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False Claims Act: Prevention Is Better Than Cure


The False Claims Act is one of the most heavy-handed laws that apply to the healthcare industry yet; many well-meaning Physicians’ Offices can unwittingly fall into its trap with the potential of losing millions in fines and penalties. The False Claims Act (FCA), 31 U.S.C. Sections 3729-3733, as amended is a federal law that makes it a civil offense to knowingly make a false record or file a false claim regarding any federal health care program, which is funded directly, in whole or in part, by the United States Government or any state health care system. The qui tam or whistleblower provisions have assumed significant importance, especially in the healthcare area largely fueled by the whistleblower 15 to 30% commissions in excess of $500 million that was paid out in 2016.

FCA liability can arise in all sorts of contexts, including:

  1. Services Not Rendered: The submission of a claim for health care services, treatments, diagnostic tests, medical devices or pharmaceuticals that were never rendered.

  2. Ghost Patients: The submission of a claim for health care services, treatments, diagnostic tests, medical devices or pharmaceuticals provided to a patient who either does not exist or who never received the service or item billed for in the claim.

  3. Kickbacks: These improper payments can come in many different forms, including, but not limited to: referral fees; finder’s fees; productivity bonuses; discounted leases; discounted equipment rentals; research grants; speaker’s fees; excessive compensation; and free or discounted travel or entertainment.

  4. Up-Coding Services: Up-coding occurs when a health care provider submits a claim for health care services, treatments, diagnostic tests or items which represent a more serious and more expensive procedure than that which actually was performed.

  5. Bundling and Unbundling: Typically, there are special reimbursement rates for groups of procedures that are typically performed together, such as laboratory tests. One common type of fraud has been to “unbundle” these procedures or tests and bill each one separately, which results in greater reimbursement than the group reimbursement rate.

  6. Lack of Medical Necessity: One common type of fraud has been to submit claims for services, treatments, diagnostic tests, and medical devices that are not medically necessary. Documentation of medical necessity is required by law.

  7. Research Grant Fraud: Some of the common forms of research grant fraud include: falsifying a grant application in order to secure a grant; falsifying research data and results; over-billing costs and other expenses associated with the grant; and using grant money for other unrelated research.

  8. Many Others: False Certification, Improper Financial Interest (Stark Law), Inflating Cost Reports, Red-Lining and Medicare Part D Fraud.

What Are “False Claims” Under The FCA?

Basically, this covers any request or demand, of value where the money or property that originated from the Government. There are four principal types of false claims:

  1. Knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval – submission of a false claim that you know on its face is false.

  2. Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim – submitting a false document required to approve the false claim.

  3. Engaging in a conspiracy to defraud by the improper submission of a false claim

  4. Concealing, improperly avoiding or decreasing an ‘obligation’ to pay money to the government – The basic purpose of this provision is to address situations where an individual or entity has already received funds or material from the government which ought to be returned (e.g., Overpayments).

 Knowledge or intent requirement

There is no proof of specific intent to defraud partly because this is not a criminal statute and also to increase the government’s probability of recovering on false claims suits.  In any event, careless or mistaken claims can serve as the basis for an FCA prosecution through any of three possibilities:

  1. Actual knowledge of the information – Example if a health care professional submits a bill to Medicare for medical services that he/she knows he/she has not provided, then a knowing submission has occurred

  2. Acts in deliberate ignorance of the truth or falsity of the information – Example, a physician practice that relied on its staff or an independent billing company to submit claims cannot avoid FCA liability by passing the buck.

  3. Acts in reckless disregard of the truth or falsity of the information act in reckless disregard of the truth or falsity of the information – Example, reliance on outdated software to bill Medicare could serve as the basis to impute knowledge to a Physician’s practice.

Penalty Provisions

The FCA’s broad reach is coupled with serious penalties.

  1. Damages: 3x (treble) damages on total loss e.g., $50,000 false claim will result in a $150,000 penalty; PLUS

  2. Penalties: $5,000 to $10,000 for each false claim submitted. For instance, if the $50,000 example above comprised of 100 false claims, an additional penalty as high as $1,000,000 can be assessed on top of the $150,000. In reality this additional penalty can easily (if not usually) reach into the millions thus for healthcare providers, this penalty is usually much higher than the treble damages.

Voluntary Disclosure Provision

If a defendant (Hospital, Nursing Home, Doctor’s Office, etc) voluntarily cooperates with the Government, a Court can reduce potential liability to 2 times the damages and possibly waive the penalties.


There are various options at the provider’s disposal to prevent or mitigate the risk, however here are three examples:

  1. Implement Compliance Controls

You can mitigate your risk for FCA liability by implementing comprehensive written policies and procedures in place to detect and prevent fraud, waste and abuse. Failure to have a robust compliance program may constitute actual knowledge or “reckless disregard” of the “truth or falsity” of a claim.

  1. Voluntary Disclosure

Providers who are proactive and voluntarily disclose false claim information within 30 days of good faith discovery will tangibly reduce their FCA exposure. However, it is advisable to first talk to an attorney to advise you properly.

  1. Timely Response To Government Investigations

When a whistleblower files a qui tam action, the government has 60 days to investigate to decide whether they want in or out. If the government decides the case has merit, they will opt in which usually means the defendant will settle for big bucks. But if the government opts out (due to a weak case), there is a 95% chance that the case could be dismissed. For this reason, a swift and decisive response, within the 60-day window, is crucial to reducing exposure.

Wrap Up

Prevention is better than cure. Providers should evaluate their compliance and oversight programs and identify weaknesses that could give rise to a qui tam action or a government investigation. They should also recognize that seemingly minor issues can give rise to significant exposure. Providers should also recognize that the DOJ’s increasingly healthcare-focused enforcement agenda is not letting up anytime soon and therefore should be diligent in monitoring all aspects of their practice especially as it applies to the billing a receipt of federal and state government funds.

Contact us if you require assistance in setting up an FCA compliance program.


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