Law & Medicine

False claims


Question: Regarding false claims, which of the following is best?

A. The False Claims Act (FCA) is the only federal antifraud statute of importance.

B. FCA covers principally health-related transactions.

C. Violations require an intention to defraud and acting negligently or knowingly.

D. A coworker may file a false-claims suit on behalf of the government and share in the proceeds.

E. FCA targets institutions and corporations, not individuals.

Answer: D. The False Claims Act, first enacted in 1863, imposes liability for submitting a payment demand to the federal government where there is actual or constructive knowledge that the claim is false. Intent to defraud is not a required element, but knowing or reckless disregard of the truth is. However, an error that is negligently committed is insufficient to constitute a violation.

Many states now have their own versions of FCA. The law applies to claims made by individuals or organizations to any governmental entity, including but not limited to Medicare/Medicaid. Although FCA is the most prominent health care antifraud statute, there are many others such as the anti-kickback statute; the Stark law; HIPAA (Health Insurance Portability and Accountability Act); and general criminal statutes covering theft, embezzlement, obstruction of criminal investigations, false statements, mail/wire fraud, and so on.

Private individuals including whistle-blowers, civic associations, or public interest groups can file a so-called qui tam action. Called relators, such plaintiffs may act alone or in concert with the government, and they stand to collect a substantial bounty, up to 30% of the proceeds. They do not have to show legal standing, and need not sustain any personal injury. The government can decide, upon diligent investigation, whether to intervene by taking or declining action, or may request the court to dismiss the case altogether.

In fiscal 2012, relators lodged 647 qui tam suits, which are now easier to file following amendments to FCA in 1986, together with the enactment of the Fraud Enforcement and Recovery Act of 2009 and the Affordable Care Act of 2010.

Health care fraud and abuse are believed to waste some 10% of federal health expenditures. Under federal law, it is illegal to submit fraudulent claims to Medicare or Medicaid. Penalties include treble damages, costs and attorney fees, and fines of $11,000 per false claim, as well as possible imprisonment and criminal fines. In fiscal 2012, the U.S. Treasury took in a record $4.9 billion in fines and penalties under FCA, largely in health care ($3 billion) and in housing and mortgages ($1.4 billion), with qui tam suits accounting for $3.3 billion.

Physician billing is susceptible to all sorts of errors; most are innocent, but some may arguably be fraudulent. Pitfalls include billing for noncovered services such as experimental treatments, double billing, quality of care issues and unnecessary services, improperly billing the government as the primary payer, or regularly waiving deductibles and copayments.

Other activities that constitute wrongdoing in this context include knowingly using another patient’s name for purposes of federal drug coverage, billing for no-shows, and misrepresenting the diagnosis to justify services. The electronic medical record enables easy check-offs on a preprinted form as documentation of actual work done. Fraud is implicated if the information is deliberately misleading for purposes of up-coding. Medicare is known to be currently looking into this aspect of physician practice.

Importantly, physicians are liable for the actions of their office staff, e.g., systematic up-coding of Medicare or CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) bills; so it is prudent to oversee and supervise all such activities. Naturally, one should document all claims that are sent, and know the rules for allowable and excluded services. Doing business with the government poses vulnerabilities that include qui tam actions, and a disgruntled employee or a nongovernmental payer can turn a case over to the government for prosecution.

A jarring example of fraud in action involved a doctor in Los Angeles who was recruited to sign off on medical charts without seeing any patients. The records were then used to fraudulently bill Medicare for durable medical equipment. Another case concerned a New York cardiologist who was arrested for intentionally misdiagnosing up to 80% of his patients in order to justify billing for enhanced external counterpulsation procedures. The scheme allegedly took in $19 million.

Even medical schools can become entangled. In 2008, two cardiologists pleaded guilty to federal fraud charges for referring patients to a medical school’s cardiac surgery program in exchange for do-nothing faculty positions. The federal Department of Justice is also currently suing a large Florida hospice outfit for alleged fraudulent referrals of patients for emergency services.


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