The False Claims Act: A Primer for Healthcare Providers

The False Claims Act: A Primer for Healthcare Providers

The False Claims Act (FCA) is an important law that healthcare providers need to understand. This law allows the government to recover money when someone submits false claims for payment to a federal healthcare program. FCA cases often involve healthcare providers accused of overbilling Medicare or Medicaid. Let’s break down the key things you need to know about the FCA.

What is the False Claims Act?

The FCA is a federal law that imposes liability on any person or company who knowingly submits false claims to the government. The law covers fraud involving any federally funded program, including healthcare programs like Medicare and Medicaid. The purpose of the law is to allow the government to recover losses caused by fraud.

The FCA was originally passed back in 1863 to combat fraud by defense contractors during the Civil War. The law was updated in 1986 and has become one of the government’s main tools for fighting healthcare fraud today. Violations of the FCA can lead to triple damages plus heavy financial penalties.

How Does the False Claims Act Work?

The FCA allows both the Department of Justice and private citizens to file lawsuits alleging false claims. These private citizens are known as “qui tam relators” and the lawsuit is referred to as a “qui tam action.” The relator reports the fraud to the government and can receive 15-30% of any money recovered.

To prove a violation of the FCA, the government or relator must show:

• A false or fraudulent claim
• The defendant knew the claim was false
• The false claim was material, meaning it could influence the government’s payment decision
• The defendant submitted the false claim to the government

If these elements are proven, the defendant is liable for 3 times the amount of damages sustained by the government plus civil penalties ranging from $11,803 to $23,607 per false claim.

Major Areas of False Claims Act Litigation

When it comes to healthcare providers, there are several major areas that often lead to FCA allegations:

Upcoding

Upcoding is when a healthcare provider submits a bill using a code that yields a higher payment rate than the code for the service actually performed. This could involve using an inaccurate diagnosis code or billing for a more complex service than was provided. Upcoding is illegal because it involves knowingly submitting incorrect information to receive higher reimbursement.

Unbundling

Unbundling is when a provider bills for multiple component services instead of using the all-inclusive code. This “fragments” the billing and results in higher payment. For example, billing separately for pre-operative services instead of using the code for the complete surgery procedure.

Kickbacks and Self-Referrals

Receiving kickbacks for referrals or self-referring patients for healthcare services you provide can also lead to FCA liability. These actions may show you submitted claims that resulted from illegal fraud or misconduct.

Worthless Services

Billing for services that were not medically necessary or were not actually provided can create FCA liability. There is also liability if you bill for a service that is so deficient it amounts to being “worthless.”

Off-Label Marketing

Pharmaceutical companies have faced FCA cases for illegally promoting off-label uses of their drugs. This can cause providers to submit false claims when prescribing the drug for an unapproved use. Medical device makers have faced similar allegations.

Inflated Cost Reports

Facilities like hospitals and nursing homes often submit annual cost reports to Medicare. FCA cases can arise if providers inflate expenses on these reports to increase Medicare reimbursement.

How to Avoid False Claims Act Liability

The key to avoiding FCA liability is having an effective compliance program. This involves:

• Implementing policies to prevent fraud, waste, and abuse
• Conducting regular auditing and monitoring to identify problem areas
• Providing training to ensure staff understand billing and documentation requirements
• Having an anonymous way for employees to report concerns
• Responding promptly to investigate any allegations of noncompliance
• Correcting any issues identified and repaying any overpayments

Having strong internal controls and procedures makes it less likely providers will submit false claims. It also shows your organization is committed to following healthcare program requirements.

False Claims Act Defenses

If you do get investigated for an FCA violation, there are defenses that could apply:

Lack of Knowledge

You can argue you did not “knowingly” submit any false claims. This requires showing there was no actual knowledge the claim was false, nor deliberate ignorance or reckless disregard of the truth.

Minor Errors

You may claim any issues were minor mistakes or clerical errors, not an intent to defraud. But the errors cannot be systemic.

Lack of Materiality

You can argue the alleged falsity was not “material” to the government’s decision to pay and did not actually cause a financial loss.

Statutory Violation

It may be possible to argue the claims submitted only involved underlying regulatory violations, not false or fraudulent claims.

Retention of Overpayments

Failure to promptly return any identified Medicare or Medicaid overpayments can also lead to FCA liability. But you may have defenses if you are actively working to quantify the full repayment amount.

Keep in mind FCA violations cover a wide range of healthcare fraud schemes. Having an experienced attorney is crucial to understand the nuances of asserting possible defenses.

Resolving False Claims Act Cases

When facing an FCA investigation, the best approach is often to negotiate a settlement. This will typically involve paying back a multiple of any damages, plus civil penalties and attorneys’ fees. Admitting liability may not be required. Settlements help avoid costly litigation and the possibility of exclusion from federal healthcare programs.

However, some cases do go to trial if a settlement cannot be reached. The FCA provides whistleblower protections so employers cannot retaliate against individuals who report fraud.

Lessons Learned

The False Claims Act imposes major liability for defrauding the government. Healthcare providers can avoid allegations by having a strong compliance program and internal controls. But if an investigation does arise, understanding the intricacies of the FCA is crucial to mount an effective defense. The stakes are high, so consult experienced legal counsel for guidance navigating this complex law.

With billions recovered annually under the False Claims Act, it pays to be proactive. Evaluating risk areas and quickly addressing any issues can help mitigate liability. Healthcare providers also should view compliance as a wise investment that improves quality of care and reduces fraud.