What Is the False Claims Act? Healthcare Facility Guide and FAQ
The False Claims Act (FCA) is a federal law that works to protect against cases of fraud, waste, and abuse of government resources. Fraudulent activity is a major concern in the healthcare industry, and each year the government reclaims funds under the authority of the False Claims Act. Healthcare facilities that violate the act can face serious financial penalties. Fraud remains a leading source of violations, accounting for roughly 80% of funds recovered between 2018 and 2022.
It’s important that facility leaders understand this act so that they can prevent violations and uphold ethical standards. We’ll discuss the intention behind the law and define the key terms. In the FAQ, we’ll provide examples of false and fraudulent claims, and go into detail about penalties, prevention strategies, and violation reporting.
What Is the False Claims Act in Healthcare?
Enacted in 1863, the False Claims Act serves to help the U.S. government recover funds lost due to fraudulent activity against federal programs. The law forbids individuals from knowingly overcharging or selling the government shoddy goods or — in the healthcare context — medical services. Knowingly is defined as having actual knowledge or deliberate ignorance of false information.
With both a civil and criminal component, individuals caught violating the False Claims Act could face fines or even criminal prosecution under this law. Alongside other fraud and abuse statutes such as the Stark Law and the Anti-Kickback Statute (AKS), the False Claims Act is intended to:
- Prevent fraudulent activity.
- Identify cases of false claims.
- Recover lost government funds.
- Penalize individuals who commit medical fraud.
What Does the False Claims Act Prohibit?
In the healthcare context, many different entities can potentially contribute to false claims, such as healthcare providers, pharmaceutical companies, or facility administrators. In particular, the False Claims Act in healthcare is used to prosecute two main categories of illegal activity:
| False Claims for Reimbursement | Any illegal billing claims submitted to government health insurers under the False Claims Act (Medicare, Medicaid, or TRICARE) |
| Misrepresentation of Medical Services | Any goods or services sold by healthcare entities that are purposely misrepresented for the sake of increasing sales |
What Are the Most Common Situations Involving False Claims?
There are many different situations and operations that can lead to false and fraudulent claims in healthcare, all of which commonly root from unethical practices that are used for financial gain. Some of the most common scenarios include:
- Submitting claims for treatments that were never delivered.
- Falsifying tests or information related to billing claims.
- Performing unnecessary medical treatment or interventions.
- Unbundling or bundling services for higher reimbursement rates.
- Double billing for medications or services.
- Exaggerating product benefits to increase sales.
- Failing to report side effects or defects when selling a product.
False Claims Act Examples
To get a better understanding of what these situations might look like in practice, we can take a look at two False Claims Act violation examples.
Example 1: Illegal Claims for Reimbursement
A healthcare provider delivers an annual physical exam to a patient. Even though the patient is healthy, the provider falsifies conditions in their medical chart and submits Medicare claims for non-existent treatments to receive more payments.
Example 2: Misrepresentation of Medical Services
A pharmaceutical company falsely promotes the benefits of a drug in an attempt to increase sales. Because physicians are misled about its effects, they over-prescribe the drug and bill Medicare for treatment that isn’t medically necessary. In this case, the physicians unknowingly submitted false claims based on the false representations by the pharmaceutical company.
What Other Relevant Provisions Apply in Healthcare?
While all types of businesses are subject to penalties under the False Claims Act, healthcare leaders should stay aware of provisions that can facilitate enforcement within their facilities. In particular, this includes Qui Tam actions and whistleblower protections:
- Qui Tam actions encourage private citizens to report false claims on behalf of the government by giving them a share of any recovered funds. This means that anyone who is suspicious of healthcare fraud — including healthcare staff, patients, or families — can file reports to the government for a financial incentive.
- Whistleblower protections prevent employer retaliation if a report is filed. This means if healthcare staff or providers report suspicious behavior under the FCA, healthcare facilities are not allowed to fire, demote, suspend, threaten, or discriminate against the filer.
What Are the Potential False Claims Act Penalties?
If violations are proven under the False Claims Act, healthcare penalties can vary in degree depending on whether cases are brought as civil or criminal cases. In general, violators of the FCA can be fined as high as three times the total cost of damages (called “treble” damages in legal parlance) and up to $11,000 for each illegally billed service.
For instance, if false Medicare claims are submitted for two different healthcare services, such as a lab test and x-rays, each one of these services can result in up to a $11,000 fine, for a total of up to $22,000, not including any potential treble damages.
What Steps Can Facilities Take To Prevent Violations?
To protect against the misuse of resources and uphold ethical standards at your facility, it’s important to take protective measures against false claims. Implement these steps to help with the prevention and prompt identification of potential violations of the FCA.
1. Look Out For Warning Signs
There are common patterns or warning signs you can watch out for that may indicate medical fraud or abuse. Stay vigilant for any excessive costs, unexplainable treatment, or inconsistencies in documentation in your facility’s records.
2. Conduct Regular Audits
To help you identify warning signs, it’s important to conduct regular audits of your facility’s medical claims, charts, or any other pertinent pieces of documentation required for the billing process.
3. Educate Providers and Staff
Build a just work culture by enforcing accurate billing procedures and educating staff about reporting suspicious behavior.
How Do You Report Violations?
If you’re suspicious of any fraudulent activity, you can file a complaint through the Office of Inspector General (OIG) for the Department of Health and Human Services. The OIG investigates many different types of complaints related to fraud and abuse in healthcare.
The False Claims Act has provisions that both protect and financially incentivize individuals to report on fraudulent activity. So, filing a complaint is a necessary and beneficial step for you and all other affected parties.
Need Help Keeping Current With Healthcare Compliance Requirements?
By understanding the False Claims Act, healthcare leaders can take important steps toward building a more ethical work culture. Need more support with compliance? Our trusted healthcare facility resources and guides provide the essential information you need, without the headaches.
Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current, as laws regularly change through updates in legislation, regulation, and case law at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.