What Is Considered a False Claim?

Liability under the federal False Claims Act occurs when 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. The cases 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 individuals 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.

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 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 to over 45% in 2007, to the overwhelming majority percentage in the last decade.

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 products provided (inappropriate coding); misrepresenting the nature of a patient’s condition (IPPS and OPPS fraud).
  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, they have been unlawfully unbundled.
  4. Billing for medically unnecessary services – this includes furnishing services in excess of the patients’ 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.Increasing units of service, which are subject to a payment rate.
  7. Billing procedures over a period of days when all treatment occurred during one visit (i.e. split billing).
  8. Billing Medicare based on a higher fee schedule or unit schedule than that used for non-Medicare patients.

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).

C.  KICKBACKS

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 also 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 the certain designated health services (“DHS”), the physician cannot refer patients to the entity for DHS. The entity likewise 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, doing 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 that provide for “backdoor” benefits furnished by hospitals to the referring physicians, which amount to physician benefits for free or less than fair market value.

A violation of the Stark Law can be the basis for False Claims Act liability.

What Makes Something a “False” Certification Under the False Claims Act?

We have all heard the term “false.”  It is something that is ‘not true,’ right?  The False Claims Act, however, does not apply to all falsehoods.

A claim to Medicare may be false under the False Claims Act when the provider falsely certifies that it has complied with all relevant statutes and regulations related to the claim for payment. The certification in question must be a prerequisite to qualifying for the government reimbursement. That means that if a provider makes a false certification, but that certification has no bearing on whether the government would pay the Medicare benefit or not, then it is not actionable fraud under the False Claims Act.  The false certification has to be the qualifying factor behind the provider obtaining the reimbursement.

That, then, brings us to the difference between false claims under the False Claims Act that are “factually false” compared to ones that are “legally false,” based on false certifications.

  • Factually false claim. A factually false claim involves an inaccurate description of goods or services provided (e.g., a hospital claimed a more complex DRG than the discharge diagnosis, and notes indicate).
  • Legally false claim. A legally false claim is when a provider submits a document that is not true, certifying that it complied with federal law, and that certification is a prerequisite to receiving the government benefits.

Kathleen Hawkins

Dignity Health
$37 million

Kathleen Hawkins, RN MSN, had been employed by Defendant, Catholic Healthcare West (CHW) for approximately 6 years when she decided she had had enough of trying to change the hospital system from within.

CHW, a California not-for-profit corporation that operated hospitals in California, Arizona, and Nevada, was at the time the eighth largest hospital system in the nation and the largest not-for-profit hospital provider in California.

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Joe Strom

Johnson & Johnson
$184 Million

Joe Strom contacted us in 2005. We were very grateful that he did. We immediately formed an all-star legal team and a process to stop a very harmful pharmaceutical marketing strategy. It was this process we set into motion that ultimately returned hundreds of millions of dollars to the U.S. Treasury, and a portion of that, very well-deserved, into Joe’s bank account.

Joe told us a very troubling story about the off-label promotion of a pharmaceutical drug for patients who already suffered from chronic heart failure.

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Bruce A. Moilan Sr.

$27 Million

Bruce Moilan was a seasoned hospital systems expert by the time he contacted our Firm. At the time he decided to file his qui tam lawsuit, he was employed by South Texas Health System as a System Director for Materials Management. In this position, he oversaw $24 million in annual purchases of supplies and equipment and helped determine budget, reduction and cost analysis throughout the contract bidding and negotiations process. His job was to insure proper implementation for purchasing, receiving and management of inventory, for McAllen Hospitals, L.P.

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