What is the Federal False Claims Act?

Jamie Frantz CEMC, CPC

Associate

Aegis Compliance and Ethics, LLC

What is the Federal False Claims Act?

The Federal False Claims Act (“FCA”) also called the “Lincoln Law” is an American federal law that imposes liability on persons and companies (typically federal contractors) who defraud governmental programs.  It is the federal Government’s primary litigation tool in combating fraud against the Government. This article seeks to outline and clarify specific details contained in the FCA.

What is a false claim?

The FCA states that any person is liable who:

  • Knowingly presenting, or causes to be presented, a false or fraudulent claim for payment or approval;
  • Knowingly making, using, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
  • Has possession, custody, or control of property or money used, or to be used, by the government and knowingly delivers, or causes to be delivered, less than all the money or property;
  • Is authorized to make or deliver a document certifying receipt of property used, or to be used, by the government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
  • Knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the government, or a member of the Armed Forces, who lawfully may not sell or pledge property;
  • Knowingly make, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government.

Reverse false claims, provides liability where a person acts improperly to avoid paying money owed to the government.  Relative to healthcare services, examples of fraud or misconduct subject to the Federal False Claims Act are as follows:

  • Falsifying a medical chart notation;
  • Submitting claims for services not performed, not requested, or unnecessary;
  • Submitting claims for expired drug;
  • Upcoding and/or unbundling service;
  • Submitting claims for physician services performed by a non-physician provider (NPP) without regard to Incident-to guideline.

The FCA is violated by submitting a false claim with knowledge that it is false. However, the act states that a violation may occur even without intent to defraud.  The person in violation will also be liable for the cost of the civil action brought to recover any such penalty as well as three times the damages to the federal government sustains because to the false claim.

In June of 2016, correlating with the 2015 enactment of the Federal Civil Penalties Inflation Adjustment Act, the Department of Justice (“DOJ”) issued an Interim Final Rule that adjusts for inflation civil monetary penalties, including almost doubling penalties for the Federal False Claims Act violations, which went into effect on August 1,2016.  Penalties increase between $10,781 and $21,563 per claim, plus three times the amount of damages that the federal government sustains because of the false claim.

When False Claim Acts penalties increase, so do the financial rewards for the whistleblowers, thus increasing their incentive to allege false or fraudulent claims.

The False Claims Act allows reduced penalties (mitigation) if the person committing the violation self-discloses and if:

  • The person responsible furnishes officials of the United States responsible for the investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;
  • Such person fully cooperates with the investigation of such violation;
  • At the time, such person furnishes the information about the violation, no criminal prosecution, civil action, or administrative action has commenced under this title with respect to such violation, and the person did not have actual knowledge of the existence of an investigation into such violation.

The Qui Tam or Whistleblower provision.

If any one individual knows of a violation of the FCA he or she may bring a civil action on behalf of him or herself and on behalf of the U.S. government (such an individual is called a relator).  If the government intervenes, it has the primary responsibility for prosecuting the Qui Tam action.  The relator may be awarded 15-25 percent of the amount recovered through the Qui Tam action, depending on the extent to which the relator contributed to the prosecution.  Since 1986, recoveries in Qui Tam action exceeded $18 billion.

The statute seeks to protect possible relators who come forward with information of wrongdoing.  Any relator shall be entitled to all relief necessary to make the relator whole if the relator is discharged, demoted, suspended, threatened, harassed or in any manner discriminated against in the terms and conditions of employment because of lawful acts done by the relator in furtherance of the efforts to stop one or more violations.

 

 

 

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