Lately I have fielded a growing number of questions regarding various applications/uses of the False Claims Act and Medicare billing inquiries. What is disconcerting about these inquiries is their source; too many from providers or provider organizations. One in particular arises out of an acquisition and this bears special note and comment which, I have provided toward the end of the post.
To start, the False Claims Act in summarized fashion for healthcare providers relates as follows;
(a) Any person who (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; (3) conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government;. . . or (7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person . . . .
(b) For purposes of this section, the terms “knowing” and “knowingly” mean that a person, with respect to information (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.
What this boils down to for providers is that a False Claim Act violation can occur either via deliberate act such as knowingly submitting a claim that is false or when a provider fails to seek knowledge that is common, acting in reckless disregard to the truth or circumstances surrounding the claim. This latter element creates major risk for providers in terms of their use of outside contractors to provide Medicare covered services under Parts A or B.
Taking the two major facets of the genesis of False Claims Act violations separately, the first element of a deliberate act is fairly straightforward. The majority of risk here occurs when providers bill for services not provided or not required by the patient. For example, in reviewing recent False Claims Act cases in hospice, the deliberate act(s) consist of placing people into the Medicare Hospice benefit that are by disease state, not terminal and/or in other instances, billing for continuous care and not providing the service. In SNFs and arising out of the latest OIG report on SNF Medicare billing practices, upcoding patients to higher RUG categories where services were not provided and/or, not required. Each example is a fairly clear, deliberate act or activity to garner reimbursement (bill the government) for care not required or not provided.
The second facet is more nuanced in so much that a provider can be only tangentially connected yet still guilty of completing a False Claims Act violation. This element occurs when providers utilize third-party contractors to provide certain services yet fail to use due care to determine whether such services were actually provided and/or warranted. In this situation, a provider of a Part A or Part B covered service using a third-party contractor to provide some element of a care service, cannot eliminate the False Claim Act liability by hiding under a veil of a contractual relationship or agreement; especially if the provider caused the contractual relationship to exist and benefitted by the contract (logical). Not knowing a violation occurred or could occur via not employing basic due diligence and standards is considered a willful act under the False Claims Act and thus, a violation subject to remedy and penalty.
Getting more concrete: A provider (SNF, Home Health, etc.) for example, under Part A uses a therapy contractor to provide physical, occupational and/or speech therapy. The contractor provides certain information to the provider, as required by contract, to generate Part A claims. At a later date, claims are reviewed or probed via a ZPIC or RAC process and determined that the same are suspect and unjustified. The provider states that the contractor is to blame yet, cannot substantiate that it took any due care to audit the contractor’s work or to review claims for accuracy and integrity. The contractor in this case may or may not be tangentially liable for the False Claims Act violation, based on the provisions of the contract, but the provider is “totally”. Why? The provider is the organization that fraudulently or falsely billed Medicare and caused the violation, even though its claim that it did nothing knowingly or intentionally (all the contactor) is used as a defense. The False Claims Act does not require deliberate action in perpetrating the event merely a disregard of the truth or the events (hear no evil, see no evil, speak no evil).
With the CMS OIG directly stating its intent to spend more time reviewing SNF claims, particularly those that fall into high therapy RUG categories, and the industry-wide reliance on third-party therapy contractors, SNFs need to pay particular attention to the definitions within the False Claims Act. Of principal importance is the requirement or lack thereof, of direct action. Merely a failure to hold contractors accountable and to exercise due diligence as part of the claims submission/billing process can lead to a False Claims Act violation. As I have written before, the simple action (or in this case, inaction) of failing to benchmark RUG levels against national and regional data, to employ an outside resource to periodically test claims, and to monitor the basic provision of care from contractors is all that is required to fit into the category of “reckless disregard” for the truth or accuracy of claims submitted.
Lastly, as mentioned initially, False Claims Act violations that arise from an acquisition, while rare, can occur. I know of one specific case and the circumstances are daunting and troubling. When an acquirer assumes a provider number from an acquired provider, the assumption comes with liability for prior acts. As no statute of limitation exists for fraud, the acquirer is thus the same provider as the original provider via assumption of the former provider number and status. CMS does not differentiate as to the circumstantial aspects of liability for fraudulent actions between providers. While a purchase agreement may stipulate limitations on liabilities arising from prior actions of the former provider, CMS’ enforcement and remedies don’t translate similarly. In other words, CMS will seek enforcement and issue remedies against the current provider, even if the acts were committed by the former provider. The sole remedy for the acquirer is contractual, removed entirely from CMS. As contractual disputes require time and remedy through arbitration or court proceedings, enforcement and other remedies from CMS do not. The actions taken by CMS are independent of the contract between the seller and the acquirer. Again, the “we didn’t know” defense is useless as the assumption is on the part of CMS, “you chose to assume the provider number and the liabilities that inure thereto (such that they existed)”.
My best advice to acquirers, and I have gone down this road many times, is to obtain new provider status via application and issuance of a new provider number. I know this process can be a bit timely and bureaucratic but nonetheless, it stands as the only surefire way to immunize the acquirer from former actions of the seller, at least where Medicare. billing irregularities and False Claims Act violations are concerned. The alternative remedy is extensive and thorough pre-closing due diligence on claims and frankly, this process is more tedious, onerous, and expensive than obtaining a new provider number. Additionally, sellers can get “cranky” from the required probing to complete a thorough due diligence of claim activity, such that deals can easily morph negative. Finally, never and I mean never, assume a contract during the acquisition, especially where the contract is for a third-party provision of care and services tangential to Medicare/Medicaid claims. Negotiate new; for safety sake.