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Medicare Compliance and the False Claims Act

Learning Objectives

  • The laws that are used to combat fraud and abuse against government health care programs such as The False Claims Act, The Anti-Kickback statute, Physician Self-Referral ("Stark") Statute and Deficit Reduction Act
  • How employers can prevent false claims
  • How employees can avoid False Claims Act violations
  • The role of whistleblowers in False Claims Act suits
  • How Whistleblowers are protected
  • The key legal steps in filing suits and how the government joins
  • State False Claims Acts

Available in English

45 minutes

Fraud and abuse convictions in the healthcare industry are becoming increasingly prevalent as the government grows more comfortable with laws created to prevent such activity. It is crucial that healthcare proivders and compliance officers understand these laws not only because following them is the right thing to do, but also because violating them could result in criminal penalties, civil fines, exclusion from the Federal health care programs, or loss of medical license from State medical board.

With added regulations, the government’s more active role in pursuing cases of fraud, and huge fines for violators on the line, it’s essential that healthcare entities understand anti-fraud regulations and work to prevent the occurrence of fraud and abuse within their organization.

So, as a healthcare provider or compliance officer, how do you accomplish this task? How do you make sure everyone within your organization stays compliant with federal regulations and avoids fraudulent activity?  The answer comes in the form of training and instruction- educating your staff on recognizing and avoiding fraud and abuse.

Before you jump into the steps of a solid anti-fraud training program, though, it’s beneficial to understand fraud and the laws enacted to prevent it.

What is healthcare fraud?

Healthcare fraud is defined as knowingly or willingly executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or obtain any property or money under the control of any healthcare benefit program.

The majority of healthcare fraud is committed by a small number of dishonest healthcare providers, but the consequences are substantial.  The federal government suffers some big losses when cases of fraud go undetected, but healthcare fraud’s negative affects aren’t limited to the government.   Consumers pay a price as well.  Fraud translates into higher premiums and out-of-pocket expenses for consumers, as well as reduced insurance benefits or coverage.

Sadly, some consumers are direct victims of fraud when subjected to unnecessary or unsafe medical procedures.  Tens of thousands of times each year, patients undergo unneeded surgery performed by doctors who are after more money, according to a USA TODAY study.   Fraud victims also include those whose medical records are compromised or insurance information used to submit falsified claims.

And then there’s the healthcare provider or entity that committed the fraud… when found to be in violation of fraudulent activity against the government, the violator is charged with some serious fines.  As a healthcare provider, you do not want to find yourself in this situation.

How is the government combating fraud?

In an effort to combat fraud, the federal government has enacted several laws to deter and penalize violators.  The Anti-Kickback Statute, the Stark Law (Physician Self-Referral Statute) and the False Claims Act mentioned previously are three such laws.

Anti-Kickback Statute

The Anti-Kickback Statute combats hidden financial arrangements between healthcare providers.  There are a variety of improper arrangements where providers will offer a benefit in return for other providers prescribing or using their products or services.   These are referred to as kickbacks.  Kickbacks frequently result in medically unnecessary treatment, often causing the government to be charged or overcharged for unnecessary services.

Violation of the Anti-Kickback Statute is a felony and punishable with criminal penalties in fines up to $25,000 and five years in prison, and civil penalties up to $50,000 per violation.  The government must prove intent in order to take action against a violator.  However, not all financial arrangements or payment practices between providers are considered a violation of the Anti-Kickback Statute.  There are “safe harbors” that providers can join that do not violate the statute.

Stark Law

The Stark Law prohibits a physician from referring a patient for certain designated health services (DHS) payable by Medicare to an entity with which the physician has a financial relationship, such as an ownership interest or compensation arrangement.  The Stark Law, therefore, prevents physicians from inappropriately profiting from referrals.  Like the Anti-Kickback Statute, some exemptions exist under the Stark Law.

Because the Stark Law is a civil liability statute, no intent is required to violate it.  You can’t go to prison for violating the Stark Law, but since intent is not required to violate the statute, violations occur more frequently and are easier for the government to prove.  Violations can result in monetary penalties up to $15,000 per violation and $100,000 per scheme.  They can also result in exclusion from participation in federal healthcare programs.

False Claims Act

Since amendments were passed in 1986, the False Claims Act has become the federal government’s most effective tool in combating fraud and abuse in federal spending.  The amendments significantly expanded the role of whistleblowers, increased financial incentives and reduced several critical barriers to bringing actions against those accused of fraud.

To prove that an individual or entity is in violation of the False Claims Act, the government or a qui tam plaintiff (also known as a “relator” or whistleblower) must prove the following:

  • That the defendant presented, or caused to be presented, to the US government a claim for payment or approval, or a document to facilitate the payment of a claim.
  • That the claim and/or document was fraudulent.
  • That the defendant knew the claim was fraudulent or acted with reckless disregard of the truth of the claim.

If these elements are present, a violation of the False Claims Act occurred even if the government never actually makes a payment or suffers a financial loss.  A defendant does not have to act with a specific intent to defraud in order to be liable.

The False Claims Act contains penalty provisions known as single damages that states the government is entitled to three times the amount of its loss.  However, the more severe penalty provision is that which addresses penalties specifically, fining between $5,000 and $11,000 for each false claim submitted or document used to get a false claim approved for payment.

Due to the severity of penalties authorized by the False Claims Act, you should take all reasonable steps to reduce their liability for billing errors or other violations of Medicare policy regulations.  Some healthcare entities are coming forward on their own to disclose possible violations within their organization in the hope of negotiating a settlement.

However, disclosure itself is not without risk.  The False Claims Act does not provide a voluntary disclosure provision that reduces penalties if a disclosure is made.  Disclosure may, in fact, increase the chances of a more extensive audit or review of billing practices.  There is no guarantee of leniency with voluntary disclosure.  Still, a true voluntary disclosure will be viewed more favorably than a violation that is uncovered through a routine audit or as a result of a whistleblower’s tip.

How can you prevent fraud in your organization?

Now back to prevention.  You can take a proactive role in preventing false claims in your healthcare organization through the establishment and enforcement of a compliance program.  A compliance program can also speed proper payment of claims, minimize billing mistakes, reduce the chances that an audit will be conducted, and deter conflicts with the Stark Law and Anti-Kickback Statutes.

Compliance programs should include the following elements:

  • Education on laws to prevent healthcare fraud
  • Procedures for monitoring and auditing coding and billing documents to better detect errors
  • Education on the responsibility of employees to report any concern about a false claim
  • Procedures for reporting concerns about false claims
  • Procedures for investigating all reported concerns and correcting any billing errors that are discovered
  • Statement that the compliance officer will investigate any allegation of retaliation toward an employee for bringing up a concern
  • Procedures for protecting employees from retaliation for reporting a concern

How can employees avoid violations?

It’s the duty of all employees to report false claims.  They have a responsibility to recognize fraud and abuse, report concerns, and take steps to prevent fraudulent activity.  It’s important that all employees are aware of areas of compliance affecting their duties, from scheduling appointments to finalizing accounts receivable.

Healthcare fraud is not something to be taken lightly.  Fraud is costly for the government, consumer, and guilty healthcare provider or entity.   But with proper training and education you can significantly reduce the chances of fraud and abuse.

Our  Medicare Compliance and the False Claims Act course keeps healthcare entities in compliance with government regulations.  It provides you with knowledge about the federal laws used to combat fraudulent billing.  

Course Outline
  • Overview of the False Claims Act, Anti-kickback statute, Stark Law and The Deficit Reduction Act
  • Employer and employee responsibilities in preventing and identifying fraud and abuse and includes whistle blower activities and employee protections.
  • False Claims Act [31 U.S.C. § § 3729-3733]
  • Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]
  • Physician Self-Referral Law [42 U.S.C. § 1395nn]
  • Exclusion Statute [42 U.S.C. § 1320a-7]