Reducing Risks under the Expanded Scope of the False Claims Act

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By: Mark S. Armstrong, Epstein Becker Green Wickliff & Hall

The federal False Claims Act (“FCA”), originally known as “Lincoln’s Law,” was enacted during the Civil War era to deter and punish those who submitted false bills to the government for supplies never sent to the Union armies and inflated bills to the government for delivered supplies.  In 1986, Congress amended the FCA to broaden its application from the defense industry to combat healthcare fraud – primarily involving Medicare and Medicaid claims.  More recently, Congress expanded the FCA by enacting the Fraud Enforcement and Recovery to include violations for (i) making false or fraudulent claims, or making false statements related to a claim, to any contractor, subcontractor or entity to whom payment is made by the government, and (ii) knowingly and improperly retaining an overpayment.

Government agencies and qui tam “relators” acting in the name of the United States are using the expanded scope of the FCA as their primary weapon for fighting fraud and abuse in the government’s health care programs.  However, by taking proactive steps to improve regulatory compliance, health care providers can reduce the risk of an FCA violation and enhance operational functions.

FCA Liability

The FCA makes it unlawful for a person to “knowingly” make a “false or fraudulent” claim to the government for payment or approval.  Although the FCA imposes liability only when the claimant acts knowingly, it does not require that the person submitting the claim have actual knowledge that the claim is false.  A person who acts in reckless disregard or in deliberate ignorance of the truth or falsity of the information can also be found liable under the FCA.

An FCA investigation can have a profound effect on health care providers.  Although the potential liability can be staggering, hospitals and other health care providers can significantly reduce the risks of violating the FCA by taking some important steps to address and prevent fraud, including (i) developing and distributing written compliance policies, (ii) monitoring the compliance program that the organization adopts and (iii) properly training employees at all levels on the organization’s commitment to compliance.

Strategies to Minimize Liability

As an initial matter, health care providers should adopt written compliance policies and procedures that reflect current Federal and State statutes and regulations regarding the submission of claims and Medicare cost reports.  These policies should include provisions that:

  • Provide for proper and timely documentation of all physician services prior to billing,
  • Emphasize that claims should be submitted only when appropriate documentation supports the claim and only when such documentation is available for audit and review, and
  • Indicate that the diagnosis and procedures reported on the reimbursement claim should be based on the medical record and that documentation necessary for accurate code assignment should be available to the coding staff.

While implementing comprehensive policies and procedures is essential for reducing risk, consistently monitoring and evaluating the process is a key element in maintaining the program’s compliance elements and reporting suspected noncompliance.  Typical techniques for monitoring compliance include (i) regular and periodic compliance audits by internal or external auditors who have expertise in Federal and State statutes and federal health care requirements and (ii) sampling protocols.

Compliance audits should target, at a minimum, the hospital’s compliance with laws governing kickback arrangements, physician self-referral prohibitions, claim development and submission, reimbursement, cost reporting and marketing.  Sampling protocols should identify and review variations from an established baseline.  If deviations from the baseline are the result of noncompliance, then health care providers should take prompt steps to correct the problem.  Reports from the audits, sampling protocols and other reviews, including on-site visits, interviews with personnel and employee questionnaires, should be presented to the governing body and should specifically identify areas requiring corrective action.

Properly educating and training employees at all levels, including corporate officers, managers, employees, physicians, and other health care professionals, is a critical element to an effective compliance program.  Thorough training programs regarding fraud and abuse laws, coding requirements, claim development and submission processes can reduce a provider’s risk of potential fraud or FCA liability.  In addition, corporate officers, managers, employees, physicians and other health care professionals should attend specific training on topics such as Federal and State statutes, regulations and guidelines, and corporate ethics, which emphasize the provider’s commitment to compliance and its legal obligations.


The government’s focus on health care fraud has intensified with the recent expansion of the FCA.  Nevertheless, health care providers can significantly reduce their risk of such violations while simultaneously enhancing operational functions, improving the quality of health care services, and decreasing the cost of health care by implementing a comprehensive compliance program with regular monitoring and consistent training.  In so doing, health care providers may avoid the significant penalties of an FCA claim that is filed by the government or a qui tam relator.

MARK S. ARMSTRONG is a Member of Epstein Becker Green Wickliff & Hall in its Health Care and Life Sciences practice group and focuses primarily on regulatory, reimbursement and litigation matters involving a wide range of health care providers including, academic medical centers, DME suppliers, hospitals, managed care organizations, pharmaceutical companies, pharmaceutical wholesalers, pharmacies, pharmacy benefit managers, and physician practices.

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