False claims

Question: Regarding false claims, which of the following is best?

A. The False Claims Act (FCA) is the only federal antifraud statute of importance.

B. FCA covers principally health-related transactions.

C. Violations require an intention to defraud and acting negligently or knowingly.

D. A coworker may file a false-claims suit on behalf of the government and share in the proceeds.

E. FCA targets institutions and corporations, not individuals.

Answer: D. The False Claims Act, first enacted in 1863, imposes liability for submitting a payment demand to the federal government where there is actual or constructive knowledge that the claim is false. Intent to defraud is not a required element, but knowing or reckless disregard of the truth is. However, an error that is negligently committed is insufficient to constitute a violation.

Many states now have their own versions of FCA. The law applies to claims made by individuals or organizations to any governmental entity, including but not limited to Medicare/Medicaid. Although FCA is the most prominent health care antifraud statute, there are many others such as the anti-kickback statute; the Stark law; HIPAA (Health Insurance Portability and Accountability Act); and general criminal statutes covering theft, embezzlement, obstruction of criminal investigations, false statements, mail/wire fraud, and so on.

Private individuals including whistle-blowers, civic associations, or public interest groups can file a so-called qui tam action. Called relators, such plaintiffs may act alone or in concert with the government, and they stand to collect a substantial bounty, up to 30% of the proceeds. They do not have to show legal standing, and need not sustain any personal injury. The government can decide, upon diligent investigation, whether to intervene by taking or declining action, or may request the court to dismiss the case altogether.

In fiscal 2012, relators lodged 647 qui tam suits, which are now easier to file following amendments to FCA in 1986, together with the enactment of the Fraud Enforcement and Recovery Act of 2009 and the Affordable Care Act of 2010.

Health care fraud and abuse are believed to waste some 10% of federal health expenditures. Under federal law, it is illegal to submit fraudulent claims to Medicare or Medicaid. Penalties include treble damages, costs and attorney fees, and fines of $11,000 per false claim, as well as possible imprisonment and criminal fines. In fiscal 2012, the U.S. Treasury took in a record $4.9 billion in fines and penalties under FCA, largely in health care ($3 billion) and in housing and mortgages ($1.4 billion), with qui tam suits accounting for $3.3 billion.

Physician billing is susceptible to all sorts of errors; most are innocent, but some may arguably be fraudulent. Pitfalls include billing for noncovered services such as experimental treatments, double billing, quality of care issues and unnecessary services, improperly billing the government as the primary payer, or regularly waiving deductibles and copayments.

Other activities that constitute wrongdoing in this context include knowingly using another patient’s name for purposes of federal drug coverage, billing for no-shows, and misrepresenting the diagnosis to justify services. The electronic medical record enables easy check-offs on a preprinted form as documentation of actual work done. Fraud is implicated if the information is deliberately misleading for purposes of up-coding. Medicare is known to be currently looking into this aspect of physician practice.

Importantly, physicians are liable for the actions of their office staff, e.g., systematic up-coding of Medicare or CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) bills; so it is prudent to oversee and supervise all such activities. Naturally, one should document all claims that are sent, and know the rules for allowable and excluded services. Doing business with the government poses vulnerabilities that include qui tam actions, and a disgruntled employee or a nongovernmental payer can turn a case over to the government for prosecution.

A jarring example of fraud in action involved a doctor in Los Angeles who was recruited to sign off on medical charts without seeing any patients. The records were then used to fraudulently bill Medicare for durable medical equipment. Another case concerned a New York cardiologist who was arrested for intentionally misdiagnosing up to 80% of his patients in order to justify billing for enhanced external counterpulsation procedures. The scheme allegedly took in $19 million.

Even medical schools can become entangled. In 2008, two cardiologists pleaded guilty to federal fraud charges for referring patients to a medical school’s cardiac surgery program in exchange for do-nothing faculty positions. The federal Department of Justice is also currently suing a large Florida hospice outfit for alleged fraudulent referrals of patients for emergency services.

However, some doctors are exonerated. A Nevada doctor submitting disallowed bills for pulmonary function tests as part of pulmonary rehabilitation was held to have acted in good faith, and a Utah neurologist actually sued the state’s Medicaid fraud control unit for libel and malicious prosecution for years of harassment and threats.

According to a Wall Street Journal report, managed care fraudsters have recently been targeted by the government for acts such as withholding or reducing payments to doctors, impermissibly cutting costs after receiving preset fees, or refusing to enroll certain patients.

The managed care industry services nearly 40 million state and federal beneficiaries out of some 90 million Americans covered under Medicare and Medicaid. Nationwide, prosecution of managed care entities has targeted misleading claims, denial of patient care, and tardiness in physician payments in Pennsylvania; multimillion-dollar duplicative premiums in New York; and the siphoning of funds meant to pay physicians in California.

The government also took action against a plan in Florida for allegedly inflating spending of mental health premiums to circumvent a state law requiring a refund whenever expenditures dipped below 80% of premiums. And a jury reached a verdict of $330 million against a company in Virginia on 18,000 counts of fraud for expenses well below those of competitors – purportedly because of denial of care, as some patients were excluded and only healthier and nonpregnant patients were enrolled ("Medicare, Medicaid Managed Care Gets Scrutiny for Fraud," Wall Street Journal, March 19, 2008, p. B1).

The government’s most lucrative source of recovery in health care fraud is the pharmaceutical industry. In 2012, for example, one large pharmaceutical company paid $1.5 billion, part of a global $3 billion settlement, to settle FCA allegations by the U.S. Department of Justice regarding the off-label marketing of several drugs, including Paxil, Wellbutrin, and Zofran, as well as physician kickbacks for Imitrex, Flovent, and other drugs. Another company paid $441 million for promoting Vioxx for an off-label use in rheumatoid arthritis and for making misleading statements regarding the drug’s cardiovascular safety.

Marketing FDA-approved drugs for off-label use, illegal under the False Claims Act, has long been a scourge of pharmaceutical and device manufacturers. But in a recent rare victory for Big Pharma, the U.S. Court of Appeals for the Second Circuit held that it was against theFirst Amendment right of free speech to prohibit manufacturers from discussing such off-label use when physicians themselves can legally prescribe their products for off-label indications (United States v. Caronia [703 F.3d 149 (2d Cir. 2012)]). Interestingly, the FDA has decided not to appeal the case to the Supreme Court.

Dr. Tan is a former professor of medicine and adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. It is adapted from the author’s book, "Medical Malpractice: Understanding the Law, Managing the Risk" (2006). For additional information, readers may contact the author at siang@hawaii.edu.

Question: Regarding false claims, which of the following is best?

A. The False Claims Act (FCA) is the only federal antifraud statute of importance.

B. FCA covers principally health-related transactions.

C. Violations require an intention to defraud and acting negligently or knowingly.

D. A coworker may file a false-claims suit on behalf of the government and share in the proceeds.

E. FCA targets institutions and corporations, not individuals.

Answer: D. The False Claims Act, first enacted in 1863, imposes liability for submitting a payment demand to the federal government where there is actual or constructive knowledge that the claim is false. Intent to defraud is not a required element, but knowing or reckless disregard of the truth is. However, an error that is negligently committed is insufficient to constitute a violation.

Many states now have their own versions of FCA. The law applies to claims made by individuals or organizations to any governmental entity, including but not limited to Medicare/Medicaid. Although FCA is the most prominent health care antifraud statute, there are many others such as the anti-kickback statute; the Stark law; HIPAA (Health Insurance Portability and Accountability Act); and general criminal statutes covering theft, embezzlement, obstruction of criminal investigations, false statements, mail/wire fraud, and so on.

Private individuals including whistle-blowers, civic associations, or public interest groups can file a so-called qui tam action. Called relators, such plaintiffs may act alone or in concert with the government, and they stand to collect a substantial bounty, up to 30% of the proceeds. They do not have to show legal standing, and need not sustain any personal injury. The government can decide, upon diligent investigation, whether to intervene by taking or declining action, or may request the court to dismiss the case altogether.

In fiscal 2012, relators lodged 647 qui tam suits, which are now easier to file following amendments to FCA in 1986, together with the enactment of the Fraud Enforcement and Recovery Act of 2009 and the Affordable Care Act of 2010.

Health care fraud and abuse are believed to waste some 10% of federal health expenditures. Under federal law, it is illegal to submit fraudulent claims to Medicare or Medicaid. Penalties include treble damages, costs and attorney fees, and fines of $11,000 per false claim, as well as possible imprisonment and criminal fines. In fiscal 2012, the U.S. Treasury took in a record $4.9 billion in fines and penalties under FCA, largely in health care ($3 billion) and in housing and mortgages ($1.4 billion), with qui tam suits accounting for $3.3 billion.

Physician billing is susceptible to all sorts of errors; most are innocent, but some may arguably be fraudulent. Pitfalls include billing for noncovered services such as experimental treatments, double billing, quality of care issues and unnecessary services, improperly billing the government as the primary payer, or regularly waiving deductibles and copayments.

Other activities that constitute wrongdoing in this context include knowingly using another patient’s name for purposes of federal drug coverage, billing for no-shows, and misrepresenting the diagnosis to justify services. The electronic medical record enables easy check-offs on a preprinted form as documentation of actual work done. Fraud is implicated if the information is deliberately misleading for purposes of up-coding. Medicare is known to be currently looking into this aspect of physician practice.

Importantly, physicians are liable for the actions of their office staff, e.g., systematic up-coding of Medicare or CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) bills; so it is prudent to oversee and supervise all such activities. Naturally, one should document all claims that are sent, and know the rules for allowable and excluded services. Doing business with the government poses vulnerabilities that include qui tam actions, and a disgruntled employee or a nongovernmental payer can turn a case over to the government for prosecution.

A jarring example of fraud in action involved a doctor in Los Angeles who was recruited to sign off on medical charts without seeing any patients. The records were then used to fraudulently bill Medicare for durable medical equipment. Another case concerned a New York cardiologist who was arrested for intentionally misdiagnosing up to 80% of his patients in order to justify billing for enhanced external counterpulsation procedures. The scheme allegedly took in $19 million.

Even medical schools can become entangled. In 2008, two cardiologists pleaded guilty to federal fraud charges for referring patients to a medical school’s cardiac surgery program in exchange for do-nothing faculty positions. The federal Department of Justice is also currently suing a large Florida hospice outfit for alleged fraudulent referrals of patients for emergency services.

However, some doctors are exonerated. A Nevada doctor submitting disallowed bills for pulmonary function tests as part of pulmonary rehabilitation was held to have acted in good faith, and a Utah neurologist actually sued the state’s Medicaid fraud control unit for libel and malicious prosecution for years of harassment and threats.

According to a Wall Street Journal report, managed care fraudsters have recently been targeted by the government for acts such as withholding or reducing payments to doctors, impermissibly cutting costs after receiving preset fees, or refusing to enroll certain patients.

The managed care industry services nearly 40 million state and federal beneficiaries out of some 90 million Americans covered under Medicare and Medicaid. Nationwide, prosecution of managed care entities has targeted misleading claims, denial of patient care, and tardiness in physician payments in Pennsylvania; multimillion-dollar duplicative premiums in New York; and the siphoning of funds meant to pay physicians in California.

The government also took action against a plan in Florida for allegedly inflating spending of mental health premiums to circumvent a state law requiring a refund whenever expenditures dipped below 80% of premiums. And a jury reached a verdict of $330 million against a company in Virginia on 18,000 counts of fraud for expenses well below those of competitors – purportedly because of denial of care, as some patients were excluded and only healthier and nonpregnant patients were enrolled ("Medicare, Medicaid Managed Care Gets Scrutiny for Fraud," Wall Street Journal, March 19, 2008, p. B1).

The government’s most lucrative source of recovery in health care fraud is the pharmaceutical industry. In 2012, for example, one large pharmaceutical company paid $1.5 billion, part of a global $3 billion settlement, to settle FCA allegations by the U.S. Department of Justice regarding the off-label marketing of several drugs, including Paxil, Wellbutrin, and Zofran, as well as physician kickbacks for Imitrex, Flovent, and other drugs. Another company paid $441 million for promoting Vioxx for an off-label use in rheumatoid arthritis and for making misleading statements regarding the drug’s cardiovascular safety.

Marketing FDA-approved drugs for off-label use, illegal under the False Claims Act, has long been a scourge of pharmaceutical and device manufacturers. But in a recent rare victory for Big Pharma, the U.S. Court of Appeals for the Second Circuit held that it was against theFirst Amendment right of free speech to prohibit manufacturers from discussing such off-label use when physicians themselves can legally prescribe their products for off-label indications (United States v. Caronia [703 F.3d 149 (2d Cir. 2012)]). Interestingly, the FDA has decided not to appeal the case to the Supreme Court.

Dr. Tan is a former professor of medicine and adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. It is adapted from the author’s book, "Medical Malpractice: Understanding the Law, Managing the Risk" (2006). For additional information, readers may contact the author at siang@hawaii.edu.

Question: Regarding false claims, which of the following is best?

A. The False Claims Act (FCA) is the only federal antifraud statute of importance.

B. FCA covers principally health-related transactions.

C. Violations require an intention to defraud and acting negligently or knowingly.

D. A coworker may file a false-claims suit on behalf of the government and share in the proceeds.

E. FCA targets institutions and corporations, not individuals.

Answer: D. The False Claims Act, first enacted in 1863, imposes liability for submitting a payment demand to the federal government where there is actual or constructive knowledge that the claim is false. Intent to defraud is not a required element, but knowing or reckless disregard of the truth is. However, an error that is negligently committed is insufficient to constitute a violation.

Many states now have their own versions of FCA. The law applies to claims made by individuals or organizations to any governmental entity, including but not limited to Medicare/Medicaid. Although FCA is the most prominent health care antifraud statute, there are many others such as the anti-kickback statute; the Stark law; HIPAA (Health Insurance Portability and Accountability Act); and general criminal statutes covering theft, embezzlement, obstruction of criminal investigations, false statements, mail/wire fraud, and so on.

Private individuals including whistle-blowers, civic associations, or public interest groups can file a so-called qui tam action. Called relators, such plaintiffs may act alone or in concert with the government, and they stand to collect a substantial bounty, up to 30% of the proceeds. They do not have to show legal standing, and need not sustain any personal injury. The government can decide, upon diligent investigation, whether to intervene by taking or declining action, or may request the court to dismiss the case altogether.

In fiscal 2012, relators lodged 647 qui tam suits, which are now easier to file following amendments to FCA in 1986, together with the enactment of the Fraud Enforcement and Recovery Act of 2009 and the Affordable Care Act of 2010.

Health care fraud and abuse are believed to waste some 10% of federal health expenditures. Under federal law, it is illegal to submit fraudulent claims to Medicare or Medicaid. Penalties include treble damages, costs and attorney fees, and fines of $11,000 per false claim, as well as possible imprisonment and criminal fines. In fiscal 2012, the U.S. Treasury took in a record $4.9 billion in fines and penalties under FCA, largely in health care ($3 billion) and in housing and mortgages ($1.4 billion), with qui tam suits accounting for $3.3 billion.

Physician billing is susceptible to all sorts of errors; most are innocent, but some may arguably be fraudulent. Pitfalls include billing for noncovered services such as experimental treatments, double billing, quality of care issues and unnecessary services, improperly billing the government as the primary payer, or regularly waiving deductibles and copayments.

Other activities that constitute wrongdoing in this context include knowingly using another patient’s name for purposes of federal drug coverage, billing for no-shows, and misrepresenting the diagnosis to justify services. The electronic medical record enables easy check-offs on a preprinted form as documentation of actual work done. Fraud is implicated if the information is deliberately misleading for purposes of up-coding. Medicare is known to be currently looking into this aspect of physician practice.

Importantly, physicians are liable for the actions of their office staff, e.g., systematic up-coding of Medicare or CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) bills; so it is prudent to oversee and supervise all such activities. Naturally, one should document all claims that are sent, and know the rules for allowable and excluded services. Doing business with the government poses vulnerabilities that include qui tam actions, and a disgruntled employee or a nongovernmental payer can turn a case over to the government for prosecution.

A jarring example of fraud in action involved a doctor in Los Angeles who was recruited to sign off on medical charts without seeing any patients. The records were then used to fraudulently bill Medicare for durable medical equipment. Another case concerned a New York cardiologist who was arrested for intentionally misdiagnosing up to 80% of his patients in order to justify billing for enhanced external counterpulsation procedures. The scheme allegedly took in $19 million.

Even medical schools can become entangled. In 2008, two cardiologists pleaded guilty to federal fraud charges for referring patients to a medical school’s cardiac surgery program in exchange for do-nothing faculty positions. The federal Department of Justice is also currently suing a large Florida hospice outfit for alleged fraudulent referrals of patients for emergency services.

However, some doctors are exonerated. A Nevada doctor submitting disallowed bills for pulmonary function tests as part of pulmonary rehabilitation was held to have acted in good faith, and a Utah neurologist actually sued the state’s Medicaid fraud control unit for libel and malicious prosecution for years of harassment and threats.

According to a Wall Street Journal report, managed care fraudsters have recently been targeted by the government for acts such as withholding or reducing payments to doctors, impermissibly cutting costs after receiving preset fees, or refusing to enroll certain patients.

The managed care industry services nearly 40 million state and federal beneficiaries out of some 90 million Americans covered under Medicare and Medicaid. Nationwide, prosecution of managed care entities has targeted misleading claims, denial of patient care, and tardiness in physician payments in Pennsylvania; multimillion-dollar duplicative premiums in New York; and the siphoning of funds meant to pay physicians in California.

The government also took action against a plan in Florida for allegedly inflating spending of mental health premiums to circumvent a state law requiring a refund whenever expenditures dipped below 80% of premiums. And a jury reached a verdict of $330 million against a company in Virginia on 18,000 counts of fraud for expenses well below those of competitors – purportedly because of denial of care, as some patients were excluded and only healthier and nonpregnant patients were enrolled ("Medicare, Medicaid Managed Care Gets Scrutiny for Fraud," Wall Street Journal, March 19, 2008, p. B1).

The government’s most lucrative source of recovery in health care fraud is the pharmaceutical industry. In 2012, for example, one large pharmaceutical company paid $1.5 billion, part of a global $3 billion settlement, to settle FCA allegations by the U.S. Department of Justice regarding the off-label marketing of several drugs, including Paxil, Wellbutrin, and Zofran, as well as physician kickbacks for Imitrex, Flovent, and other drugs. Another company paid $441 million for promoting Vioxx for an off-label use in rheumatoid arthritis and for making misleading statements regarding the drug’s cardiovascular safety.

Marketing FDA-approved drugs for off-label use, illegal under the False Claims Act, has long been a scourge of pharmaceutical and device manufacturers. But in a recent rare victory for Big Pharma, the U.S. Court of Appeals for the Second Circuit held that it was against theFirst Amendment right of free speech to prohibit manufacturers from discussing such off-label use when physicians themselves can legally prescribe their products for off-label indications (United States v. Caronia [703 F.3d 149 (2d Cir. 2012)]). Interestingly, the FDA has decided not to appeal the case to the Supreme Court.

Dr. Tan is a former professor of medicine and adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. It is adapted from the author’s book, "Medical Malpractice: Understanding the Law, Managing the Risk" (2006). For additional information, readers may contact the author at siang@hawaii.edu.