New Medicare Fraud and Abuse Provisions Under the PPACA

By Jeff Weinstein and Scott Honiberg for HealthLeaders Media, July 12, 2010

President Obama recently signed off on legislation that very likely will result in a substantial increase in lawsuits against health care providers. Intended to combat fraud in the Medicare & Medicaid programs, several amendments in the Patient Protection and Affordable Care Act significantly change the status quo, and will require greater vigilance by healthcare providers in their dealings with the federal government.

What the law means for the whistle–blower
The most dramatic change in the law concerns whistle–blower actions under the federal False Claims Act (FCA). The FCA is one of the government’s most important tools in fighting fraud such as false billings and requests for payment, or improper retention of government overpayments. In perhaps the most important provision of the new legislation, a whistle–blower who initiates a lawsuit under the FCA alleging such fraud no longer must be the “original source” of the information.

Until now, the FCA’s “public disclosure” bar has meant that in order for a whistle–blower to participate in any settlement, he or she needed direct and independent knowledge concerning false billings or other false claims submitted to the government. The result was information that had already been publicly disclosed could not serve as the basis of a whistle–blower suit.

Because the new law states that the government must now be a party in a hearing in order for the information disclosed in the hearing to constitute a “public” disclosure, information disclosed in private litigation may now potentially be used as the basis of a whistle–blower suit under the FCA. A plaintiff can now be a “whistle–blower” merely by having knowledge that “materially adds to” allegations that have already been publically disclosed.

The new law also allows a whistle–blower to initiate an action under the FCA based on facts that already have been disclosed to the public through state or local administrative reports, hearings, audits or investigations (unless the whistle–blower’s facts are “substantially the same” as those already disclosed). By essentially repealing, or, at least, lowering the public disclosure bar, Congress hopes more instances of false claims will be disclosed, thus potentially resulting in more recovery by the government.

The downside—for physicians, hospitals, and other health care providers—is that permitting suits based on information that has already been publicly disclosed is likely to prove tempting to potential plaintiffs who hope to share in the government’s recovery. The new law’s impact will be blunted somewhat by the fact that it is not retroactive—that is, a whistleblower cannot file suit based on a publicly disclosed claim that was submitted to the government before the law’s effective date of March 23, 2010.

Still, the new law will allow plaintiffs’ counsel to begin combing through public records and information disclosed in private litigation in the hope of turning up information that can be used as the basis for a suit under the FCA, and it will be more difficult for healthcare providers who are the target of such suits to get them dismissed on jurisdictional grounds.

What the law means for overpayments
Another notable provision of the new law is a healthcare provider who receives a federal government overpayment must report that overpayment and return it to the government within 60 days of discovering the error. Failure to do so will subject the provider to liability under the FCA, which includes civil penalties.

For example, a healthcare provider who, upon discovery, fails to report and return an overpayment by Medicare within the time required by the new law will, in addition to the amount of the overpayment, also be subject to civil penalties. The issue of overpayments will be an interesting one to watch, as provider claims are paid by Medicare contractors after adjudication and, in theory, according to Medicare reimbursement methodologies. These provisions suggest that providers may be increasingly held liable for overpayments made, not only for errors they made (e.g., as a result of an error originating with how they submitted as claim), but for having been overpaid as a result of an error by the Medicare contractor who paid the claim.

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