Federal False Claims Act

The Federal False Claims Act (FCA) is a Federal law that prohibits, among other things, the knowing filing of a false or fraudulent claim for payment, the knowing use of a false record or statement to obtain payment on a false or fraudulent claim paid by the United States, or the conspiracy to defraud the United States by getting a false or fraudulent claim allowed or paid.  The FCA allows any person who discovers that a government contractor is defrauding the Federal government to report it, and then to sue the wrongdoer on behalf of the U.S. government.  In general, the FCA covers fraud involving any federally-funded contract or program, with the exception of tax fraud. 

In FCA lawsuits, known as qui tam suits, the Federal government has the right to join the private citizen’s lawsuit.  If the government is then able to collect from the fraudulent contractor, the law allows the whistleblower to share in the proceeds.  If the government declines, the individual may proceed on his or her own.  The FCA also contains an anti-retaliation provision which protects those who make FCA-protected disclosures or file a qui tam suit. 

Knowingly violating Medicare laws and the Medicare Fraud and Abuse Statute also violates the FCA.  Hospitals, doctors, home healthcare agencies, and laboratories that seek and receive reimbursement for Medicare and Medicaid funds are subject to the False Claims Act.  Some of the ways a healthcare provider can violate the FCA include:

• knowingly billing for services not rendered;
• misrepresenting the type of goods or services rendered;
• misrepresenting the nature of the patient's illness;
• failing to provide correct data on annual hospital or nursing home cost reports to the government, if the errors were knowing or intentional; or
• providing substandard care.

Any persons or entities with evidence of fraud against Federal programs or contracts may file a qui tam lawsuit, as long as the government or another private party has not already filed a lawsuit based on the same evidence.

Those who violate the False Claims Act can be required to pay three times the dollar amount that the government was defrauded (known as “treble damages”) and civil penalties of $5,500 to $11,000 for each false claim.   A qui tam suit is a civil action, not a criminal action. For that reason, imprisonment is not a potential sanction in a qui tam case.  However, filing a qui tam action may trigger a criminal investigation and prosecution by the government which could lead to criminal fines or jail time for the wrongdoer(s).

Any associate who discovers wrongdoing that violates the FCA is protected from being discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee in furtherance of an FCA action.  The anti-retaliation provision protects employees who engage in lawful acts in furtherance of a FCA action.  This includes investigation for, initiation of, testimony for, assistance in, or harassed because of an FCA action filed or to be filed.  The protection against retaliation extends to whistleblowers whose allegations could legitimately support an FCA case even if the case is never filed.

Those who violate the FCA are liable for three times the dollar amount that the government is defrauded and civil penalties of $5,500 to $11,000 for each false claim.  A qui tam plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement. 

Under the anti-retaliation section of the FCA, any employee who is discharged, demoted, harassed, or otherwise discriminated against because of lawful acts by the employee in furtherance of an action under the Act is entitled to all relief necessary to make the employee whole, which may include reinstatement, double back pay, and compensation for any special damages, including litigation costs and reasonable attorneys' fees.

Kentucky Fraud and Abuse Laws

The Commonwealth of Kentucky also has enacted laws to protect the financial integrity of the Kentucky Medical Assistance Program through the investigation and prosecution of healthcare providers who fraudulently bill or abuse the Medicaid system to obtain benefits or payment for services.

The Kentucky Fraud and Abuse Laws define “Fraud” as “an intentional deception or misrepresentation made by a recipient or a provider with the knowledge that the deception could result in some unauthorized benefit to the recipient or provider or to some other person.  It includes any act that constitutes fraud under applicable federal or state law.”   

Examples of fraud under the Kentucky Fraud and Abuse Laws would include those activities listed above as examples of violations of the FCA.

Those found to have violated the Kentucky Fraud and Abuse laws shall be liable for (a) restitution in the amount of the excess payments, plus interest; (b) a civil payment in an amount up to three times the amount of excess payments; (c) a civil payment of five hundred dollars ($500) for each false or fraudulent claim submitted for providing treatment, services, or goods; and (d) payment of legal fees and costs of investigation and enforcement of civil payments.

In addition, those found to have violated the Kentucky Fraud and Abuse Laws will be removed as a participating provider in the Medical Assistance Program for two months to six months for a first offense, for six months to one year for a second offense, and for one year to five years for a third offense. 

Any person who has reasonable cause to believe that a violation of the Kentucky Medicaid Fraud and Abuse laws is being committed, should report the violation to the Medicaid Fraud Control Unit or the Medicaid Fraud and Abuse hotline.  The identity of the person making such a report will be kept confidential by the party receiving the report. 

Employers are not permitted, without just cause, to discharge or in any manner retaliate against any employee who in good faith makes such a report, or who participates in any proceeding with regard to any such report or investigation.  An employee injured by any act in violation of the prohibition against employer retaliation may pursue a civil cause of action to enjoin further violations, and to recover the actual damages sustained, together with the costs of the lawsuit, including reasonable attorney’s fees. 

All associates are required to comply with Federal and State healthcare fraud, abuse, and false claims laws.  Activities that are prohibited include, but are not limited to:

• Intentionally or knowingly making false or fraudulent claims for payment or approval; and 
• Submitting false, fraudulent or misleading information for the purpose of gaining the right to participate in a plan or obtain reimbursement for services (including submitting claims for services not rendered and submitting claims that characterize the service differently from the service actually rendered).