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"Understanding the False Claims Act: Know when it applies and when to be thankful it doesn't"


Below is an excerpt:

Steep penalties

Health care providers have always been worried about liability under the False Claims Act (FCA). The FCA is a civil liability statute imposing stiff penalties for knowingly submitting false bills to federal government payors, including bills for health care services submitted to Medicare and Medicaid. The FCA authorizes penalties of triple the amount of the government's damages, plus additional penalties per claim. In-house lawyers should have enough understanding of the FCA to recognize potential issues if your business has anything to do with claims for health care services.

Enforcement on the rise

According to the U.S. Department of Justice (DOJ), the federal government recovered $5.69 billion in settlements and judgments from civil FCA cases in fiscal year 2014, the highest ever. While the FCA has been in existence for a long time, more than half of the total penalties recovered have been imposed since January 2009.


Why is FCA exposure on the rise? One factor is whistleblowers. The FCA has qui tam provisions which incentivize individuals to file lawsuits alleging FCA violations. Under the FCA, qui tam plaintiffs, known as "whistleblowers" or "relators," are entitled to up to 30 percent of the recovery if the government intervenes and prevails in the action. The DOJ reports that the number of qui tam lawsuits exceeded seven hundred in 2014, with whistleblowers receiving an aggregate total of approximately $435 million.

The tricky concept of “knowledge”

Liability under the FCA hinges on whether the entity knew the claims for payment were false. A significant part of the battle when a whistleblower case is filed or the government opens an investigation will center around this concept. "Knowledge" in the FCA context means that the provider (or business partner submitting the claims had actual knowledge of the claim's falsity; or acted with deliberate ignorance of the claim's truth or falsity; or acted with reckless disregard of the claim's truth or falsity. Unfortunately, this is a broad definition.

What makes a claim “false?”

There are several ways in which a claim submitted for payment could be determined to be false.

Factually false claims: A factually false claim means that the services on the bill did not actually happen. This type of false claim can take the form of billing for services not provided, billing for more expensive services than those actually rendered (called "upcoding"), double-billing for services, or billing for services that were medically unnecessary, even if they were actually performed.

Legally false claims: A legally false claim occurs when the circumstances of the services on the claim or the claim itself create or reflect a violation of an underlying law or regulation. For example, claims for physician services rendered pursuant to an arrangement that violates the Stark Law (prohibiting self-referrals) or the Anti-Kickback Statute are legally prohibited and are thus "false," if made knowingly. The submission of the claim itself is evidence of the provider's implied certification that the claim is valid, such that even if the provider (or biller) has not affirmatively represented that the claims are legally compliant, submitting legally invalid claims is generally viewed as a knowing misrepresentation under the FCA.

Reverse false claims: The DOJ has somewhat recently started prosecuting "reverse false claims," which is a failure to return overpayments (made by the federal government) within the 60 day time frame imposed in 2010 by the Affordable Care Act (ACA). The ACA added a requirement that all overpayments be returned to the government within sixty days of when the claim is "identified" and created FCA liability for failing to do so. It is unclear when an overpayment is "identified," i.e., it could be when it is discovered or when it is quantified. The Centers for Medicare and Medicaid Services (CMS) has issued proposed rules on the subject, and there is a case pending in the U.S. District Court for the Southern District of New York that may shed additional light.

Attorney-client privilege

It has always been somewhat of a delicate dance whether attorney-client privileged communications are accessible to the government in an FCA investigation or litigation. Recent case law has tended to define the scope of privilege increasingly more narrowly, although this determination is highly fact-specific.

Key take-aways for in-house counsel

Ensure your department and any compliance function of your company is well aware of the FCA if your business touches the health care industry or federal government payors.

Carefully protect communications with your internal clients to maximize the chances of protection. Document and label all compliance-related communications with counsel as “attorney-client privileged” and try to keep the scope of any such communications limited to only privileged matters.

Control compliance information within your company to minimize the likelihood of whistleblowers.

If your business involves claims for health care services to be reimbursed by federal government payors, implement and update your billing compliance programs and audits.

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