False Claims Act Amendments: Increased Exposures For Health Care Providers

One of the biggest liability exposures for healthcare providers has been claims by the federal government relating to alleged Medicare fraud and abuse practices under the False Claim Act and the Fraud Enforcement and Recovery Act of 2009. These statutory changes increase compliance risks, and may result in significant new exposures for healthcare providers. The following summarizes several of the more important aspects of the new legislation.

Mr. Bailey writes: On May 20, 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 ("FERA"), which amends the FCA in several important respects to close loop holes and to enhance the ability of the government and whistleblowers to identify and successfully pursue entities and individuals who improperly receive government funds. Since Medicare payments are a significant portion of many healthcare providers' revenue, these statutory changes increase compliance risks, and may result in significant new exposures for healthcare providers. The following summarizes several of the more important aspects of the new legislation, which is now in effect. A. Retaining Overpayments

Prior to FERA, whistleblowers could assert a claim under the FCA only if the provider wrongfully obtained government funds to which the provider was not entitled. If the provider received excessive funds as a result of an error by the government or an innocent mistake by the provider, the harsh penalties under the FCA did not apply. Pursuant to the new legislation, whistleblowers can now bring an FCA action against providers who knowingly and improperly keep government funds paid to them in error.

Although the new statute probably does not apply to overpayment situations in which the provider retains excess payments pending an audit or payment reconciliation, providers nonetheless face significant increased exposure under the statute because it is often difficult to confirm all payments made by government programs are correct. An open question under the statute is whether a whistleblower can assert an overpayment action based on the premise that the provider should have known the payment was in error or should have exercised greater oversight to confirm the accuracy of incoming payments. In any event, providers should now reevaluate their internal controls and compliance procedures to assure reasonable efforts are being devoted to identifying and promptly refunding overpayments.

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