including knowledge based on the person's own investigation of the defendant's conduct, of the information on which the allegations are based and has voluntarily provided or verified the information on which the allegations are based or has voluntarily provided the information to the [department] attorney general before filing an action pursuant to this section that is based on the information."

SECTION 8. Section 27-14-11 NMSA 1978 (being Laws 2004, Chapter 49, Section 11) is amended to read:

"27-14-11. [DEPARTMENT] STATE NOT LIABLE FOR CERTAIN EXPENSES.--The [department] state shall not be liable for expenses that a person incurs in bringing an action pursuant to the Medicaid False Claims Act."

SECTION 9. Section 27-14-12 NMSA 1978 (being Laws 2004, Chapter 49, Section 12) is amended to read:

"27-14-12. [EMPLOYEE] WHISTLEBLOWER PROTECTION.--Any employee, agent or contractor who is discharged, demoted, suspended, threatened, harassed or otherwise discriminated against in the terms and conditions of employment by the employer because of lawful acts done by the employee, agent or contractor on behalf of the employee, agent or contractor or others in disclosing information to the [department] attorney general or in furthering a false claims action pursuant to the Medicaid False Claims Act, including investigation for, initiation of, testimony for or assistance in an action filed or to be filed pursuant to that act, shall be entitled to all relief necessary to make the employee, agent or contractor whole. Such relief shall include reinstatement with the same seniority status that the employee, agent or contractor would have had but for the discrimination, two times the amount of back pay, interest on the back pay and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorney fees. An employee, agent or contractor may bring an action in the appropriate court of the state for the relief provided in this subsection. A civil action under this section shall not be brought more than three years after the date on which the retaliation occurred."

SECTION 10. Section 27-14-13 NMSA 1978 (being Laws 2004, Chapter 49, Section 13) is amended to read:

"27-14-13. FALSE CLAIMS AND REPORTING PROCEDURE.--

A. A civil action [shall be brought within the limitations set forth in Section 37-1-4 NMSA 1978] under Section 27-14-4 NMSA 1978 may not be brought more than six years after the date on which the violation of Section 27-14-4 NMSA 1978 is committed, or more than three years after the date when facts material to the right of action are known or reasonably should have been known by the attorney general, but in no event more than ten years after the date on which the violation is committed, whichever occurs last.

B. If the state elects to intervene and proceed with an action brought under Section 27-14-8 NMSA 1978, the state may file its own complaint or amend the complaint of a person who has brought an action under Section 27-14-8 NMSA 1978 to clarify or add detail to the claims in which the state is intervening and to add any additional claims with respect to which the state contends it is entitled to relief. For statute-of-limitations purposes, any such state pleading shall relate back to the filing date of the complaint of the person who originally brought the action, to the extent that the claim of the state arises out of the conduct, transactions or occurrences set forth, or attempted to be set forth, in the prior complaint of that person.

[B.] C. In any action brought pursuant to the Medicaid False Claims Act, the [department] state or the person bringing the action shall be required to prove all essential elements of the cause of action, including damages, by a preponderance of the evidence.

[C.] D. Notwithstanding any rule or other provision of law, a final judgment rendered in favor of the [department] state in any criminal proceeding charging fraud or false statements, whether upon a verdict after trial or upon a plea of guilty or nolo contendere, shall [preclude] estop the defendant from denying the essential elements of the offense in any action that involves the same transaction as in the criminal proceeding and that is brought pursuant to the Medicaid False Claims Act."

SECTION 11. Section 27-14-15 NMSA 1978 (being Laws 2004, Chapter 49, Section 15) is amended to read:

"27-14-15. USE OF FUNDS.--

A. Damages collected pursuant to the Medicaid False Claims Act on behalf of the state shall be remitted to the state treasurer for deposit in the general fund to be used for the state's medicaid program.

B. Penalties, legal fees or costs of investigation recovered pursuant to the Medicaid False Claims Act on behalf of the state shall be remitted to the state treasurer for deposit in the general fund to be used for the state's medicaid program.

[C. Pursuant to Subsection C of Section 30-44-8 NMSA 1978, penalties recovered pursuant to the Medicaid False Claims Act on behalf of the state may be claimed by the attorney general pursuant to procedures established by the department and the attorney general.]"

- 21 -