A Physician Perspective of the Federal Civil False Claims Act

Introduction

This article provides a view of the federal civil False Claims Act (FCA)[reference 1] from a physician's perspective. I spent over 21 years as a Medical Consultant for California's Medicaid program working with and evaluating the clinical and administrative aspects of healthcare claims from a physician and clinician perspective. I was the physician consultant on many cases that involved false and fraudulent claims. (I'm not a lawyer and this article doesn't cover all the legal intricacies and facts of the FCA; this article is not legal advice.)

Purpose and Scope of the Act

The purpose of the FCA, as it relates to healthcare, is to deter and penalize (via civil financial penalties) the submission of false claims for reimbursement purposes. The FCA can be applied to any entity, including business entities, organized entities, or individuals. This includes individual healthcare practitioners, clinical practices, healthcare organizations, healthcare companies, and healthcare insurers. It also applies to any and all disciplines in health care, including but not limited to practitioners of every type (physicians of all specialties, nurse practitioners, psychologists, occupational and physical therapists, laboratories, hospitals, skilled nursing facilities, etc). It gives the federal government the authority to act against any entity that submits or causes to be submitted false or fraudulent claims to government healthcare programs. As such, this means the FCA generally applies to healthcare programs that have any Medicare component. While not the focus of this article, be aware that states have separate false claims acts related to their respective Medicaid programs; the federal and state programs may intertwine depending on various particulars.

Of important note, the FCA applies to healthcare claims where the billing entity knew or should have known that the claims submitted were false or fraudulent. I've emphasized the phrase, “or should have known” because this is a critical component that many are unaware of, and it broadly expands the power and scope of the FCA. This usually means that it's not necessary to prove that a clinician definitively had specific knowledge that false or fraudulent claims were submitted for reimbursement. Rather, as long as the context and related facts of a case indicate that a clinician had reason to know about such claims, the clinician can be held liable. A clinician is potentially financially liable under the FCA if they "acted in deliberate ignorance or reckless disregard of the truth or falsity of the information."[reference 2]?In addition, the FCA law itself states under section 3279 (b)(1)(B) that to be found as having knowingly committed a violation of the Act does not require proof of specific intent to defraud.[reference 1] Making or using false or fraudulent records, including falsified clinical records, are a violation of the FCA.

Potential Civil Penalties

The FCA imposes civil liability on violators. FCA-assessed financial damages can be quite hefty. Clinicians found to have violated the Act may face fines of up to three times the amount the false claims cost the federal health program, plus $11,000 per claim. These are the upper cap on financial penalties; under certain circumstances, they may be lowered.

Let's review what this translates to in terms of dollars. As an example, assume hypothetical "Doctor A" is found to have submitted 500 claims for hypothetical procedure code number 12345 and was paid $300 for each service. If a legal venue finds that "Doctor A" did indeed violate the FCA, this clinician is potentially liable for the following amounts:

• $300 (amount paid per claim ) x 500 (total number of claims) x 3 (the FCA penalty multiplicative factor) = $450,000
• 500 (total number of claims) x 11,000 (FCA penalty per claim) = $5,500,000
• Total = $5,950,000

Obviously, a financial penalty can drastically increase even further depending on the amount paid per claim and the total number of claims submitted.

Potential Criminal Penalties

Under a separate federal criminal false claims act, criminal penalties can be up to $250,000 and 5 years of incarceration. Conviction under the criminal act is a whole separate ball of wax from the civil act and is beyond the scope of this article.

What Constitutes a False Claim?

The short answer is, "a lot."

Many things can be considered false healthcare claims.[reference 3] Examples include, but are not limited to:

• Service Upcoding - Submitting a service code on a claim that represents a higher level or category of service than was actually performed or documented. It's critical to ensure adequate medical record documentation that reasonably and clearly substantiates all service codes billed. Even without intent to submit a false claim, absent, incomplete, or unclear medical record documentation can lead to findings that services were upcoded.

• Medical Necessity - It's critical to ensure that medical records accurately and clearly document medical indication and necessity for services claimed. Medical necessity is by its nature a subjective determination, and different authoritative guidelines may define medical necessity differently for the same or similar services. Therefore medical documentation should, within reason, contain adequate documentation to appropriately substantiate medical necessity for billed services, such that a reasonable clinician peer using any reasonable authoritative guideline would find medical necessity to be substantiated. Most likely, clear-cut and obvious lack of medical necessity, rather than subtle and highly subjective deficiencies in establishing medical necessity, are likely to result in accusations of false claims.

• Improper Diagnosis Coding - For those clinicians working in either Medicare Advantage plans or other plans that are paid based on risk-adjusted factors using diagnosis codes, miscoding or upcoding these codes can result in higher payments than warranted. In such cases, these can be viewed as false claims. Probably the most well-known example of this is hierarchical condition category (HCC) coding, where inappropriate diagnosis code submission on claims leads to overpayment based on patient and population risk scores. HCC coding false claims are currently being scrutinized by Medicare.

• Unbundling - This is billing a group of services individually as separate codes when the particular group is usually billed together under one service code. This usually results in an unjustified overpayment, because the single code which covers the entire group of services usually pays a lower amount than when each service is billed individually. A simple example of unbundling would be billing separately for sodium, potassium, chloride, and bicarbonate, instead of billing all these under one laboratory code.

• Billing for Services Not Provided - An obvious example of this is billing for a physician service for which there is no medical record documentation. However, this can also take many other forms. Examples can include:

1. Altering medical records to document a service when other evidence establishes a patient was never actually seen.
2. Billing for devices or use of supplies that can't be substantiated as having been purchased.
3. Submitting claims for services that were in full or part rendered by providers who are not appropriately licensed and/or are not contracted with the healthcare entity to which the service is being billed.
4. Not Meeting Administrative Policy Guidelines for Billing - This refers to when a certain minimum number or type of services must be rendered in order to bill and be paid for a particular code with or without a modifier. Not rendering all the services required for the code/modifier combination can be considered a false claim.

Conclusions

I've reviewed some aspects of the federal civil FCA that are pertinent to physicians and other clinicians. Although individual states may have separate false claims acts for their respective Medicaid programs, the principles of these state false claims acts generally mirror those of the federal one. As a result, familiarity with the physician/clinician aspects of the FCA is likely to provide familiarity with the state counterparts. Regardless of their particular practice settings, physicians and other clinicians need to be aware of FCA issues to avoid submitting false claims and the consequences that may ensue.

References:

1. Office of the Law Revision Counsel, United States Code. False Claims Act,?31 U.S.C.?§ 3729. Accessed on July 21, 2023, at https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section3729&num=0&edition=prelim#sourcecredit
2. U.S. Department of Health and Human Services, Office of the Inspector General. Fraud and Abuse Laws. Accessed on July 21, 2023, at https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/
3. CMS. Fact Sheet. Laws against health care fraud. Accessed on July 21, 2023, at https://www.cms.gov/files/document/overviewfwalawsagainstfactsheet072616pdf

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Disclaimer:?

Nothing contained in this article is intended as, nor to be construed as medical advice, diagnostic advice, or treatment advice. Any and all readers of any part of or all of this article shall never make any medical, health, healthcare, insurance, financial, legal, or any other decision or take any related action based upon any statement, comment, opinion, linked outside information source, or any other information contained in, implied by, inferred from, or suggested by this article. Always consult with the appropriate healthcare provider when making any medical or healthcare-related decisions or taking any related actions. Always consult with the appropriate healthcare insurance or coverage professional when making any decisions or taking any actions relating to healthcare coverage.