The False Claims Act in Medical Billing

The civil False Claims Act is found at 31 U.S.C. § 3729, and its core is a short list of things a person may not knowingly do. The two that matter most to a billing operation are the first two: knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval; and knowingly making or using a false record or statement that is material to a false or fraudulent claim. The Act also reaches a conspiracy to do either, and — the mirror image of a claim for payment — knowingly avoiding an obligation to pay money back to the government.

The phrase “causes to be presented” is why the statute belongs to billing and not only to the person who clicks submit. A practice that generates a claim a third party transmits, or that gives a billing company the coded charge behind a claim, has caused the claim to be presented. Liability does not require that the same hand both created the falsehood and sent it to the payer.

Everything in the False Claims Act turns on the word “knowingly,” and the Act defines it far more broadly than ordinary usage. A person acts knowingly when the person has actual knowledge that a claim is false, but also when the person acts in deliberate ignorance of whether it is true or false, or in reckless disregard of the truth. And the statute is explicit that it requires no proof of specific intent to defraud. A practice cannot answer a false-claim charge with “we never meant to cheat anyone,” because meaning to cheat is not what the government has to show.

The line the standard draws is between the honest mistake and the reckless one. A genuine, isolated error — a transposed code, a one-off keying slip caught and corrected — is not a false claim, because it is neither known to be false nor a product of ignoring the truth. What the standard reaches is the practice that looks away: the biller who submits without checking rules a reasonable operation would check, the office that keeps billing a way it has been told is wrong, the pattern that a functioning review would have caught. Deliberate ignorance and reckless disregard exist precisely so that a practice cannot manufacture innocence by choosing not to know.

A claim does not have to be invented to be false. The theories the government uses in health care are familiar billing failures seen through the statute's lens — and most involve a claim that is accurate on its face but untrue underneath.

• Services not rendered. Billing for a visit, test, or procedure that did not happen, or for time or units not actually provided. The clearest case, and the least common in an otherwise honest practice.
• Upcoding. Billing a code that pays more than the service actually furnished supports. The code number is a fact; the falsehood is the claim that the documented service matches it.
• Medically unnecessary services. Billing for care that was not reasonable and necessary for the patient, where the program pays only for necessary care.
• Unbundling. Billing separate codes for components that should be billed under a single combined code, so the claim collects more than the bundled service is worth.
• False certification. Submitting a claim while out of compliance with a requirement the claim expressly or implicitly certifies compliance with.

False certification is the subtlest of these, and the Supreme Court drew its boundary in Universal Health Services v. Escobar (opens in a new tab) (2016). The Court accepted that a claim can be false by implication — that submitting a claim can represent compliance with the rules that govern payment, so that undisclosed noncompliance makes the claim a misleading half-truth. But it fenced the theory in with materiality. A violation supports liability only if it is material to the government's decision to pay, and the Court called that materiality standard “demanding” and “rigorous.” Whether a requirement was labeled a condition of payment is “relevant” but, in the Court's words, “not automatically dispositive”; if the government keeps paying claims in full while knowing a requirement was violated, that is strong evidence the requirement was not material.

The reason a False Claims Act matter is a different order of problem from a repayment demand is the remedy. The statute provides for damages equal to three times the amount the government sustains — treble damages — plus a civil penalty for each false claim. The trebling applies to the government's loss; the per-claim penalty applies to the claims themselves.

The statute does temper the remedy for a practice that comes forward. If a person reports everything it knows about the violation to the government promptly — before any government action or any investigation the person is aware of — and fully cooperates, a court may reduce the damages from treble to no less than double. That reduction is a deliberate incentive to disclose and cooperate rather than conceal, and it is one reason the significant problems belong in a formal disclosure channel, not buried.

The money is not the end of the exposure, either. A False Claims Act resolution is frequently paired with fraud-and-abuse consequences — an OIG exclusion from the federal programs, or a corporate integrity agreement that governs how a practice operates for years afterward. And because the government has a long window to sue — the statute allows an action as late as ten years after the violation in some circumstances — the tail on an unaddressed problem is measured in years, which is one reason record retention and this statute are connected.

The False Claims Act is unusual in who is allowed to enforce it. Alongside the Attorney General's own authority to sue, the Act's qui tam provision lets a private person — a “relator” — bring a civil action on the government's behalf and in the government's name. The name is short for a Latin phrase meaning one who sues for the king as well as for himself, and the mechanism is why so many health care fraud cases begin not with an auditor but with an insider.

The procedure is built to give the government first look. A qui tam complaint is filed in camera and stays under seal for a period while the government investigates and decides whether to intervene — the defendant is not even served until the court allows it. If the government takes over the case, it leads it; if it declines, the relator may pursue it alone. Either way the relator, if the case succeeds, may receive a share of the recovery — and that share is set higher when the government declines to intervene and the relator carries the case than when the government takes it over. The precise percentages are in the statute; the shape worth remembering is that the law pays more to the whistleblower who does more of the work.

That last point is the practical link between the whistleblower mechanism and a practice's own controls. The relator in a health care case is very often a current or former employee of the billing operation — someone who saw the claims. A compliance program with a channel that actually receives and acts on concerns is the alternative to that employee concluding the only way to be heard is to file. The choice a practice makes when someone raises a billing problem is, in a real sense, a choice about which door the problem leaves by.

The False Claims Act is easiest to place by seeing what it collects. It is the enforcement backstop for the rest of the cluster's laws: violations that are defined elsewhere become liability here, on the claims that follow.

• A claim tainted by a kickback is a false claim. The Anti-Kickback Statute says, in as many words, that a claim including items or services resulting from a kickback constitutes a false or fraudulent claim for False Claims Act purposes — so a back-room arrangement turns the clean-looking claims built on it into False Claims Act exposure.
• A prohibited self-referral becomes one too. A claim for a designated health service furnished on a referral that the Stark law bars is not payable, and billing it can support a false-claim theory even though Stark itself is a strict-liability payment rule.
• A retained overpayment becomes one. Under the 60-day overpayment rule, an identified Medicare or Medicaid overpayment kept past the deadline to return it is an “obligation,” and knowingly avoiding it is a reverse false claim.

Two things follow from that role. The Anti-Kickback Statute and the Stark law each set their own prohibition and are worth understanding on their own terms — their comparison tables lay out how the three differ in intent, reach, and remedy — but the False Claims Act is the common destination, which is why it is named in each of them. And when a practice wants to resolve its own exposure, the route depends on the problem: the OIG Self-Disclosure Protocol is the channel for potential fraud and kickback conduct, while an identified overpayment with no such conduct is simply reported and returned. Both are ways of getting ahead of a False Claims Act problem rather than waiting for one to find the practice.

A billing team does not set out to file false claims, and the statute is not aimed at the honest error it corrects. The work is to keep ordinary mistakes from becoming the kind the knowing standard reaches, and to make sure the practice can show it took its own signals seriously.

1. 01

   Make the claim match the record

   The single best protection is boring: bill what was documented and provided, at the level the documentation supports. Upcoding, unbundling, and billing for the unrendered are the theories that put a practice in the statute's path, and each is a claim that does not match its record.
2. 02

   Do not look away from a credible signal

   The reckless-disregard and deliberate-ignorance prongs are what turn a knowable error into a knowing one. When a review, a denial pattern, or a colleague's concern points at a billing problem, investigate it and write down what you found. Acting on the signal is both the right fix and the record that the practice was not reckless.
3. 03

   Return identified overpayments on time

   A credit balance that is really an overpayment is not the practice's money. Reporting and returning an identified overpayment by its deadline keeps it from becoming the reverse false claim the statute reaches — the difference between an accounting task and a fraud exposure is whether the money goes back.
4. 04

   Route the serious ones, and protect the people who raise them

   A possible kickback, a suspected pattern, a self-referral question — these belong with the compliance program and counsel, not with a judgment call at the billing desk, and a formal disclosure may be the right move. Just as important, treat the employee who surfaced the concern as an asset, not a threat: retaliation is its own violation, and a concern handled internally is a case that never has to be filed.

None of this sits apart from the rest of a practice's regulatory work. The False Claims Act is the sharp end of the whole compliance and regulations picture — the statute that gives the Anti-Kickback Statute, the Stark law, the overpayment rule, and the accuracy of everyday coding their consequences — which is why a practice that does the ordinary things well is, without thinking of it that way, managing its False Claims Act risk every day.