Archive for December, 2018

Ontario, Canada Passes An Award Based Whistleblower Program

Monday, December 17th, 2018

What Happened?

On July 14, 2016, the Ontario Securities Commission adopted OSC Policy 15-601 which is a Whistleblower Program that included financial rewards for whistleblowers for the first time in Canadian history.

The Background

Before the enactment of OSC Policy 15-601 Whistleblower Program, Ontario did not have specific whistleblower laws. Courts had to piece together portions of the Canadian Criminal Code, Public Servants Disclosure Protection Act, and the Securities Act in order to determine the outcome of whistleblower cases. Many perceived this system to be inconsistent and unreliable. This inspired the Ontario Securities Commission to enact legislation aimed at protecting and incentivizing whistleblowers.

The Motivation

After observing the success of the United States Dodd–Frank Wall Street Reform and Consumer Protection Act, the Ontario Securities Commission (OSC) became convinced that the key to a successful whistleblower program was an award. This motivated the OSC to implement OSC Policy 15-601 Whistleblower Program (Program) which contained a whistleblower award for the first time in Canadian history.

Who Can Be A Whistleblower In Ontario?

The Program defines a whistleblower as an individual who voluntarily provides original information regarding a violation of Ontario securities law in accordance with specified reporting procedures. A whistleblower does not necessarily have to be an employee. A supplier, contractor, or client can qualify as a whistleblower as long as they voluntarily report new information to the OSC. This information must be based upon the individual’s independent knowledge and must not be public. An individual can still be considered a whistleblower even if they are found to have participated in the misconduct. Of note, a company or organization cannot be a whistleblower.

What Protections Can A Whistleblower Receive?

Under the Program, a whistleblower is granted protection of confidentiality as well as protection against reprisal. The OSC must make all reasonable efforts to protect the whistleblower’s identity. However, this information may be revealed in order to permit the accused to respond to the report of misconduct. The Program also protects the whistleblower against any action taken against them that negatively affects their employment. If a reprisal occurs, the OSC may take action against the employer. A whistleblower may also file a civil suit against the employer for remedies. Potential remedies could be reinstatement or damages for double the amount of lost earnings the whistleblower suffered.

What Awards Can A Whistleblower Receive?

In Ontario, a whistleblower may receive an award if their report of misconduct results in an enforcement action of over $1 million. However, the whistleblower’s report must contain original information that meaningfully assists the OSC in order to receive an award. A whistleblower award ranges from 5% to 15% of the total judgment. However, the award is capped at $5 million. The OSC considers the timeliness and importance of the report, as well as the whistleblower’s cooperation when determining the award amount. Of note, a whistleblower who participated in the reported misconduct may still be entitled to an award. Their award can also be decreased based upon their degree of participation.

How One Blows The Whistle In Ontario, Canada

While the Program encourages the whistleblower to report misconduct through their employer’s internal reporting procedures, it is not required. Of note, a whistleblower who reports internally to their employer must also report to the OSC within 120 days to be eligible for an award. The whistleblower, or the whistleblower’s attorney, must mail or email a Whistleblower Submission Form to the OSC’s Office of the Whistleblower.

The Canadian Take Away

According to the Ontario Securities Commission, the Whistleblower Program has already been extremely effective in producing whistleblower tips. Since its enactment in 2016, over 200 tips have been reported to the OSC. Even though many consider the Program to be groundbreaking due to the whistleblower award, some have argued that the award is not enough. By capping the award at $5 million, some fear that high level executives will not be incentivized to blow the whistle. Interestingly, the United States Securities and Exchange Commission is currently considering implementing a cap being on whistleblower awards as well. Opponents of this change assert the same argument as the one made in Canada.

Alberta, Canada Passes Its Version Of A Whistleblower Program

Friday, December 7th, 2018


What Happened?

On November 19, 2018, the Alberta Securities Commission, the regulatory agency responsible for administering Alberta’s securities laws, implemented its first whistleblower program through the enactment of ASC Policy 15-602 Whistleblower Program and corresponding amendments to the Alberta Securities Act.

The Background

Before the enactment of ASC Policy 15-602 Whistleblower Program, Alberta did not possess protection for a whistleblower who reported a breach of securities legislation. The only laws that a whistleblower could potentially seek protection under were certain provisions of the Canadian Criminal Code, Public Servants Disclosure Protection Act, and the Securities Act. This patchwork of provisions did not provide much protection under the law. Many considered it an ineffective whistleblower program.

The Motivation

After the 2008 financial crisis many Albertans were left struggling. Out of this need for extra income, more individuals were falling for Ponzi-like schemes and losing substantial amounts of money. Whistleblowers could have come forward and stopped this from happening; however, no one was willing to take that risk without any protections or incentives in place. This motivated the Alberta Securities Commission (ASC) to enact ASC Policy 15-602 Whistleblower Program, thereby amending the Alberta Securities Act (the Act) and creating the Office of the Whistleblower.

Who Can Be A Whistleblower In Alberta?

Under the Alberta Securities Act, a whistleblower is defined as an employee of a person or company who voluntarily reports a breach of Alberta securities laws by the person or company to the ASC. The term “employee” is widely interpreted. It includes a full-time or part-time employee, an independent contractor, an employee or director of an independent contractor working for a person or company, as well as an employee or director of an affiliate of a person or company. Of note, a person will not be considered a whistleblower if the reported breach is misleading or untrue.

What Protections Can A Whistleblower Receive?

Under the Act, a whistleblower’s identity, and any information that might disclose a whistleblower’s identity, is confidential. This information will remain confidential and will not be revealed unless it is necessary to prove that the accused did not commit the alleged breach. The whistleblower is also protected against reprisal. The term “reprisal” is broadly interpreted and includes any conduct committed by a colleague or employer that adversely and materially affects the employment or working conditions of the whistleblower or the whistleblower’s family. If a whistleblower believes a reprisal has been made, the whistleblower must submit a Reprisal Reporting Form, found on ASC’s website, to the Office of the Whistleblower. If the ASC finds that a reprisal has been made it may impose sanctions.

The Act also created a civil right of action for the whistleblower to claim damages against the colleague or employer that committed the reprisal. These protections apply to all whistleblowers who report misconduct in good faith, regardless of whether or not the report results in an enforcement action.

How One Blows The Whistle In Alberta, Canada

The Program encourages the whistleblower to report misconduct to their employer before submitting it to the ASC however, it is not mandatory. Reports can be made to the ASC by phone, email, and regular mail. If submitting a report of misconduct by mail or email, the whistleblower must complete the Whistleblower Submission Form found on the ASC’s website. The whistleblower must mail the completed Form, as well as any supporting material, to the Office of the Whistleblower. Supporting material should include a description of the material, how the material was obtained, and whether the material might reveal the whistleblower’s identity. An attorney may submit a report of misconduct on behalf of their whistleblowing client. In this instance, the attorney must complete and submit the Whistleblower Counsel Submission Form, found on the ASC’s website, on behalf of their client.

The Take Away

Following the approach taken by Quebec in its Autorité des marchés financiers, the Alberta Securities Commission declined to include a financial reward in its Whistleblower Program. Alberta determined there was not sufficient evidence to prove financial rewards produced more whistleblower tips. The two Canadian provinces believe confidentiality and protection against reprisals are all that is needed to incentivize whistleblowers into coming forward. Of note, the Ontario Securities Commission came to the opposite conclusion, and included a whistleblower reward of up to $5 million for tips that lead to an enforcement action. Coincidentally, the three Canadian provinces established whistleblower programs within the past several years.

The Government Accountability Office Warns That New Laboratory Rates May Lead to $11B in Excess Payments

Tuesday, December 4th, 2018

On November 30, 2018, the United States Government Accountability Office (GAO) issued a noteworthy report that the implementation of new rates for laboratory testing may lead to billions of dollars in overpayments to labs. The GAO concluded that while CMS’s new clinical lab fee schedule was supposed to save hundreds of millions of dollars, changes in the way Medicare pays for panels of tests could end up costing the program approximately $11 billion dollars.

The GAO is an independent, nonpartisan agency that works for Congress. Often called the “congressional watchdog,” the GAO examines how taxpayer dollars are spent and provides Congress and federal agencies with objective, reliable information to help the government save money and work more efficiently. As required under the Protecting Access to Medicare Act of 2014 (PAMA), the GAO conducted a study to review CMS’s implementation of new payment rates for laboratory tests. To revise the rates, CMS collected data on private-payer rates from approximately 2,000 laboratories and calculated median payment rates, weighted by volume. CMS did not, however, receive data from all laboratories required to report. As a result, the GAO criticized CMA for using incomplete data in its calculations and recommended that CMS collect complete private-payer data. HHS agreed with this recommendation.

The GAO’s independent study found that the new payment rates could lead Medicare to pay billions of dollars more than is necessary and result in Clinical Laboratory Fee Schedule (CLFS) expenditures increasing from what Medicare paid prior to 2018 for primary two reasons.

          (1) Change in Fee Schedule Enables Labs to Potentially “Unbundle” Tests

First, the change in the fee schedule enables labs to significantly “up-charge” for panel tests. Prior to 2018, Medicare always paid a bundled rate for panel tests (groups of laboratory tests generally performed together) regardless of how labs submitted their claims. In the new schedule, labs can bill for each component test individually if they submit claims that way. According to the GAO report, “…if a laboratory submitted a claim individually for the 14 component tests that comprise a comprehensive metabolic panel it would receive a payment of $81.91, a 528% increase from the 2018 bundled payment rate of $13.04 for this panel test.” As a result of the study, CMS is reviewing whether it still retains the authority to bundle payments rates.

            (2) Incorrect Baseline Could Result in Excess Payments

Second, in order to change the fee schedule, CMS used the maximum Medicare payment rates in 2017 as a baseline to start the phase in of payment-rate reductions instead of using actual Medicare payment rates from 2017. This resulted in excess payments for some laboratory tests and, in some cases, higher payment rates than those Medicare previously paid, on average. Accordingly, the GAO recommended that CMS phase in payment-rate reductions that start from the actual payment rates rather than the maximum payment rates.

Given the large amount of Medicare payments at stake, large laboratory testing companies are certainly watching these developments closely.