The False Claims Act: Healthcare Facility Guide and FAQ
Fraudulent activity is a major concern in the healthcare industry. As a primary focus of the False Claims Act, healthcare fraud remains a leading source of settlements, accounting for roughly 80% of funds recovered between 2018 and 2022. To help protect against false claims and uphold ethical standards, it’s important that facility leaders understand how to enforce this act.
Violating the False Claims Act can result in serious financial penalties. To help you proactively identify and prevent violations at your facility, this FAQ will walk through everything you need to know, from what this law is to how you can adhere to relevant provisions.
What Is the False Claims Act in Healthcare?
Enacted in 1863, the False Claims Act (FCA) is a federal law that works to protect against cases of fraud, waste, and abuse of government resources. 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, the False Claims Act is intended to:
- Prevent fraudulent activity
- Identify cases of false claims
- Recover lost government funds
- Penalize individuals who commit fraud
False Claims Act: Healthcare Summary
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 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 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 Claim Act Examples
To get a better understanding of what these situations might look like in practice, we can take a look at two example scenarios that would count as violations under the FCA.
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 so that they can 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 — to include 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 Penalties for Violating the False Claim Act?
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, though, violators of the FCA can be fined as high as three times the total cost of damages (referred to as “treble damages”) 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.
- Look Out For Warning Signs: There are common patterns or warning signs you can watch out for that may indicate fraud or abuse. Stay vigilant for any excessive costs, unexplainable treatment, or inconsistencies in documentation in your facility’s records.
- 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.
- 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.
Remember that the False Claims Act holds 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.
Stay Up-To-Date With Regulatory Healthcare Laws
By understanding the False Claims Act, healthcare facilities can take important steps towards building a more ethical work culture. Keep up with other pertinent rules and regulations impacting the healthcare industry through IntelyCare’s free newsletter.