Doctors and medical practices face increasing government scrutiny and frequent regulatory and policy changes—all of which pose greater risk and even reputational costs than ever before. It is likely that most doctors will be involved in a malpractice suit at some time in their career. Another legal quagmire for physicians is the risk of defending against a False Claims investigation.
The False Claims Act was passed by Congress and signed into law by President Lincoln in 1863, during the Civil War. The original False Claims Act became law in response to federal contractors selling defective goods to Union troops. What can this 148-year-old law have to do with a 21st-century medical practitioner?
The False Claims Act is a “qui tam” law. Simply put, a “relator,” or whistleblower, is rewarded for bringing a situation involving someone submitting false claims to the attention of the federal government. In effect, a citizen—the relator—sues on behalf of the government and gets a percentage of the recovery. The law has been amended several times over the years, but the gist of the law has not changed. How the government applies it has changed a lot, however.
Let’s fast forward to when this law was used against medical practitioners. In 1987, an eye surgeon, working for an eye clinic, was the source of information alleging that the eye clinic was performing unnecessary ophthalmologic surgeries. The allegation was not that the surgeries were not performed, but that they were not medically necessary. The claim was settled for $605,000, and the whistleblower received a percentage of the settlement for their assistance in reporting the false claim. Federal prosecutors and others realized that identifying and pursuing false claims was a potential source of federal income.
Whistleblowers often are disgruntled former employees who believe they know detailed information about the “fraudulent” operation. Not only do they exact revenge by causing their prior employer a lot of aggravation, but they also are rewarded well for their services.
False Claim Act actions can be either civil or criminal. Civil actions involve only fines and penalties, but criminal actions can lead to prison time. Both civil and criminal actions can have consequences that include being barred from federal programs such as Medicare and Medicaid, as well as Tricare. Both can impact your medical license and lead to other sanctions by state medical boards.
The False Claims Act prohibits the following actions that apply to medical bills submitted to Medicare and Medicaid:
Knowingly presenting, or causing to be presented, a false claim for payment; and
Knowingly making, using, or causing to be made or used, a false claim record or statement.
Under this law, the provider has the following responsibilities:
The provider cannot submit a bill that involves federal funds that the provider knew, or should have known, was not true or was not necessary for the patient’s well-being.
The provider cannot falsify or have someone else falsify their medical records to justify an insurance claim.
The provider cannot claim they did not know what they were doing or having others do on their behalf.
The provider has a responsibility to check the accuracy of their biller or billing service concerning what leaves the office under their name. They must make sure that documentation is appropriate and may not recklessly disregard what they know to be true or should have known to be true.
The Medicare Attestation on any insurance form states: “Anyone who misrepresents, falsifies, or conceals essential information required for payment of Federal funds, may be subject to fine, imprisonment, or civil penalties under applicable Federal laws.”
Economics of the False Claims Act
There are two economic facets to the False Claims Act: 1) how much money the Federal Government recovers from a healthcare practitioner; and 2) how much the whistleblower can collect for their participation by informing on the errant provider. Under this act the Federal Government has recovered over $37.6 billion, including $2.2 billion in 2020 alone, with $309 million awarded to the whistleblowers.(1) These amounts include money recovered from private practices, hospitals, and nursing homes, as well as other healthcare facilities. It also includes payments involving durable medical equipment and unnecessary laboratory tests. Additional money also was generated to state governments from various Medicaid investigations under the Federal False Claims Act.(2) These numbers do not include additional penalties awarded by the various state False Claims Act investigations or prosecutions.
The more importance the government attaches to the whistleblower’s information, the higher percentage of recovered money the government tends to give to the whistleblower.
Most prosecutors will say that the whistleblower provision is what motivates reporters to provide the inside information that makes this act so effective against healthcare providers. People in a position with knowledge of fraud are incentivized to become whistleblowers by the prospect of financial gain.
How much can a whistleblower receive for informing the government of false claims? If the government decides to proceed with a case against a provider in a False Claims Act suit, and the whistleblower has met the criteria set out by the law, they are entitled to 15% to 25% of the money recovered. The more importance the government attaches to the whistleblower’s information, the higher percentage of recovered money the government tends to give to the whistleblower. If the government decides not to proceed, and the whistleblower decides to proceed on their own, they can obtain at least 25% to 30% of the recovered monies. If the whistleblower has been convicted of a related felony, however, they are ineligible to receive any compensation. Even 15% can come to a significant amount of money.(3)
As of 2020, the financial penalties for false claims range from $11,665 to $23,331 per claim! In addition, the government can request triple damages in criminal cases. (They usually ask for double or two-and-half times damages in civil actions.) That means if the claims in question add up to $250,000, they can request up to $750,000 plus the financial penalties per claim. The government may go back as far as six years, or three years from the time the government knew or should have known the facts of the alleged fraud. This can—and does—add up to thousands of claims. The money penalties become prohibitive. That is why most False Claims Act actions are settled without proceeding to trial. The stakes are very high for most practitioners.
An example of a False Claims Act investigation would involve being investigated for billing evaluation and management visits by your Medicare patients at two levels higher than is appropriate. That seemingly innocuous error, when multiplied by thousands of dollars, will add up to life-altering fines and penalties. If particularly egregious, it could even result in jail time. Remember that medical assistant you fired? They make out very well. Without getting into too many legal details, the whistleblower comes out with about 15% of the amount of money recovered. This is a motivator for not having cause to use the words “disgruntled” and “former employee” in the same sentence.
Another important area is data analytics. If the practice is using certain codes out of proportion to other similar practices in the area, it presents a target for investigation. Of course, there may be very good reasons for using a higher number of codes, and they may be for procedures that the practice performed and that were documented and appropriate. For example, if the practice in question is a urology practice, that might be a perfectly good reason why many codes often used by urologists are used with higher frequency than in the neighboring family practitioner’s practice. The health law attorneys who are defending the provider should make this clear to the Federal investigators as early as possible.
Tests ordered, even if your entity does not bill for it, but another unrelated entity does bill for it, is also fair game for investigation. The same goes for prescriptions for medication. If the provider writes for medically unnecessary prescriptions, even though they do not receive any compensation, they can be found partly responsible for a false claim. Nonparticipating providers think they are bullet-proof, but this is not the case. The False Claim Act applies to all providers who write unnecessary prescriptions.
Providing or aiding in filing a false claim is what makes you culpable, not whether or not you are in network or participating with Medicare or Medicaid.
Civil or Criminal: Which Way Does It Go and Why
Under the False Claims Act, a person convicted of a criminal violation of this law is subject to five years in prison. Fines for each claim can be $250,000 for an individual or $500,000 for a company for a felony conviction, or $100,000 for an individual or $200,000 for a company for a conviction of a misdemeanor.
How does the government determine whether to proceed with a criminal or a civil suit? The government considers various factors, such as intent, knowledge, and the scope of the alleged false claims.
Most healthcare providers claim ignorance of any scheme to defraud the government. They did not know they were using the wrong CPT code, or what documentation was necessary to support the claim. The standard, however, when it comes to intent is “known or should have known.” Putting your head in the sand and claiming not being aware of what is needed to support the level of code used for an office visit will not suffice as a defense to fraudulent intent. Deliberate ignorance will not work. Every case is different and is considered on its own facts and circumstances.
Of course, actual knowledge can be considered more egregious than deliberate ignorance. It is difficult to claim lack of knowledge when millions of dollars are billed with no monitoring of what the billing service is doing.
A review by private auditors is not expensive and can show government auditors that you are trying to comply.
The following suggestions greatly reduce the possibility of any criminal intent being inferred by the prosecutors, and, for that matter, may reduce the possibility of being prosecuted at all.
If the practice employs only certified coders, or uses only a billing company that uses certified coders, that will serve as a defense against willful ignorance. Another proactive recommendation is to have certified private auditors review your procedures on a regular basis—preferably quarterly. A review by private auditors is not expensive and can show government auditors that you are trying to comply. The auditor will recognize coding mistakes and any deficiencies in your charting. Correcting mistakes and following the suggestions of your private auditor should be very helpful in the defense of a False Claims Act investigation. Our advice is to be meticulous in your documentation and be proactive. Do not wait to be investigated. Ignoring the results of a prior audit is not recommended. You should review your own bills and medical records to make sure that you know what is leaving your office under your signature. Remember, when you sign the insurance form, electronically or otherwise, you are certifying what you submit is true. When possible, have one provider review another doctor’s records and submissions to Medicare and Medicaid. This will provide a set of “fresh eyes” on each other’s records.
Since 2005, all Medicaid providers that make at least $5 million annually are required to have a written compliance program. It is beyond the scope of this article to go into details regarding what is recommended in that document. Suffice it to say that the policy must include detailed provisions as to how your practice prevents fraud, waste, and abuse. It is recommended, but not required, that all practices have such a written policy. Having a written policy that is used in your practice goes a long way to prove to investigating agencies that there is no criminal intent. Of course, if you have purchased a compliance policy and it is still in the shrink-wrapped package, you will not have created a reasonable defense against fraud. The U.S. Department of Health and Human Services has a webpage for such voluntary compliance programs.(4)
Bottom Line: Although the False Claims Act has lofty purposes and is intended to discourage fraud and abuse, there is a financial incentive for whistleblowers to come forward and present a case to the government that will make for a costly and time-consuming defense by medical practices and hospitals. However, if doctors follow the suggestions we have outlined in this article and make every effort to have appropriate documentation for diagnosis and treatment plans, conduct regular audits of the billing practices, and, finally, make every effort not to anger, antagonize, or be insensitive when an employee is terminated, then the likelihood of having to pay large penalties and fines to the government will be significantly decreased.
The United States Department of Justice. Justice Department recovers over $3.7 billion from false claims act cases in fiscal year 2017. December 21, 2017..
Szalados JE. Regulations and regulatory compliance: false claims act, kickback and Stark Laws, and HIPAA. In Szalados JE, ed. The Medical-Legal Aspects of Acute Care Medicine. Springer, Cham; 2021: 277-313.
Desir R, Perreault SJ, Wainberg J. When cash is not king: an examination of the relative effectiveness of tangible vs. cash incentives on whistleblower reporting. Accounting Horizons. June 8, 2022.
Reses HE, Jones ES, Richardson DB, Cate KM, Walker DW, Shapiro CN. (2021). COVID-19 vaccination coverage among hospital-based healthcare personnel reported through the Department of Health and Human Services Unified Hospital Data Surveillance System, United States, January 20, 2021–September 15, 2021. Am J Infect Control. 2021;49:1554-1557.
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