Question: Which of the following is correct?

A. The False Claims Act dates back to the Civil War era.

B. The FCA covers only patently false statements.

C. Material misrepresentation is insufficient.

D. Negligence constitutes a violation.

E. A qui tam lawsuit under FCA refers to a third party who has suffered personal harm.

Answer: A. The False Claims Act (FCA) is an old law, enacted by Congress in 1863 to impose liability for submitting a payment demand to the federal government when there is actual or constructive knowledge that the claim is false.1 Many states now have their own versions of FCA.

Intent to defraud is not a required element, but knowing or reckless disregard of the truth or material misrepresentation are – whereas negligence is insufficient to constitute a violation.

Penalties include treble damages, costs, and attorney fees, as well as fines of $11,000 per false claim and possible imprisonment. Although FCA is the most prominent health care antifraud statute, there are many others, such as the antikickback statute, the Stark Law, HIPAA, and general criminal statutes covering theft, embezzlement, obstruction of criminal investigations, false statements, mail/wire fraud, and so on.

In the health care field, FCA most commonly involves false claims made to Medicare or Medicaid. Pitfalls include billing for noncovered services such as experimental treatments, double billing, unnecessary services, billing the government as the primary payer when inappropriate, 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 as documentation of actual work done, and fraud is implicated if the information is deliberately misleading, as in the example of upcoding.

Importantly, physicians are liable for the actions of their office staff, so it is prudent to oversee and supervise all billing activities. Aggrieved or disgruntled employees or contractors, popularly known as whistle-blowers, can file a qui tam action. 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.

FCA prosecutions are daily affairs, with egregious examples regularly making the news headlines. A few random pickings might give you an idea of the problem:

In 2015, in its largest case of health care fraud, the federal Department of Justice filed criminal charges against 243 individuals across the nation. Some of the violations included billings for intensive psychotherapy sessions for noncommunicative dementia patients, simply moving patients to different locations, and fraudulent prescriptions under Medicare Part D.

In 2016, a pain management clinic used “ill-equipped, desperate doctors in dire need of work” to write faked prescriptions for narcotics. The clinic owner, a doctor, was sentenced to 144 months in prison for running what was described as a “pill-mill zoo.”

Arguably, the most dramatic physician case occurred in 2017 and involved a Florida dermatologist who settled with the government for $18 million for treating patients for skin cancer they did not have. The action came from a qui tam lawsuit filed by another dermatologist.

A major development in the false claims law came with last year’s U.S. Supreme Court decision in Universal Health Services v. Escobar.2

This landmark case dealt with claims made by Arbour Counseling Services to the Massachusetts’ Medicaid program for mental health counseling and prescriptions, a satellite mental health facility of Universal Health Services. It turned out that relatively few Arbour employees were actually licensed to provide mental health counseling or authorized to prescribe medications. A death resulted from a reaction to an unlicensed prescription.

In a unanimous decision, the Supreme Court held that there can be FCA liability when a defendant submitting a claim makes specific representations about the goods or services provided but fails to disclose noncompliance with material statutory, regulatory, or contractual requirements. Technically referred to as “implied false certification,” such material omissions may amount to a misrepresentation and may be deemed fraudulent, even if the requirements were not expressly designated as conditions of payment.

In the words of the court, “Today’s decision holds that the claims at issue may be actionable because they do more than merely demand payment; they fall squarely within the rule that representations that state the truth only so far as it goes, while omitting critical qualifying information, can be actionable misrepresentations.”

The implied false certification, or implied fraud, ruling has widespread implications, as it does not require a patently false statement. A material misrepresentation or omission may suffice.

There is concern that this ruling will open the floodgates of FCA prosecution. However, the federal Ninth Circuit Court of Appeals has recently quashed an attempt to invoke the implied certification claim in an FCA suit against DJO Global and Biomet, brought by a medical device salesman and his private investigator. Their rejected whistle-blower suit alleged that the defendants were providing their spinal bone growth stimulation devices for use on the cervical spine, even though Food and Drug Administration approval was for use only on the lumbar spine.

Another concern is, can an alleged wrong prognosis regarding life expectancy amount to a false claim?

Under Medicare rules, a physician certifying that a patient is eligible for hospice care must attest that the condition is terminal, with death expected within 6 months.

AseraCare, a hospice company, was accused of knowingly submitting false claims to Medicare by certifying patients as eligible for hospice who did not have a life expectancy of 6 months or less. The government claimed that the medical records of the 123 patients at issue did not contain clinical information and other documentation that supported the medical prognosis. Thus, AseraCare’s claims for those patients were false.

The case brought out the conflicting views of physicians: Did the medical records supported AseraCare’s certifications that the patients were eligible? The defendants argued that, when hospice-certifying physicians and government medical experts look at the very same medical records and disagree about eligibility, the opinion of one medical expert alone cannot prove falsity without further evidence of an objective falsehood.

AseraCare won a summary judgment defending against the $200 million lawsuit in the U.S. District Court for the Northern District of Alabama.3 In a memorandum opinion, the court began with Blaise Pascal’s axiom that “Contradiction is not a sign of falsity, nor the lack of contradiction the sign of truth.” Federal prosecutors have appealed to the federal 11th Circuit Court of Appeals, which recently heard oral arguments. Its decision is pending.

In support of the hospice center physicians, the American Medical Association and other organizations have filed an amicus brief asserting that a physician’s opinion may be deemed false only if no reasonable physician could hold that opinion.

Dr. Tan is emeritus professor of medicine and former adjunct professor of law at the University of Hawaii, Honolulu. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the materials have been taken from earlier columns in Internal Medicine News. For additional information, readers may contact the author at siang@hawaii.edu .

References

1. 31 U.S. Code, Section 3729(a)(1)(A) .

2. Universal Health Services v. United States ex rel. Escobar, 579 U.S. ____ (2016) .

3. U.S. ex rel. Paradies et al. v. AseraCare Inc. et al., Case number 2:12-CV-245-KOB , in the U.S. District Court for the Northern District of Alabama.

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