Viewpoint: False Claims Act is feds' top weapon against fraud

March 5, 2010

The False Claims Act (FCA) prohibits the "knowing" submission, or causing of a submission, of a false claim to the federal government. The Federal Enforcement Recovery Act extends the reach of the FCA to medical practices that fail to notify the government of overpayments received. This situation creates potential liability for practices that fail to pay careful attention to their billing and collection processes.

Key Points

The FCA is a civil statute that dates back to the Civil War era. It was revised in 1986 and again, through the Federal Enforcement Recovery Act (FERA), in 2009. It has been described as the single most important tool that taxpayers have to combat fraud committed against the federal government. This act applies to fraud involving any federally funded program or contract except tax fraud. In the past, the FCA used to concentrate on fraud involving defense contractors, but the focus now has shifted to healthcare.

The FCA prohibits the "knowing" submission, or causing of a submission, of a false claim to the federal government by individuals, corporations, companies, associations, firms, partnerships, and societies. A separate violation of the FCA occurs with each submission.

deliberate ignorance or reckless disregard of the truth or falsity of the information, can be found guilty under the FCA. (Go to http://memag.com/MC219 to read the previous column.)

Penalties under the FCA range from a fine of $5,000 to $11,000 per false claim plus "treble damages" (three times the amount of damages sustained by the government) and the government's litigation costs. Because it is a civil statute, the burden of proof, which rests on the government, is only a preponderance-of-the-evidence standard rather than the beyond-a-reasonable-doubt standard required for a criminal conviction.

In 2009, the FCA received a major boost when Congress passed FERA. Although FERA was passed mainly to address concerns that financial entities and other organizations receiving money under the Troubled Assets Relief Program (TARP) would misuse those monies, Congress did not limit its reach to financial institutions. All healthcare providers who receive reimbursement from a federal program, including Medicare or Medicaid, are subject to FERA. FERA created a whole new list of offenses, but the one most troubling to physicians is a provision that extends the reach of the FCA to practices that fail to notify the government of overpayments received. As such, physicians and their practices now have an affirmative duty to notify the government of any monies they have received as a result of billing irregularities.

This obligation is a two-edged sword. By notifying the government of the overpayment, a practice exposes itself to allegations of fraud in the billing process. By failing to notify the government of the overpayment, however, a practice exposes itself to a violation of FERA. This situation provides yet another opportunity for employees and former employees to benefit by bringing a Qui Tam action and creates additional potential liability for practices that fail to pay careful attention to their billing and collection processes.

In the next Malpractice Consult column, we will discuss other laws that adversely could affect your practice, your reputation, and your ability to defend yourself if sued for malpractice.

Medical Economics consultant Steven I. Kern, JD, is a health law attorney with Kern Augustine Conroy & Schoppmann in Bridgewater, New Jersey; Lake Success, New York; and Philadelphia. Malpractice Consult deals with questions on common professional liability issues. Unfortunately, we cannot offer specific legal advice. If you have a general question or a topic you'd like to see covered here, please send it to memalp@advanstar.com
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