False Claims Act Impact On Medical Billing and Coding

Posted on December 26th, 2023 / Under Medical Billing / With No Comments

Initially, the False Claims Act in healthcare was enacted during the Civil wall to impose liability on individuals and organizations defrauding the government. This is why FCA is also known as Lincoln Law.

Since then, the False Claims Act has covered healthcare fraud and massively impacted medical billing and coding processes. Fraudulent billing practices lead to compliance issues, legal penalties, and improper reimbursement, so FCA is a critical deterrent for such practices.

Keep reading to learn about the False Claims Act in healthcare and the spectrum of fraudulent healthcare activities it addresses.

Understanding the False Claims Act

Medical billing and coding processes are highly complex, which is one reason these processes are vulnerable to intentional fraud and errors. For instance, submitting a claim for medical services that are deemed unnecessary or non-existent is a common intentional fraudulent activity that is covered under the False Claims Act.

A healthcare provider’s billing practices are governed under the False Claims Act once they contract with the state or federal government to treat Medicare beneficiaries. Under this contract, all medical claims are submitted to Medicare. In case of healthcare fraud, like unnecessary services, neglect, use of faulty equipment, and inadequate services, healthcare providers are liable for civil and criminal penalties. To avoid such penalties, providers must ensure billing and claim submission is accurate and compliant with healthcare regulations.

If reckless disregard or intentional misconduct of a provider is established, Medicare can directly sue them in civil court. It is crucial to note that the court can impose liability without finding the provider’s specific intent to defraud.

The mere submission of a false claim to Medicare is considered a clear violation, irrelevant to the payment status of the claim. In 2021, healthcare fraud accounted for over $5 billion of the total $5.6 billion Department of Justice’s False Claims Act’s settlements and judgments.

Some Federal False Claims Act examples are: 

1. Intentionally present a false claim or cause it to be present to obtain payment from the federal government. 
2. Defraud the government by getting a false claim approved or paid. 
3. Create, use, or influence the creation of a false statement or record for reimbursement. 
4. Create, cause to be created, or intentionally use a false document, record, or statement to decrease, completely avoid, or conceal the obligation to pay or transmit property to the government.

Difference Between Billing Fraud and Abuse

Fraud

In billing, fraud is defined as the act of willfully planning or executing a scheme to defraud the federal government and obtain income from healthcare programs such as Medicare. Fraud is attempted through fraudulent representations or any payment or property that is under the custody of the healthcare benefit program.

Examples of billing fraud include:

1. Billing for more services than the patient received.
2. Billing for premium medical equipment while substituting standard or faulty equipment during treatment.
3. Misrepresentation of the date of service to justify higher reimbursement.
4. Inconsistent medical documentation submitted with a billed service.
5. Gaining duplicate payments through double billing.

Abuse

Billing abuse is not always intentional, but if it becomes consistent, it can be termed as healthcare fraud. It is defined as a provider or contractor’s behavior or conduct that is inconsistent and contradicts the standards of any business, medical practice, or insurance company.

Examples of billing abuse include:

1. Waiving co-pays or co-insurance to encourage the patient to obtain further treatment.
2. Billing from an out-of-network location while requesting pre-authorization under the network’s location.
3. Conducting experimental services that do not meet a specific standard.
4. Exaggerating or misrepresenting a diagnosis.
5. Not disclosing discounts or hidden payments beforehand.

How False Claim Act Is Brought

The False Claim Act comes into play under two circumstances. One is when a former or current employee of a medical practice, with adequate knowledge of internal fraudulent activities being performed in the practice, files a lawsuit on behalf of the government.

They can also be called a whistleblower or relator in this scenario. Whistleblowers can be awarded around 10 to 30 percent of the total amount recovered in the lawsuit for filing the qui tam claim.

On the other hand, the U.S. Department of Justice can also file a False Claim Act if they have information on false claims being submitted by a practice. The DOJ also files claims for fraudulent healthcare practices when they learn about them through another local, state, or federal agency.

Penalties for Violating the False Claims Act

If a provider or healthcare facility violates the False Claims Act, the penalties can include:

1. Repayments: Under the court’s order, the provider or medical practice can be ordered to make repayments to the healthcare benefit program such as Medicare, Medicaid, or Tricare. 
2. Corporate Integrity Agreements: When a provider, organization, or entity enters a corporate integrity agreement, they must meet specific criteria before being able to bill a federal agency for the services they provide. 
3. Treble Damages: Healthcare providers that make illegal self-referrals or kickbacks, billing Medicare a total of $1 million, can be sued and court-ordered to pay $3 million in damages. 
4. Statutory Penalties: A single False Claims Act violation is worth $11,000 in damages. So, if a provider violates the Act once, they can be legally required to pay $11,000 in damages.

FAQs

What is an example of False Claims Act Healthcare?

A common False Claims Act violation committed in the healthcare industry is upcoding, where the hospital assigns codes of expensive services to standard or inexpensive services provided to the patient. This is done to increase reimbursement obtained from Medicare.

How does the False Claims Act affect medical billing?

False Claims Act impacts a healthcare organization’s billing practices by deterring fraudulent activities. Providers that engage in improper billing will be subject to legal repercussions, including hefty fines and exclusions from healthcare benefit programs.

Why does the False Claims Act matter to healthcare providers?

The False Claims Act enables the federal government to bring lawsuits against healthcare providers engaging in billing abuse or fraud, promoting ethical billing practices in the healthcare industry.

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