Tennessee False Claims Act

In 2005, the Tennessee State Legislature enacted the Tennessee False Claims Act, a statute that is very similar to the federal FCA. See Tenn. Code Ann. §§ 4-18-101, et. seq. Any person or business that knowingly submits or conspires to submit a false claim to a Tennessee state agency for payment, or makes or uses a false record or statement to get a claim paid or avoid repaying the state, is liable under the state FCA. The Tennessee False Claims Act goes beyond its federal counterpart in that it establishes liability for a person who is a beneficiary of an inadvertent submission of a false claim who, after discovering the fraud, fails to disclose it to the state within a reasonable time. The Act does not apply to claims worth less than $500, claims relating to state tax laws, claims relating to workers’ compensation, or claims already covered by the Medicaid False Claims Act (a separate state statute).

In Tennessee, civil penalties are set between $2,500 and $10,000 for each individual false claim, not including treble damages. Whistleblowers are entitled to 25 to 33% of the state’s recovery, and up to 50% if the government decides not to join the case. Moreover, whistleblowers receive some protection from retaliation in the statute’s provisions. Finally, relators who disclose fraud to the Tennessee state government under Tenn. Code § 71-5-183(e)(2) can qualify as an original source of information about the fraud.

Tennessee also has a separate Medicaid False Claims Act, which also mimics the federal FCA. This statute only applies to false claims submitted to the state’s Medicaid program, known as TennCare. Under the Medicaid False Claims Act, individual occurrences of fraud can result in penalties between $5,000 and $25,000, plus treble damages. This specialized statute contains the same qui tam provision, anti-retaliatory measures, and statute of limitations as the Tennessee False Claims Act.

State Cases

In April 2014, Tennessee’s Attorney General Bob Cooper announced that CRC Health Group (“CRC”) agreed to pay the state $9.25 million to resolve allegations that it defrauded the state’s Medicaid program, TennCare, at its New Life Lodge Facility in Burns, Tennessee. According to the Complaint, between 2006 and 2012, CRC caused third party payers, mostly pharmacies, to bill TennCare for prescription drugs that New Life Lodge was obligated to pay for under their TennCare-paid per diem. Additionally, CRC allegedly exceeded its state-licensed patient capacity on multiple occasions and provided substandard services to patients. In particular, some of New Life Lodge’s personnel were not properly licensed or supervised, failed to follow the facility’s own treatment plans, failed to meet legal “medical necessity” requirements that are mandatory under TennCare, and billed for services not rendered.

In May 2014, First Call Ambulance Service agreed to pay $500,000 to settle allegations that it violated both the federal FCA and the Tennessee False Claims Act. Allegedly, First Call up-coded billings for ambulance transports it provided to patients that were covered by TennCare. In most cases, First Call billed for providing advanced life support services during ambulance runs when it was in fact only providing basic life support services. The false claims resulted in TennCare overpaying by tens hundreds of thousands of dollars.

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