Verisys- Healthcare Fraud and Abuse

3 Healthcare Fraud and Abuse Laws Providers Should Know About

In 2021, the Department of Justice reported recovering over $5.5 billion from settlements due to fraud and false claims. This is the largest amount recovered under the False Claims Act since 2014.

Over $5 billion of the total amount recovered in 2021 was related to the healthcare industry. You may find this surprising, but as federal healthcare spending increases, so does the risk of abuse. Abuse of government healthcare programs is a federal offense with severe penalties.

As a healthcare provider, being familiar with healthcare fraud and abuse laws is important. Doing so not only protects you as the provider and your organization, but also the American taxpayers, who pay the bill.

This guide will cover three federal fraud and abuse laws that healthcare providers need to know about. These include:

• The False Claims Act (FCA)
• The Anti-Kickback Statute (AKS)
• The Physician Self-Referral Law (STARK)

I. False Claims Act

Originally enacted during the Civil War, the FCA was established to prevent fraudulent acts against federal and state programs. Since then, the FCA has changed significantly. Today, the FCA establishes liability for knowingly presenting a false or fraudulent claim for payment to the U.S. government or a government contractor.

The Most Common False Claims

The FCA primarily combats healthcare fraud and abuse associated with Medicare and Medicaid. However, it applies to a false claim submitted for payment to any federally funded program, including Tricare or the Veterans Health administration.

Several scenarios, as described below, can constitute FCA violations when knowingly and intentionally committed.

• Billing for services not rendered
• Up-coding services
• Falsifying certification(s) of medical necessity or authentication of services performed
• Medicare Part D prescription fraud
• Inflating cost reports to maximize reimbursements from federal programs 
• Choosing healthier patients in a capitation model to capitalize on Medicare and Medicaid reimbursements (“red-lining”)
• Submitting a claim for a patient who does not exist or who never received service or items billed for (a “ghost patient”)

Violating the FCA comes with steep penalties. Those that knowingly submit or are involved in the submission of a false or fraudulent claim for payment to any federally funded program are subject to the following:

• Civil monetary penalties of up to $11,000 for each false claim submitted
• Payment of three times the amount of damages sustained due to the fraudulent act
• Payment of the costs of any civil action brought to recover such penalties and damages

Due to the vast quantity of aid that federally funded healthcare programs provide, the FCA depends upon and allows what is known as qui tam actions. This allows a private citizen — now also known as a “whistleblower” or a “relator” — to file suit on behalf of the government against persons engaged in fraud. 

II: Anti-Kickback Statute

The Anti-Kickback Statute (AKS) prohibits any offer, payment, solicitation, or receipt of money, property, or remuneration to reward or induce the referral of patients or healthcare services to generate business. These referrals include any service or item payable by a government healthcare program. 

Remuneration is considered anything of value and can include, but is not limited to:

• Free rent
• Hotel stays
• Meals or entertainment
• Excessive compensation 

Those who pay or accept kickbacks can be found in violation of the AKS. Possible penalties include fines of up to $50,000 for each kickback and prison time. A breach of the AKS is also subject to prosecution under the FCA and various federal and state laws and regulations.

III: Physician Self-Referral Law

The Physician Self-Referral Law, frequently referred to as the STARK law, prohibits providers from referring patients to receive designated health services with which the provider or an immediate family member has a financial relationship. Violation of this law requires health services to be payable by Medicare or Medicaid. Designated health services include the following:

• Laboratory services
• Physical and occupational therapy and outpatient speech-language pathology services
• Imaging services
• Radiation therapy services and supplies
• Durable medical equipment and supplies
• Parenteral and enteral nutrients, supplies, and equipment
• Prosthetics, orthotics, and prosthetic devices and supplies
• Home health services
• Outpatient prescription medications
• Hospital services, including both inpatient and outpatient

As a strict liability statute, the STARK law doesn’t require proof of intent to violate the law. Penalties for violations of the STARK law include:

• Denial of payment for designated health services provided
• Civil penalty payments of up to $15,000 for each service rendered
• Repayment of three times the amount of improper payment 

Since STARK is a civil law, it doesn’t apply criminal penalties such as prison time. But, some exceptions may apply.

Understanding Risk: The Exclusion Statute

Under the Exclusion Statute, individuals and entities convicted of the following crimes are excluded from participating in federally funded programs in the future:

• Medicare or Medicaid fraud
• Patient neglect or abuse
• Felony convictions related to healthcare theft, fraud, or financial misconduct
• Felony convictions related to unlawful manufacturing, distributing, prescribing, or dispensing of controlled substances

An FCA, AKS, or STARK law violation qualifies for placement on the Office of Inspector’s General exclusion list. Excluded providers and entities can no longer bill Medicare and Medicaid directly or indirectly through an employer or group practice for services rendered to patients.

Steps to Avoid Healthcare Fraud and Abuse Violations

As you can see, there is a considerable risk in employing or contracting with excluded individuals or entities. Here’s what you can do to prevent and avoid FCA, AKS, and STARK law violations and their severe penalties:

1. Understand the rules and policies that relate to services and goods being billed.
2. Choose a trusted screening platform such as Verisys’ FACIS® for screening and monitoring current and prospective providers.  
3. Notify your supervisor or compliance officer immediately if you become aware of a potential billing problem. A quick review of the matter allows for proper action to be taken. Voluntarily disclosing such information may help avoid or limit liability under the FCA, AKS, and STARK laws.

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