Few people understand how fraud is defined within the context of the False Claims Act (FCA), which leads some to believe that certain methods of reporting services are fraudulent when they are not. Not all coding errors provide a basis for fraudulent conduct, because reporting must not simply be false; it must be legally false, among other things, in order for a provider to be found liable. Here are a few things to remember in order to defend fraud claims or avoid them all together.

UNDERSTANDING THE FCA
The FCA is a series of statutory sections that defines what constitutes a false claim and the requirements that permit a private party to sue a provider on behalf of the United States. This type of lawsuit is designed to recover monies paid to persons or entities that have submitted false claims to the government for payment. An action for making a false or fraudulent claim for Medicare or Medicaid reimbursement must show that a false claim or statement in support of a claim was presented or caused to be presented to the United States with the knowledge that the claim or statement was false and that the false claim caused damage to the government. 1 If such conduct is proved, the offending party can be held liable for a civil penalty of $5,500 to $10,000 for each false claim submitted as well as three times the amount of actual damage to the federal government.2 If the action is initiated by a whistleblower, the defendant may also be required to pay the relator's costs and attorney's fees.3

AMBIGUITY IN CODING GUIDANCE CAN DEFEAT A FRAUD CLAIM
When the rules pertaining to the method of reporting a particular service are ambiguous, coding that is ultimately determined to be in error, for purposes of FCA analysis, is not legally false. To avoid ambiguity, determine if a coding standard has more than one interpretation. You can do this by conducting a search of opinion articles on the subject. If any different interpretations exist, a search will usually reveal them. If your search results do not find any alternate interpretations, it does not mean they do not exist. In this case, advice from a coding expert with substantial experience in the specialty can be particularly useful.

A FRAUDULENT CLAIM MUST NOT ONLY BE WRONG BUT OBVIOUSLY WRONG
In order to be found liable for reporting fraudulent claims, the FCA requires that a false claim must have been “knowingly” presented. Be aware that the FCA broadly defines the terms knowing and knowingly as including “actual knowledge,” “acts in deliberate ignorance of the truth or falsity” of the information submitted on the claim, or “acts in reckless disregard of the truth or falsity of the information” submitted on the claim form.4 Providers who bill Medicare and Medicaid have a duty to familiarize themselves with the requirements for payment, because the simple act of submitting a claim for reimbursement implies compliance with all governing rules that are a precondition of payment. As a result, reporting in a manner clearly contradicted by statutory or regulatory payment provisions could lead to FCA liability.

MISTAKES DO NOT CREATE FRAUD LIABILITY
The federal courts are consistent in holding that mistakes do not create fraud liability.5 As federal judges struggle to understand the complex coding schemes of the Medicare and Medicaid programs, they are increasingly tolerant of defendants who are caught miscoding.6 Courts are particularly sympathetic to claims of health care providers who could end up liable for penalties in the millions of dollars after FCA multipliers and penalties are applied. In fact, there is some evidence that the courts do not impose FCA penalties for simple mistakes and are willing to view suspicious billing as mistaken. Keep in mind that, even if the presentation of false information is determined to be a mistake, any money erroneously paid must be refunded to the Medicare or Medicaid trust fund.

CONCLUSION
Fraud is not evident in a great number of cases where it is alleged. In fact, a substantially large number of false claims cases are dismissed or abandoned during the investigative process, because the relator did not understand what constitutes legal falsity or what constitutes a condition of payment under the Medicare and Medicaid programs. As a general rule, coding that is not technically and expressly prohibited cannot be wrong, let alone legally false. Nonetheless, when the technically correct answer is contrary to prevailing wisdom, you can expect concerns to be raised. In such cases, validate your conclusions with supporting expert analysis followed by a presentation of the issue to and a written determination from the carrier to minimize FCA liability.

Michael D. Miscoe, Esq, is the founding partner of Miscoe Health Law, LLC, in Central City, Pennsylvania. Mr. Miscoe may be reached at (814) 754-1857; mmiscoe@miscoehealthlaw.com.

  1. 31 U.S.C. §3729(a)(1)
  2. 31 U.S.C. §3729(a)
  3. 31 U.S.C. §3730(b)
  4. 31 U.S.C. §3729(b)(1)
  5. U.S. ex rel. Phillips v. Pediatric Services of America, Inc., 142 F. Supp. 2d 717 (W.D. N.C., 2001); U.S. v. Prabhu, 442 F. Supp. 2d 1008 (D. Nev., 2006)
  6. Gosfield A. Medicare and Medicaid Fraud and Abuse. §5:10. Eagan, MD: Thomson Reuters; 2009. (Citing U.S. v. Krizek, 859 F. Supp. 5, 8-11 (D.D.C. 1994)