Fraud and abuse: Violating the False Claims Act

By Elizabeth E. Hogue, Esq., Burtonsville, MD

McNutt v. Haleyville Medical Supplies Inc. (D.C. Docket No. 01-03156-CV-AR-J, Sept. 9, 2005) makes it clear that providers who violate any requirement of the Medicare/Medicaid programs and submit claims for reimbursement also have violated the False Claims Act.

The government alleged that companies owned by Gerald and Frances Burleson violated the anti-kickback statute by paying kickbacks camouflaged as rental payments and commissions to pharmacists and other individuals. Specifically, the Burlesons issued monthly checks to referring pharmacists. The amount of the checks was a percentage, typically 20% to 25%, of the amount the Burlesons received from Medicare for services provided to patients referred by those pharmacists. The Burlesons characterized each check as "rent" in the memo portion of the check in order to conceal the true nature of the kickback payments.

The government also claimed that the Burlesons paid kickbacks to two respiratory therapists and a doctor's patient representative for referring Medicare patients to the Burlesons. The government identified specific claims submitted by the Burlesons to Medicare for reimbursement for services that were rendered to patients referred by individuals receiving kickbacks. The government alleged that, by virtue of these acts, the Burlesons knowingly presented, or knowingly caused to be presented, false or fraudulent claims for payment in violation of the False Claims Act.

The government further alleged that Medicare and Medicaid providers are required to sign a provider agreement with the government. Under the terms of these agreements, providers certify that they will comply with all laws and regulations related to "proper practices for Medicare providers." One of the laws included in these certifications is the anti-kickback statute. According to the government, a Medicare provider's compliance with its provider agreement is a condition for receipt of payments from the Medicare/Medicaid programs and other federal and state health care programs.

Reasonable and necessary

The office of the Inspector General (OIG) of the U.S. Department of Health and Human Services made it clear some time ago that providers implicitly make certain promises when they submit claims for payment to all federal and state health care programs. Specifically, the OIG says that, consistent with the False Claims Act, providers promise that the care they rendered was reasonable and necessary for every claim submitted for payment. If claims are submitted for unreasonable or unnecessary care, they may be "false claims." Providers that submit false claims are subject to criminal prosecution and civil enforcement action, including suspension or exclusion from participation in the Medicare and Medicaid and other state and federal health care programs and civil money penalties.

In the McNutt case, the government clarifies that providers also violate the False Claims Act when they submit claims for care rendered to patients and illegal kickbacks were paid to induce referrals of these patients.

In addition, providers should note that the McNutt case seems to say that if providers violate any requirement of federal and state health care programs, including, for example, requirements that providers must comply with all state and federal laws and regulations, the claims involving noncompliance are false.

The consequences of noncompliance for providers are becoming more serious. Yet, there are still providers who "thumb their noses" at fraud violations. Ignoring compliance hurts providers and the health care industry. Providers who ignore fraud issues also hurt patients, a result that is unacceptable to us all.