Liability under the federal False Claims Act occurs where a defendant (1) knowingly presents (or causes to be presented) a false or fraudulent claim for payment; (2) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; (3) conspires with others to commit a violation of the False Claims Act (4) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the Federal Government.
A broad array of scenarios can constitute FCA (False Claims Act) violations. Healthcare fraud cases include coding false claims; DRG false claims; PPS false claims; Medicare kickbacks; outpatient PPS false claims fraud; Stark law violations; DME fraud; and DRG fraud, are brought by whistleblowers, who typically have previously attempted to call attention to the problem within their company. Qui tam, which is a feature of the False Claims Act, is a unique mechanism that allows persons and entities with evidence of fraud against federal programs to sue the wrongdoer on behalf of the government. Currently, qui tam provisions include strong financial incentives to file a lawsuit on behalf of the federal government.
I. FRAUDULENT HEALTHCARE BILLING
Healthcare fraud cases including coding false claims, DRG false claims, PPS false claims, outpatient PPS false claims, kickbacks, Stark law violations, DME fraud, and DRG fraud (DRG creep) now comprise the majority of all False Claims Act cases. As a percentage of the total False Claims Act lawsuits filed each year, qui tam lawsuits have steadily increased from 12% in fiscal year 1987, over 45% in 2007, to 65% in 2011.
Below is a more detailed explanation of healthcare fraud scenarios under the False Claims Act.
A. FALSE BILLING
1. Billing for services not rendered or products not delivered.
2. Misrepresenting services rendered or product provided (e.g., upcoding, inappropriate coding). Also, misrepresenting the nature of the patient’s condition (e.g., DRG fraud, DRG creep).
3. Ungrouping services or products billed- in this scenario, tests and other services that are automatically performed as a panel, group or set, should be billed as a single service. When a provider breaks these services out of the group and bills them individually, the provider is deemed to be “unbundling.”
4. Billing for medically unnecessary services – this includes furnishing services in excess of the patient’s needs, based on their diagnosis; or furnishing a battery of diagnostic tests, where, based on the diagnosis, only a few were needed; it also includes misrepresenting the diagnosis to justify the services or products.
5. Duplicate billing.
6. Falsifying records to meet or continue to meet the conditions of participation; this includes the alteration of dates, the forging of physicians’ signatures, and the adding of additional information after the fact. This is somewhat common with Durable Medical Equipment (DME) fraud.
7. Increasing units of service, which are subject to a payment rate.
8. Billing procedures over a period of days when all treatment occurred during one visit (i.e. split billing).
9. Billing Medicare improperly based on a higher fee schedule or unit schedule than that used for non-Medicare patients.
10. Submitting bills to Medicare that are the responsibility of other insurers under the Medicare Secondary Payer rule.
B. FALSE COST REPORTS
Involves Medicare Part A providers, such as hospitals, nursing homes, and home health agencies; also involves Medicare Advantage Plans and Medicaid Managed Care Plans; such fraud falls into several general categories:
1. Inflating costs relating to patient care; i.e. including cost of non-covered services, supplies and equipment.
2. Seeking reimbursement for costs apportionable to non-Medicare patients; i.e. manipulating statistics to obtain additional payment, such as increasing the square footage of Medicare certified areas.
3. Seeking reimbursement for costs that are not related to patient care.
4. Failing to disclose the related nature or the relationship between business entities with whom the provider is dealing.
5. Improperly manipulating statistics (e.g., patient census, cost center allocations, square footage).
Usually involves the following two different types of payment:
1. Disguised payments made in return for patient referrals;
2. Non-cash payment to physicians in return for patient referrals, such as free or below market value rent, contractual arrangements providing for payment in exchange for non-existent services, etc. These often violate the Stark Law.
D. STARK VIOLATION
The Stark law, 42 U.S.C. § 1395nn, is also known as the Physician Self-Referral Law. If a physician (or immediate family member) has a direct or indirect financial relationship (ownership or compensation) with an entity that provides any of certain designated health services (“DHS”), the physician cannot refer patients to the entity for DHS and the entity cannot submit a claim to Medicare for such DHS unless the financial arrangement fits in a statutory or regulatory exception.
The Stark law was intended to prohibit physicians from profiting (actually or potentially) from their own referrals. The Stark Law sanctions improper physician referrals, and does so by providing penalties for illegal referrals prospectively. Its effect is to prohibit relationships that have been demonstrated to encourage over-utilization. It is a strict liability statute, i.e. there is no need to show knowledge or intent.
The Medicare and Medicaid programs depend on physicians and other healthcare professionals to exercise independent judgment in the best interests of patients. Financial incentives tied to referrals have a tendency to corrupt the healthcare delivery system in ways that harm federal programs and their beneficiaries. Corruption of medical decision-making can result when a physician refers a patient to a provider on the basis of the physician’s financial self-interest, instead of the patient’s best interests.
Overpaid medical directorships, interest free loans/forgiveness of debts, illegal recruitment arrangements and improper discounts, may represent financial windfalls to physicians resulting in hospital referrals in violation of the Stark Law. Examples also include sham contracts which provide for “backdoor” “sweet deals” between hospitals (which afford to physicians benefits like, office space, renovations, equipment, furniture, housekeeping services, office supplies, copy and fax machines, telephone and utility as well as transcription services) and referring physicians, which amount to benefits to physicians for free or less than fair market value.
A violation of the Stark law can be the basis for False Claims Act liability.