Health Care Fraud and Abuse - Feb. 20, 27, and March 4

Question 1

What kinds of violations exist under the Federal False Claims Act (FCA)?

Answer 1

The False Claims Act has a civil and a criminal version.

Question 2

What are some of the civil penalties for violating the FCA? (Q)

Answer 2

For a civil violation, a violator can be expelled from the federal Medicare program, be required to pay triple the government’s actual damages, and be required to pay civil penalties ranging from $11,000 to $24,000 per false claim even if the government suffers no damages. For healthcare providers, each separate request for payment or code on a billing statement may be considered a claim, which can quickly add up to significant liability.

Question 3

What are some common types of false claims? (Q)

Answer 3

In healthcare, common false claims include the submission of an untrue claim to Medicare for a service or level of service that wasn’t actually provided or the submission of an untrue record supporting a claim for a Medicare payment and submitting a bill to Medicare for services that weren’t medically necessary.

Question 4

What is the scienter requirement for the FCA? (Q)

Answer 4

Although one way to have scienter is to intend to defraud the government, a defendant may also have scienter by merely acting knowingly.

Question 5

For the FCA, how can a defendant act knowingly? (Q)

Answer 5

A defendant acts knowingly if the defendant either has actual knowledge of the false information, remains deliberately ignorant of the information’s truth or falsity, or recklessly disregards the information’s truth or falsity.

Question 6

How can a statement or record be material for the purposes of the FCA? (Q)

Answer 6

A statement or record is material if it has a natural tendency to influence or is capable of influencing the payment of money.

Question 7

Does the materiality requirement of the FCA apply to both false statements and omissions? (Q)

Answer 7

Yes.

Question 8

What is a reverse false claim? (Q)

Answer 8

In a reverse false claim, the provider knowingly uses a false record or statement to retain government funds that should be returned, typically Medicare overpayments.

Question 9

How can providers be prosecuted for reverse false claims? (Q)

Answer 9

A provider is expected to use reasonable diligence to identify overpayments within eight months of receiving them and to return overpayments within 60 days of identifying and quantifying them.

Question 10

What is the Anti-Kickback Statute? (Q)

Answer 10

The Anti-Kickback Statute (AKS) is a federal criminal law aimed at preventing healthcare fraud and abuse. Essentially, the statute prevents healthcare providers from receiving kickbacks for referring an item or service that’s paid for by a federal healthcare program.

Question 11

How does the AKS apply on the referring side? (Q)

Answer 11

On the referring side, the statute applies to anyone in a position to refer goods or services that are paid for by a federal healthcare program, such as doctors, nursing home administrators, or even marketing companies that direct patients to certain providers.

Question 12

How does the AKS apply on the paying side? (Q)

Answer 12

On the paying side, the statute applies to anyone who provides a kickback to a referring person, such as pharmaceutical companies, hospitals, or laboratories.

Question 13

What does the AKS cover as far as referrals? (Q)

Answer 13

The statute’s coverage is technically limited to referrals for items or services paid for, at least in part, by a federal healthcare program. However, the definition of federal healthcare program is extensive, covering any federal program that provides health benefits other than the health insurance provided to federal employees.

Question 14

What is considered a kickback for the purposes of the AKS? (Q)

Answer 14

A cash kickback violates the statute, but a kickback can also take other forms. The statute prohibits any remuneration, meaning any form of financial compensation. Assume the hypothetical laboratory gave doctors luxury trips to induce them to refer patients to the laboratory. Those trips would be considered kickbacks.

Question 15

Does financial compensation have to be a pure kickback to violate the AKS? (Q)

Answer 15

No. Financial compensation whose primary purpose is valid is still prohibited if even one purpose is to induce or reward a referral.

Question 16

What is the mens rea requirement for the AKS? (Q)

Answer 16

To violate the statute, a person must act knowingly and willfully.

Question 17

How does a person satisfy the knowingly and willingly mens rea requirement of the AKS? (Q)

Answer 17

A person satisfies this requirement if the person knowingly and willfully provides compensation to someone for the purpose of inducing referrals, even if the person doesn’t know about the statute and doesn’t intend to violate it.

Question 18

What are several exceptions and safe-harbor provisions for the AKS? (Q)

Answer 18

Some permitted exceptions are:

Financial arrangements that are part of an employment agreement;

Discounted prices for drugs furnished under the Medicare gap discount program;

Limited types of payments made to group purchasing organizations, which are groups that help reduce healthcare costs by making volume purchases at lower prices on behalf of a group of healthcare entities.

Question 19

How are violations of the AKS categorized? (Q)

Answer 19

Violations are felonies that may result in fines up to $100,000, prison time up to 10 years, or both.

Additionally, even if no criminal action are brought, violators could still face potential alternative enforcement options, such as civil penalties or being administratively excluded from participating in federal healthcare programs for a set time. Further, the doctors could have their medical licenses suspended or revoked.

Question 20

What is the Ethics in Patient Referrals Act? (Q)

Answer 20

The Ethics in Patient Referrals Act is a federal civil law that’s more commonly referred to as the Stark Law after the bill’s sponsor, US Representative Pete Stark.

Question 21

What does the Stark law do? (Q)

Answer 21

The Stark Law prohibits doctors from referring Medicare and Medicaid patients for specific, listed services if the doctor or the doctor’s immediate family member has a financial relationship with the entity providing the referred service, unless an exception applies.

Question 22

What is considered a referral for the purposes of the Stark Law? (Q)

Answer 22

Under the Stark Law, a referral is a physician’s request for, ordering of, or certification of the need for any designated health service that will be provided by someone else.

Question 23

For the purposes of the Stark Law, do services provided by the physician or the physician’s employees count as a referral? (Q)

Answer 23

No. Services provided by the physician or the physician’s employees don’t count as a referral.

Question 24

For the purpose of the Stark Law, what is the definition of physician? (Q)

Answer 24

The definition of physician is broad, including medical doctors, dentists, chiropractors, and others.

Question 25

For the purposes of the Stark Law, does a referring physician need to have a particular state of mind for the referral to violate the law? (Q)

Answer 25

No. A referring physician doesn’t need to have any particular state of mind for a referral to qualify.

Question 26

Is the Stark Law a strict-liability statute? (Q)

Answer 26

Yes. The Stark Law is a strict-liability statute, which means that if an arrangement fits the definition of a prohibited referral, the physician is liable even if she didn’t intend to benefit from the referral, didn’t realize she was making a referral, and didn’t know about the Stark Law.

Question 27

What referrals does the Stark Law apply to? (Q)

Answer 27

The Stark Law applies only to referrals for a specific list of services, called designated health services.

Question 28

For the purposes of the Stark Law, what is included in designated health services? (Q)

Answer 28

This list includes many common referrals, such as referrals for imaging, laboratory testing, hospital care, physical therapy, and durable medical equipment. Thus, the designated-health-service limitation doesn’t actually limit the law’s reach much.

Question 29

Does the Stark Law apply to referrals paid by anyone? (Q)

Answer 29

No. The Stark Law applies only to referrals for services paid for by Medicare or Medicaid.

Question 30

What kind of referrals does the Stark Law prohibit? (Q)

Answer 30

The Stark Law prohibits only self-referrals, meaning a referral from a doctor to an entity that’s financially related to the doctor.

Question 31

When is an entity financially related to a doctor? (Q)

Answer 31

An entity is financially related to a doctor if the doctor or a member of the doctor’s immediate family has either (1) an ownership or investment interest in the entity or (2) a compensation arrangement with the entity. These financial arrangements don’t have to be in cash.

Question 32

Do qualifying compensation arrangements have to be for only cash? (Q)

Answer 32

No. These financial arrangements don’t have to be in cash. Qualifying arrangements may involve anything of value, such as stock, intellectual property, or personal property.

Question 33

What are some exceptions to the Stark Law? (Q)

Answer 33

Examples of Stark Law exceptions include bona fide employment relationships, referrals to academic medical centers, ancillary services provided in the referring doctor’s office, and some preventive services.

Question 34

When does the bona fide employee exception apply to the Stark Law? (Q)

Answer 34

The bona fide employment exception applies only if the employee’s compensation reflects fair market value. If the employee’s compensation is higher than what’s generally provided in that market, the exception won’t apply. Because the exception doesn’t apply, the employer and overcompensated employee may be violating the statute even if they’ve never heard of the Stark Law and don’t view the relationship as a referral.

Question 35

If a financial arrangement takes into account the volume or value of someone's referrals, does this violate the Stark Law? (Q)

Answer 35

If a financial arrangement takes into account the volume or value of someone’s referrals, the arrangement likely gives the referring person a type of bonus for extra referrals instead of providing fair market value. This arrangement encourages the unnecessary referrals that the Stark Law is trying to prevent, so such volume-based arrangements typically don’t qualify for an exception.

Question 36

Is the Stark Law a civil or criminal law? (Q)

Answer 36

The Stark Law is a civil law, so violators don’t face prison time.

Question 37

What are some penalties for violating the Stark Law? (Q)

Answer 37

Even unintentional violators may have to return payments received for improperly referred services. And if someone knowingly commits a Stark Law violation, the violator faces potential damages up to triple the amount billed for each improperly referred service, civil fines of $15,000 for each item billed for each improperly referred service, and exclusion from the Medicare program.

Question 38

What happens in a qui tam action? (Q)

Answer 38

In a qui tam action, a private individual sues on behalf of the sovereign, in this case, the federal government. If the lawsuit is successful, the private individual gets a share of the recovery.

Question 39

What is the private individual who files a qui tam action called? (Q)

Answer 39

The private individual who files a qui tam action is called a relator.

Question 40

Who may file a qui tam action? (Q)

Answer 40

In general, any private individual may file a qui tam action alleging that a healthcare provider or entity has violated the False Claims Act. However, there are some limitations.

Question 41

What is the first-to-file bar limitation to qui tam actions? (Q)

Answer 41

Under this limitation, once anyone has filed a False Claims Act lawsuit, no private individual may file a second lawsuit based on the same or related facts while that first lawsuit is pending.

Question 42

What does it mean that qui tam actions are limited based on publicly disclosed information? (Q)

Answer 42

Information is considered publicly disclosed if it was disclosed to the news media, in an official government report, or at a government hearing.

Question 43

Who does the publicly disclosed information rule not apply to? (Q)

Answer 43

However, to fulfill this intended purpose of encouraging private disclosure, the public-disclosure limitation doesn’t apply to private individuals who are considered original sources of information.

Question 44

How can an entity qualify as an original source for the purposes of publicly disclosed information for a qui tam action? (Q)

Answer 44

To qualify as an original source, a person must either (1) have disclosed the information to the government before it became public or (2) have extra information that’s independent of the public disclosure, that materially adds to the disclosed allegations or transactions, and that the person disclosed to the government before filing a qui tam lawsuit.

Question 45

How do qui tam actions begin? (Q)

Answer 45

Qui tam actions start off more secretly than most civil lawsuits. If the nurse met the requirements to file a qui tam action, her initial complaint would be filed with the court under seal. The nurse would also have to serve a copy of the sealed complaint on the federal government, but no copy would be served on the hospital yet.

Question 46

How many days does the government have to investigate and intervene in a qui tam action? (Q)

Answer 46

The government would get 60 days to investigate the matter and decide whether to intervene in the lawsuit.

Question 47

If the government does not intervene in a qui tam action, how can it still participate? (Q)

Answer 47

The government still would’ve been allowed to participate in some ways, such as by demanding case documents or vetoing settlements.

Question 48

What happens if the government intervenes in a qui tam action? (Q)

Answer 48

If the government intervened in the nurse’s qui tam action, either initially or at a later point in the case, the government would then become the party primarily responsible for pursuing the action.

Question 49

If the government intervenes in a qui tam action, what is the realtor allowed to do? (Q)

Answer 49

The relator still would be allowed to participate as a party, such as by calling witnesses at trial. But the government would’ve had the authority to limit the relator’s participation if it was interfering with or unduly delaying the case.

Question 50

What happens to the realtor if the intervening government asks to voluntarily dismiss or settle the action? (Q)

Answer 50

If the intervening government asked to voluntarily dismiss or settle the action, the realtor would need to be given an opportunity to be heard regarding the requests. However, the requested dismissal or settlement could be approved by the court over the realtor's objections.

Question 51

What happens if the realtor disputes a settlement that the intervening government wants to make? (Q)

Answer 51

If the realtor disputed a settlement, the court would need to determine that the settlement’s terms were fair, adequate, and reasonable.

Question 52

What happens if a qui tam action ends with the government recovering proceeds? (Q)

Answer 52

If a qui tam action ends with the government recovering proceeds, the relator gets a financial award.

Question 53

What is the realtor entitled to if the government recovers in a qui tam action? (Q)

Answer 53

As the relator, the nurse would be entitled to (1) a share of that $20 million and (2) reimbursement of her attorney’s fees and costs.

Question 54

What would the realtor get if the government intervened and recovers in a qui tam action? (Q)

Answer 54

If the government intervened in the lawsuit, the nurse’s reward for having initiated the lawsuit would likely be between 15 and 25 percent of the recovery.

Question 55

What would the realtor get if the government never intervened and recovers in a qui tam action? (Q)

Answer 55

If the government never intervened in the lawsuit and thus the nurse had to bear the entire risk of pursuing the claim, then she would be rewarded with a higher percentage, likely between 25 and 30 percent of the recovery.