Whistleblowing in Healthcare under the False Claims Act

Fraud by Hospitals, Medical Groups, and Physicians

Upcoding And Unbundling

Health care service claims are submitted for reimbursement according to the Healthcare Common Procedure Coding System based on the American Medical Association’s Current Procedure Terminology. Upcoding is a fraudulent billing practice in which a provider submits a claim for services using a code for a more expensive service or procedure than what was actually performed. Unbundling is the intentional billing of separate procedures when a procedure is normally billed for a single charge. Health care providers must accurately code services rendered, and cannot submit a code to maximize reimbursement through upcoding or unbundling.

Reimbursement For Services Not Delivered Nor Medically Necessary

The government reimburses medical providers for services performed. Providers may not file claims for treatment that are not actually provided nor medically necessary. They also cannot double bill for services. Section 6402 of the Affordable Care Act further requires that a provider must return any overpayment within 60 days or face liability under the False Claims Act.

Improper Physician Referrals And Kickbacks

Physician referrals are governed by the Stark Law and the federal Anti-Kickback Statute. The Stark Law is an amendment to the Social Security Act that prohibits self-referrals. Physicians may not refer patients to other service providers where they, or an immediate family member, have a financial interest. A provider of services may not bill for services provided as a result of the improper referral. The federal Anti-Kickback Statute prohibits payments for referrals for services covered by Medicare or Medicaid when the payment does not fall within a safe harbor. Violations of either law can create liability under the False Claims Act.

Fraud by Pharmaceutical Companies

In 2017, the ten largest pharmaceutical companies reported revenues of more than $425 billion. Given the size of the industry and the number of players involved, the amount of fraudulent activity that goes undiscovered is seemingly immeasurable. Most fraudulent practices perpetrated by pharmaceutical companies has been directed toward government health care programs.

The most common types of fraud are listed below. However, the list is by no means exhaustive as individuals and companies continuously search for new ways to beat the system. For example, some newly emerging areas of pharmaceutical fraud are counterfeit drugs, pharmacy fraud, and fraud in clinical trials. Counterfeit drugs are typically imported illegally and marketed in the United States as home remedies and cures. A new type of pharmacy fraud involves pharmacies that repackage drugs returned by nursing homes and then bill government health care programs for the same drugs multiple times. Fraud in clinical trials occurs when pharmaceutical companies contract with small groups that don’t actually perform the trials and steal patients’ identities.

PRICING

Pharmaceutical companies sometimes report false and inflated prices for their dugs knowing that federal health care programs rely on those reported prices to set payment rates. The difference between the actual sales price of a drug and the increased government payments caused by the inflated price reported by a pharmaceutical company is known as the “spread.” The larger the spread on a drug, the larger the profit for the healthcare provider or pharmacist who is reimbursed by the government.

When payments from Medicare and Medicaid programs are based on the artificially inflated prices, the submission of claims for reimbursement can subject a pharmaceutical manufacturer to liability under the False Claims Act. The government has recovered billions of dollars from pharmaceutical manufacturers for violations of the False Claims Act based on these unlawful drug pricing schemes.

Illegal Kickbacks

Kickbacks to physicians often take the form of speaker payments or “educational“ trips that are intended to disguise the true purpose of the payments – to increase the number of prescriptions written by the physician or their staff. A physician participating in a kickback scheme who submits a claim to Medicare or Medicaid may be subject to liability under the False Claims Act.

Adulterated Drugs

Drug manufacturers are required to produce pharmaceuticals according to the specifications provided to the FDA. If a manufacturer produces a drug that differs in strength, purity, or quality from the specifications in its FDA application, claims submitted to Medicaid and other federal health care programs can create liability under the False Claims Act.