February 1999 Bulletin

You can't look the other way

False Claims Act holds officers liable for actions of partners, employees

Most health care professionals are aware that they can incur significant liabilities for submitting "false" claims for services provided to Medicare and Medicaid beneficiaries. False claims take on many forms, including: billing for services not actually provided; misrepresenting that a reimbursable service was performed; "unbundling" services that must be globally billed; submitting duplicate bills; and billing for medically "unnecessary" services. But providers are less certain what to do when they believe one of their colleagues may be submitting improper claims.

The federal civil False Claims Act provides that any person who knowingly presents-or causes to be presented-a false claim for payment is subject to significant penalties. Persons who violate the Act can be held liable for a civil penalty of between $5,000 and $10,000, plus treble damages sustained by the government, for each false claim filed. Providers who are found to have submitted false claims also can be excluded from future participation in government-sponsored health care programs such as Medicare and Medicaid.

The Act defines "knowing" and "knowingly" to mean persons who have actual knowledge of information, act in deliberate ignorance of the truth or falsity of information or act in reckless disregard of the truth or falsity of information.

Notably, the government is not required to prove actual intent to submit false claims to establish liability.

Under these provisions, officers of a medical practice (and possibly even shareholders or partners who are actively involved in providing medical services, but not its day-to-day business activities) can be liable for claims submitted by their partners and employees if they consciously avoid knowledge of their falsity. Although corporate officers can avoid liability if they can show that they did not undertake any actions whereby the false claim was presented for payment, this is generally a risky strategy because virtually any official action could be construed as part of the process of submitting claims for payment. As a result, corporate officials generally gain no advantage simply by letting their employees and colleagues "do their own thing." If your colleagues turn out to be less scrupulous than you believed them to be, you can be made to pay for their transgressions.

The best way to avoid these difficulties is through education and implementation of a corporate compliance plan. By providing ongoing education to all professional staff and billing specialists, a medical practice can often avoid trouble altogether. And a compliance plan that calls for the routine review of the practice's claims-in a way that comports with accepted auditing principles-will help ferret out small problems before they become big ones.

If their charts and claims are periodically reviewed under a compliance plan, physicians will not be able to hide false billings for very long. Moreover, if a medical practice adopts and implements a thoughtful compliance program, it will be difficult for the government to contend that its officers and employees were consciously disregarding the truth or falsity of the practice's claims. To the contrary, a proper compliance plan is designed to identify inappropriate billing practices so that they can be stopped. Thus, although the practice itself (and the billing physician) could be held liable for claims submitted before the erroneous billing practice was halted, the existence of a compliance plan would provide some insulation from liability for other corporate officers or employees.

Finally, in cases of significant billing irregularities that have persisted for long periods of time, a practice should consider making a voluntary disclosure. The Office of the Inspector General of the Department of Health and Human Services operates a voluntary disclosure program. In order to participate, the disclosure must be made on behalf of an entity (not an individual), must be truly voluntary (not made in the face of a pending investigation), and disclose the nature of the wrongdoing and the harm to a federal health care program.

Voluntary disclosure is a significant step and should not be undertaken without careful consultation with legal and financial advisors. Entities that voluntarily disclose are able to frame the issue for the government and provide context for the subsequent investigation. Voluntary disclosures tend to be completed more quickly than government-initiated investigations and are less likely to result in program exclusions.

However, against these benefits an entity considering voluntary disclosure should weigh the possibility that the government will impose fines substantially in excess of what it expects or believes is appropriate and may, once it commences its investigation, find even bigger problems. Also, the government may conclude that the entity's compliance efforts are inadequate and may demand an onerous corporate integrity plan as a condition of closing the matter.

The Inspector General is expected to issue new protocols for its voluntary disclosure program in the next few weeks.

Bryan A. Schneider is an attorney at Harris Kessler & Goldstein. He can be reached at bschneid@hkgold.com.

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