Implications of the False Claims Act

Kerry Cahill, Esq., discusses how practitioners need to protect themselves even in altruistic circumstances

Altruism and the ability and competency to help others are replete in the dental profession. In most providers’ experience, patients have approached them who may not be able to afford their services. With inflation continuing to rise, many patients may not have the financial means to afford reconstructive or cosmetic dentistry, orthodontics, or endodontics. However, if a practice accepts federal funds such as Medicaid, FEDVIP, or the Enhanced Provider Relief Fund Payments, and the practitioner is considering offering discounted rates, be forewarned — these discounts have the potential to run afoul of the federal False Claims Act (FCA), 31 U.S.C. § 3729 et seq., and its equivalent statutory state counterparts.

The False Claims Act

Under the FCA, there are four primary provisions that practitioners should understand.

• First, it is unlawful to knowingly submit a false or fraudulent claim to the federal government for payment or approval, 31 U.S.C. § 3729(a).
• Second, it is unlawful to directly or indirectly make or use a false record or statement in support of a false or fraudulent claim, 31 U.S.C. § 3729(b).
• Third, it is unlawful to possess, have custody, or control of property or money used by the government, while delivering less than its full value, 31 U.S.C. § 3729(d).
• Fourth, conspiring to participate in any of the foregoing activities is also prohibited, 31 U.S.C. § 3729(c).

Although there is no statutory definition as to what constitutes a “false” claim, relevant case law provides that a claim is factually false “when the claimant misrepresents what goods or services that it provided to the Government,” (United States ex rel. Wilkins v. United Health, 659 F.3d 295, 305 [3d Cir. 2011]).

Indisputably, billing for services not provided, upcoding, and illegal kickbacks are unlawful and would warrant FCA claims. Conversely, providers may have the most altruistic intentions with respect to rendering clinical services and unknowingly subject themselves to a potential FCA claim. A provider who offers discounted rates or prepayment incentives to patients who he/she knows are uninsured or underinsured, or who are asset limited, income constrained, and employed (ALICE) may be problematic. As a matter of practicality, when a provider offers or accepts discounted rates or fails to universally balance bill and collect from his/her patients, the provider may have exposure under the FCA. For example, if a provider receives $250.00 per hour from Medicaid, is reimbursed on average $200.00 per hour after balance billing privately insured individuals, and charges his/her uninsured patients $150.00 per hour, there is an inherent question as to the true value of the provider’s services. Is the true value of the services $150.00 or $250.00? With niche orthodontic, endodontic, or implant practices, these payment discrepancies may be very large. As a result, this discrepancy in valuation often leads to costly protracted litigation, which can include a lengthy trial. At present, if found liable for an FCA violation, a civil penalty of between $5,500 and $11,000 is assessed per claim, plus 3 times the amount of damages which the government sustains because of the act, 31 U.S.C. § 3729(a)(1).

“Qui tam” cases are on the rise

Additionally, providers should note that it is not just the government that may institute suit. In addition to allowing the United States to pursue FCA violators, the FCA allows private citizens (called relators) to file suits on behalf of the U.S. government (called “qui tam” suits) against those who have defrauded the government. Private citizens who successfully bring qui tam actions may receive a portion of the government’s recovery, 31 U.S.C. §3730(d). If the government declines to pursue the claim, and the relator prevails, it is statutorily entitled to recover 25% to 30% of the damages, in addition to being reimbursed reasonable counsel fees. The significant reward in assertion of these claims is evidenced by the U.S. Department of Justice’s collection of more than $5.6 billion settlements and judgments for the fiscal year ending on September 30, 2021.*

Insurance coverage is questionable

Generally, practitioners can obtain Commercial General Liability (CGL), Employment Practices Liability (ELI/EPLI), malpractice, and umbrella policies to offset a large amount of risk associated with maintaining their practices. Also, practitioners may maintain a Directors and Officers (“D&O”) policy, in order to protect the personal assets or corporate directors and officers from liability resulting from their management decisions. However, be forewarned that FCA claims may be excluded from coverage under any potentially applicable insurance policies that the practitioner and practice may have. As a result, a practitioner without insurance coverage may have to pay any damages awarded against it.

Practice mitigation of liability

In spite of risk of potential FCA claims, there are a number of preemptive measures a practitioner can take to mitigate its risk. Ensuring that a practice is adequately structured is imperative. When forming a practice, practitioners should take into consideration the roles and responsibilities that they will directly and indirectly undertake — for example, whether they will be handling their own billing, contracting with a third-party billing service, or partnering with a Management Services Organization (MSO).

Additionally, having a well-defined Operating Agreement and up-to-date policies and procedures is integral. Together, these should delineate the responsibilities of the practitioners, their staff, and the patients with respect to handling billing matters. For practitioners in a group practice, the Operating Agreement should address insurance and the apportionment of liability for potential FCA claims among the practitioners. Even if a practice relies upon a separate business entity such as an MSO, this may not insulate the practitioner’s liability. Under the FCA, if a provider has actual knowledge or is deliberately ignorant or recklessly disregards the truth or falsity of the information, it may face liability, 31 U.S.C. § 3729(b)(1). As a result, it is imperative to have contractual provisions with third-party billing agencies regarding the communication and status of billing practices, adequate levels of insurance, and indemnification provisions.

Next, diligent record keeping and records retention is of the utmost importance. This obligation extends to all records relating to the treatment of a patient. For some FCA claims, the issue in question is whether the services for which payment was requested or received from the federal government were actually rendered. By following best practices, practitioners can provide an affirmative defense that they relied upon universally accepted industry practices, which can help to mitigate damages.

Finally, conducting periodic audits and reviews of patient reimbursement rates is wise. Similar to the preceding, these audits and reviews help the practice to implement practical policies and procedures, which can be timely modified — if necessary.

* Department of Justice. Office of Public Affairs. Justice News. Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 2021. https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year. Accessed June 24, 2022.