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How does the False Claims Act apply to Medicare and Medicaid claims?

March 21, 2024 Uncategorized

How the False Claims Act Applies to Medicare and Medicaid Claims

The False Claims Act is a important law that helps protect Medicare and Medicaid from fraud. It makes it illegal for doctors, hospitals, or other healthcare providers to submit false or fraudulent claims to Medicare or Medicaid. If they get caught doing this, they can face big fines and penalties.

The False Claims Act has been around since the Civil War. But in recent years, it has become a really big deal in healthcare. Prosecutions of healthcare fraud under the False Claims Act have gone way up. Now its one of the main tools the government uses to fight Medicare and Medicaid fraud.

Lots of people think of the False Claims Act as the federal governments “big gun” for fighting healthcare fraud. It packs a serious punch for doctors or hospitals that try to rip off Medicare or Medicaid.

Heres a quick overview of how the False Claims Act works and why its such a big deal:

The Basics of the False Claims Act

The False Claims Act makes it illegal to:

  • Knowingly submit false or fraudulent claims to Medicare or Medicaid
  • Make a false record or statement to get a false claim paid
  • Conspire with others to get a false claim allowed or paid

For instance, its illegal for a doctor to bill Medicare for services that werent provided. Or for a hospital to use incorrect diagnosis codes to make patients seem sicker than they really are. Thats fraud under the False Claims Act.

Heres some key things to know about false claims penalties:

  • Violators face fines of up to $11,000 per false claim plus three times the amount of damages to the government.
  • Whistleblowers who report fraud can get 15-30% of the money recovered.
  • The Department of Justice uses the law to prosecute hundreds of healthcare fraud cases per year.

As you can see, the penalties and fines can really add up. Thats why the False Claims Act is so feared by healthcare companies. It puts major deterrence on ripping off Medicare and Medicaid.

How the False Claims Act Works

The False Claims Act works through a process called qui tam. This allows whistleblowers to file fraud lawsuits on behalf of the government. Heres how it works:

  1. A whistleblower files a qui tam lawsuit under seal in federal court.
  2. The Department of Justice investigates the allegations while the case remains under seal.
  3. DOJ can choose to intervene and take over the lawsuit.
  4. If theres a settlement or judgment, the whistleblower gets a cut of the proceeds.

Qui tam is a powerful tool because whistleblowers have inside information that can help uncover complex fraud schemes. The DOJ simply doesnt have the resources to investigate all healthcare companies. So they rely heavily on whistleblowers to bring False Claims Act cases.

Some recent big False Claims Act cases started with whistleblowers coming forward:

  • A sales rep for Insys blew the whistle on kickbacks to doctors to prescribe fentanyl.
  • A GlaxoSmithKline employee reported fraud in the marketing of diabetes drugs.
  • Hospital employees have filed numerous cases reporting Medicare billing fraud.

Without insiders at these companies stepping forward, a lot of this fraud would have never been uncovered. Thats why whistleblowers are so key to False Claims Act cases.

Major Areas of Healthcare Fraud

The False Claims Act has been used to prosecute lots of different kinds of Medicare and Medicaid fraud. But some major areas include:

Upcoding Services

Upcoding is when a healthcare provider bills for more expensive services than were actually performed. For instance, billing for an extended hospital stay when the patient was only there overnight. Prosecutors have filed many False Claims cases against hospitals accused of systematic upcoding.

Inflating Cost Reports

Healthcare companies are required to file annual cost reports with Medicare. The government relies on these to set reimbursement rates. Prosecutors have gone after companies who falsify their cost reports to make their costs seem higher than they really are. That leads to higher payments from Medicare or Medicaid down the road.

Billing for Unnecessary Care

Some doctors or hospitals routinely perform and bill for unnecessary tests, services or procedures that patients dont actually need. There have been False Claims cases against nursing homes billing for unnecessary rehabilitation services and hospitals implanting cardiac stents patients didnt need.

Illegal Kickbacks

Its illegal under the Anti-Kickback Statute to pay kickbacks for Medicare or Medicaid referrals. But some healthcare companies try to disguise kickbacks as bonuses, consulting fees or “educational grants.” There have been many False Claims cases rooted in kickback allegations.

Prosecutors often portray kickbacks as a quid pro quo that leads to false claims being filed. For example, a hospital pays a bonus to doctors for admitting patients. Those patients admissions and bills may be considered fraudulent if they resulted from kickbacks.

Off-Label Marketing

When drug companies promote off-label uses of their products, it can lead to false claims being filed. Off-label marketing has been at the root of many major False Claims prosecutions in recent years. The DOJ says promotion of off-label uses that havent been approved by the FDA often causes false claims.

So in many cases, healthcare fraud starts with a kickback or off-label promotion scheme. This generates referrals or prescriptions that then result in false claims being filed to Medicare or Medicaid down the road.

Recent Major False Claims Act Cases

To give you an idea of how prosecutors have been using the False Claims Act, here are some of the major healthcare fraud settlements and judgments in recent years:

  • Pfizer and a subsidiary agreed to pay $2.3 billion to resolve False Claims Act allegations related to off-label marketing of drugs like Bextra and Geodon. [1]
  • DaVita paid $450 million to settle allegations they used kickbacks to induce patient referrals from doctors. [2]
  • Health Management Associates paid $260 million over allegations of upcoding and billing for unnecessary inpatient services. [3]
  • Freedom Health agreed to pay $32.5 million over alleged false claims for inflated Medicare Advantage charges. [4]

You can see some of the huge dollar amounts that these False Claims Act prosecutions lead to. And these are just a few – there are many more settlements and judgments like this each year.

The Pfizer case shows how off-label marketing prosecutions often play out. The government alleged illegal marketing led to the submission of false claims. DaVita reflected the common kickback-false claims pattern. And HMA involved allegations of routine upcoding and billing for unnecessary care.

These kinds of cases send a strong message to healthcare companies. It makes them think twice before engaging in fraud against Medicare and Medicaid. No one wants to be the next company paying hundreds of millions in False Claims Act damages.

How to Avoid False Claims Act Liability

The prospect of huge fines and exclusion from Medicare make False Claims Act liability a terrifying prospect for healthcare companies. Here are some tips to avoid it:

  • Have a strong compliance program that actively looks for and corrects any billing issues.
  • Train employees regularly on recognizing and reporting potential fraud.
  • Perform regular audits to identify any problems before they get out of hand.
  • Make sure compensation incentives dont improperly influence medical decision making.
  • Dont promote or market uses of drugs or services that havent been FDA approved.

Having robust compliance and training programs are probably the two most important proactive steps. Companies need to demonstrate they are making good faith efforts to comply with the law. That can really help if problems ever arise down the road.

The False Claims Act is a complex law with lots of nuances. But the main takeaway is that ripping off Medicare and Medicaid can lead to huge penalties. So healthcare companies need to stay squeaky clean when billing federal healthcare programs.

The False Claims Act will likely remain one of the governments prime weapons for fighting healthcare fraud for years to come. Companies that submit false claims do so at their own legal and financial peril.

References

[1] https://www.justice.gov/opa/pr/justice-department-announces-largest-health-care-fraud-settlement-its-history

[2] https://www.justice.gov/opa/pr/davita-pay-450-million-resolve-allegations-it-sought-reimbursement-unnecessary-drug-wastage

[3] https://www.justice.gov/usao-wdnc/pr/united-states-settles-false-claims-act-allegations-against-health-management-associates

[4] https://www.justice.gov/usao-sdfl/pr/freedom-health-pay-325-million-settle-false-claims-act-liability-involving-medicare

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