What Is The False Claims Act?

The False Claims Act (FCA) is a federal law which imposes liability on individuals and companies who defraud the federal government. The fraudulent acts committed under the FCA can take the following forms:

  • falsely billing the government
  • over-representing the amount of a delivered product
  • under-representing the amount of an obligation to the government

Such acts are often committed by individuals or companies who have federal contracts, or are participating in federal programs like Medicare. The FCA sets out the criminal and civil penalties for those who defraud the government under the act.

The False Claims Act is also referred to as “the Lincoln Act”. This is because it was passed in 1863, during the presidency of Abraham Lincoln. The FCA was actually passed during the American Civil War. Its primary goal was to combat fraud by suppliers to the Union Army.

Since its enactment, the FCA has become one of the major tools used for combating fraud against the government. The law has been used against all types of frauds including those arising from defense contracts, health care programs and other government spending programs.

Major Provisions

The FCA spells out the actions which can tantamount to fraud. Such actions are prohibited under the Act, and include the following:

  • presenting false claims for payment or approval by the government
  • falsely certifying the value of a property to be used by the government
  • making a false record in order to avoid or decrease an obligation to pay to the government
  • knowingly buying government property from an unauthorized officer
  • using false records to make claims from the government
  • certifying the receipt of property without ascertaining whether the information is true

Any person who commits, or participates committing the above actions has defrauded the government. He or she is liable to the civil and criminal penalties which are proportional to the loss they have caused the government.

However, there are two exemptions to the law. First of all, the FCA bars actions made against members of the armed forces, congress or the judiciary. Secondly, the law doesn’t cover claims made under the Internal Revenue Code of 1986. This means it doesn’t cover tax fraud.

Qui Tam

The FCA has a Qui Tam provision which allows private individuals to file actions on behalf of the government. The Qui Tam is often referred to as the “whistleblowers” provision. This is because it is often filed by whistleblowers.

Under the Qui Tam provision, a private individual is allowed to file a lawsuit against an entity it suspects of defrauding the government. The FCA describes the person who brings the suit as a “relator”. In the case, the relator isn’t the plaintiff. The government is the plaintiff.

A relator can file suit under the False Claims Act in any federal District Court. The suit is filed under seal, which means that only the relator and the government know about it. Upon the suit being filed, the Department of Justice (in liaison with the District Attorney) investigates the case, and decides whether or not to proceed.

If the government decides to pursue the case, the relator is entitled to between 15% and 25% of any financial settlement in case the case is won. The real percentage depends on the contribution the relator makes towards the case.

In case the government chooses not to pursue the case, then the relator can choose to pursue it on their own. In case they win, they are entitled to a maximum of 30% of any financial settlement imposed on the defendant.

Qui Tam Cases

The majority of lawsuits filed under the FCA are brought by relators. Federal statistics reveal that close to 70% of all cases pursued by the government are brought by relators. In fact, the most high profile cases are often brought by relators.

A case in point is the Pfizer healthcare fraud suit of 2009. In the case, whistleblowers revealed that the drug giant was marketing drugs for uses which weren’t covered by government health programs. The drug giant ended up paying a settlement of $2.3 billion, and the relators bagged $102 million.


Most relators are usually either employees or former employees who inform on the internal operations of a company. In the Pfizer case, the whistleblowers were employees. Another famous case in 2010 involving GlaxoSmithKline PLC was filed by a former employee. The drug giant paid a $750 million settlement, and the relator earned $96 million. (http://blogs.wsj.com/briefly/2014/07/23/what-is-the-false-claims-act-the-short-answer/)

State False Claims Acts

Most states have their own False Claims Acts. These acts are typically designed to impose liability on individuals or companies who defraud state governments. These acts enable states to pursue frauds committed at state, county or municipal level.

State False Claims Acts are usually patterned after the federal FCA. Most of them have their own Qui Tam provisions under which private individuals can bring lawsuits. The Qui Tam provisions typically mirror the one in the federal FCA.

What separates most sates FCAs from the federal FCA (as well as the FCAs of other states) is the types of fraudulent acts which they cover. Most state FCAs only cover frauds committed under Medicaid. This means that other fraud committed under pensions, construction tax, utility, and escheatment aren’t covered. This leaves the states vulnerable to being exploited under those types of fraud.

Some states have FCAs which the U.S. Department of Health & Human Services deems as strong as the Federal FCA when it comes to Medicaid fraud. In such states, it is possible to file a Medicaid fraud lawsuit under the state FCA. In case of any financial settlements, the state is entitled to a 20 to 35% increase in their share.

The States which have False Claims Acts are the following:

California, Colorado, Connecticut, Delaware, Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Virginia and Washington.

A Rise In FCA Suits

There has been a steady rise in the number of lawsuits brought under the FCA over the last few years. The majority of those lawsuits are brought under Qui Tam. According to the Wall Street Journal, there were 500 Qui Tam lawsuits filed in 2013. This is about twice the number filed in 2008, click here for more.

The WSJ attributes the spike to the increased media coverage of whistle blowers getting a huge payday. For companies this increase in FCA cases means that they need to be vigilant to avoid getting dragged to court.

Medicare Lost $60 Billion To Fraud, Abuse & Waste

A report submitted to the Congress has revealed that Medicare lost $60 billion of US taxpayers’ dollars. The report which followed an investigation by the US Government Accountability Office (GAO) states that the money was lost to fraud, abuse, waste and improper payments.

The report has sent shockwaves because of the sheer magnitude of the amounts involved. According to Centers for Medicare and Medicaid Services (CMS) – the federal body which administers Medicare, $60 billion accounts for more than 10 per cent of the total Medicare budget. The fact that it could have been lost is quite baffling.

The largest proportion of the loss came from payments to entities which aren’t medical service providers. The report identified 23,400 addresses which were on Medicare’s list of healthcare service providers. The only problem is that addresses didn’t belong to clinics, hospitals or doctors’ offices. They contained hamburger stands, mailbox shops or even vacant lots.

What isn’t clear from the report is whether the entities were deliberately set-up to defraud the system. There are clear precedents of fraudsters setting up fake practices to cheat government healthcare programs.

A case in point is a fake Florida business uncovered during a 1998 Senate investigation. The business received $6 million in healthcare payments, despite having an address which would have put in right in the middle of the Miami Airport.

However, not all wrong addresses are attempts of fraud. In some cases, it is just a matter of a genuine healthcare provider changing their address, and not notifying CMS within 30 days as is legally required.

The failure of the CMS to distinguish between cases of genuine fraud and lapses in updating addresses is causing some ire. The idea that Medicare can send taxpayers’ money to an address it hasn’t verified seems downright irresponsible.

What makes it worse is that the report claims that for years GAO has been urging CMS to use the US Postal Service to verify addresses. The Postal Service has a computer program which it uses to identify addresses. The program can identify whether an address is a building, an office, or a vacant lot.

Had Medicare used the program, at a minimum, it wouldn’t have sent money to vacant lots and hamburger stands. Why CMS refused to heed GAO’s recommendations is still unclear. Perhaps is just part of a pattern of weaknesses in the agency.

The GAO report stated that it had uncovered “a persistent weakness [in the CMS]… that increased the risk of enrolling entities intent on defrauding the Medicare program.”


The report also identified certain lapses in the physician verification processes at CMS. It found a number of physicians whose licences had been revoked for crimes in one state, but had moved to another state and were still billing Medicare.

Ultimately, the $60 billion Medicare loss seems symptomatic of wider problems at CMS – the agency charged with administering Medicare. A thorough shake-up of the CMS may be required to smoothen things out. Whether or not such a shake-up will take place remains to be seen. And even if it does occur, will the taxpayers’ money be recovered?

How To Protect Yourself From Medicare Fraud

Medicare fraud is one of the most pervasive forms of fraud in the US. It is estimated that the federal government loses $75 – $250 billion annually as a result of Medicare fraud. However, the government isn’t the only victim.

Thousands of Medicare recipients find themselves at the center of fraudulent schemes. Although few of them face financial liability, many wind up with compromised medical and insurance records which set them up for problems down the road.

A case in point is a man, mentioned in a 2010 New York Times article, who needed a wheelchair. When he applied for it using Medicare, he was denied, because according to his records, he had received a wheelchair five years before. The only problem is that the man hadn’t received any wheelchair. A fraudster had used his details to bill Medicare for a wheelchair.  Click here to read more.

Such scenarios aren’t uncommon. This is why you need to protect yourself against Medicare fraud. A fraudulent act committed in your name may not affect you immediately. However, it can become a serious problem at the point of your greatest need. In order to protect yourself, you first need to have a basic understanding of how Medicare fraud works.

How Medicare Fraud Works

At a basic level, Medicare fraud is illegitimately billing Medicare. This usually takes two forms. The first is billing Medicare for services which are not provided, or billing Medicare at excessive rates. The second is supplying Medicare recipients with unnecessary or substandard medical products/services, and then billing Medicare for it.

For both forms of Medicare fraud to work, the fraudsters need access to genuine Medicare credentials. As such, most of the fraudsters’ activities are aimed at stealing people’s Medicare credentials. They use a number of tricks from posing as government Medicare reps to pretending to be healthcare practitioners, or even conniving with genuine practitioners in order to access people’s Medicare credentials.

How To Protect Yourself

Given that the primary aim of Medicare fraudsters is to steal your credentials, protecting yourself is mostly about preventing the theft of your Medicare card or number. Some of the tips you can use are the following:

Guard Your Card

You should protect your Medicare card with as much care as you would your credit card or social security number. Do not give it out to anyone – especially on phone. Many fraudsters trick people into releasing their Medicare numbers by calling them up and pretending to be government representatives.

A great way to protect your card is to make a colored copy of it, and then black out all the digits except the last four. You can then laminate it, and use it during doctor’s visits. The original can be safely kept at home. This can prevent your card from being stolen. Remember, most health service providers require your original card only during your first visit. On subsequent visits, you can move along with your colored copy.

Beware of the Free Services Scam

A common trick used by fraudsters to collect Medicare numbers is through offering “free” services. The only condition they give for getting their “free” services is you giving your insurance information. Do not fall for this scam. If a service is truly free, then what’s the point of asking for your insurance information?

The bottom line is this: don’t give your Medicare number to anybody claiming that they want to offer you a medical service for free. Such people are often fraudsters who are trying to trick you into revealing your Medicare number.

Speaking of freebies, beware of medical supplies which you receive without having ordered for them. Some fraudsters steal your Medicare credentials, send you substandard supplies (often that you don’t need) and bill Medicare on your behalf.

If you receive medical supplies which you didn’t order for, it is almost always a sign that your Medicare credentials have been stolen. First of all, check with your healthcare service provider to ensure that they didn’t send it by mistake. Next, check your Medicare statements (more on this shortly). If you account has been billed without your permission, then report the matter to the Inspector General.

Examine Your Medicare Statements

The quickest way to identify Medicare fraud is through your statements. An easy pointer towards fraud is when you find records of doctor’s visits you didn’t make, unfamiliar medical provider names, or medical supplies you didn’t receive in your Medicare statement.

When you find unexplainable records in your Medicare statement, the first thing is to contact your health service provider – sometimes it can be a simple mistake. If the provider is a baffled as you are, then you are probably a victim of fraud, you need to report it immediately.

The best strategy for examining your Medicare statements is to keep a record of your medical the medical services and supplies. These can include doctor’s visits, equipment ordered for, labs, tests and procedures. Also, keep records of pathology reports and test results. When examining your Medicare statements, check them against your records. This makes identifying fraudulent charges much easier.

Get A Second Opinion

Medicare fraud isn’t just a matter of using your credentials without your information. Some practitioners can actually treat you for nonexistent conditions. A case in point is Dr. Farid Fata – the Michigan-based physician who was recently sentenced to 45 years in prison. Dr. Fata admitted deliberately misdiagnosing patients (telling them they had cancer), and then giving them cancer treatments – even those who were healthy. (http://edition.cnn.com/2015/07/10/us/michigan-cancer-doctor-sentenced/)

Although this is an extreme example, cases like this aren’t uncommon. Healthcare providers sometimes subject patients to unnecessary procedures, tests and treatments – for the simple reason of wanting to claim Medicare reimbursements.

To avoid becoming a victim of such fraud, please ask for a second opinion – especially for serious diagnoses like cancer. Medicare covers getting a second opinion and even a third – in case the previous two are divergent.

The bottom line is that you shouldn’t take every diagnosis as the gospel truth. If you are suspicious about any diagnosis, then request for a second opinion. A genuine medical service provider will have no problem having their diagnosis confirmed by another expert. If the service provider becomes defensive, then that can be a pointer towards the fact that the diagnosis is false.

In a nutshell, those are a few tips which you can use to protect yourself against Medicare fraud. In case you need help in identifying a fraud, then contact your state’s Senior Medicare Patrol Program, or call 877-808-2468. If you suspect that you are a victim of Medicare fraud, call the Inspector General’s fraud hotline at 800-447-8477.

What Is The Physician Self-Referral Law?

The Physician Self-Referral Law is a legislation which governs self-referral for Medicare and Medicaid patients. It is commonly referred to as the “Stark Law” (after the Congressman Pete Stark who sponsored the law), and is found in section 1877 of the Social Security Act.

To appreciate the law, it is necessary to understand what physician self-referral is. The term Physician self-referral is used to describe a situation where a physician refers a patient for medical tests or services which are then provided by himself (or herself) or a service provider in which they have a financial interest.

Examples include a surgeon who recommends a surgery which is carried out by herself, an optician who orders eye tests to be carried out at a clinic he owns and a doctor who refers a patient to a specialist, and is compensated by the specialist for making the referral.

Physician self-referral is known to raise health care costs. This is because physicians end up recommending tests or services which are unnecessary. The Stark Law was intended to avoid such a scenario for Medicare and Medicaid patients.

The law therefore prohibits referrals for Dedicated Health Services (DHS) for Medicaid or Medicare if a physician (or a close family member) has a financial relationship with the service provider. The law describes a “financial relationship” to include ownership, investments or compensation arrangements.

The DHS for which self-referrals are prohibited under the law include:

  • laboratory services
  • inpatient/outpatient services
  • physical and occupational therapy
  • laboratory, radiology and other imaging services
  • orthotics and prosthetic device supplies
  • outpatient prescription

The law prohibits a service provider from making claiming payments for self-referred DHS from Medicare or Medicaid. It prescribes steep penalties for those who make payment claims for self-referred services.

The penalties include $15,000 fine for each service provided in violation of the Law, three times any amount received from Medicare or Medicaid, and civil penalties of up to $100,000 for attempting to circumvent the law. On top of the financial penalties, violators face exclusion from Medicare and Medicaid.

The Stark Law prescribes certain scenarios in which a physician can be exempt from the law. For instance, if medical equipment is in the same room as the physician, then using it for carrying out a test doesn’t tantamount to self-referral. Also, the financial interest provision doesn’t apply to publicly traded companies i.e. if a physician refers a patient to a publicly traded company in which she has shares, it doesn’t count as self-referral.

The Physician Self-Referral Law was first enacted in 1989, and came into effect on January 1, 1992. This is commonly referred to as “Stark I”. The first revision was made in 1993, and dubbed “Stark II”. Another revision was made in 2008, and was dubbed “Stark III”. Each revision added more provisions to the law.

Since it was first drafted, the Stark Law has been somewhat controversial. Some critics claim that it is a blatant interference by the government in the medical practice of physicians. Others claim that it is an inconvenience to patients – since it means that they cannot access DHS which are immediately available at a physician’s premises. Proponents of the law claim that it is essential for protecting Medicare and Medicaid against crafty physicians.

The controversies notwithstanding, the Self-Referral Law is something which physicians need to observe. The penalties for violating it certainly outweigh the fringe benefits which may come with self-referrals.

The Biggest Healthcare Frauds In 2015

It is estimated that the government loses up to $250 billion annually in healthcare fraud. At face value, this figure seems exaggerated. However, if you begin to look at the sheer amounts lost in individual fraud cases, then it is easy to see why the figures might add up.

Here is a list of the biggest healthcare frauds in 2015 so far. There are the biggest by the millions of dollars involved. This is a running list. So, as more fraud take-downs occur, we’ll be bringing them right here. For now, these are the largest, by virtue of their magnitude.

$712 Million Medicare Bust – 243 Indicted

On June 19th, Attorney General Loretta Lynch announced the biggest Medicare take-down in history. In a joint effort between the FBI and local authorities, there were coordinated raids across 17 US cities. A total of 243 people were arrested. Those arrested included doctors, nurses, surgeons and other health professionals.

Those arrested were charged with defrauding Medicare of up to $712 million. The fraudsters mostly billed Medicare for unnecessary or non-existent medical procedures. An example is a Los Angeles doctor who billed Medicare $23 million for supplying 1,000 wheelchairs. The problem most of the people he allegedly gave wheelchairs had no need for them, and most hadn’t received them anyway. (http://money.cnn.com/2015/06/19/pf/medicare-fraud-doctors/)

$97 Million Medicare Fraud – 7 Jailed

In January, seven people including the owners and former employees of the defunct Spectrum Care, P.A were handed jail terms ranging from 4 years to 12 years. The seven were found guilty of conspiring to defraud Medicare of up to $97 million.

It is alleged that Spectrum Care – a community mental health clinic – operated a scheme of kickbacks. The clinic offered kickbacks to home care operators and patient recruiters to refer Medicare patients to them. In most cases, the patients were actually ineligible for mental health care. In extreme cases, some patients received kickbacks.

Spectrum also billed Medicare for the time patients spent doing non-medical related activities like playing games and watching TV. These bills added up to $97 million, and the defendants ended up earning hefty jail sentences. (http://compliance.com/industry-news/owners-of-a-mental-health-clinic-sentenced-for-medicare-fraud-scheme)

$75 Million Medicaid Fraud – Settlement Reached

In February, Community Health Systems – one of the largest US hospital groups – agreed to pay $75 million to settle a False Claims Act case brought by a whistleblower. The case, which was filed in 2009 alleged that CHS defrauded Medicaid by making donations to New Mexico counties in exchange for higher Medicaid payments.

The lawsuit was initiated by Robert Baker a former revenue manager at CHS. Mr. Baker alleged that for every $1 which CMS donated, it received back $3 in Medicaid payments. In February, CMS agreed to pay the federal government $75 million in damages to settle the suit. (http://www.healthcarefinancenews.com/news/community-health-systems-pay-75-pay-whistleblower-case-over-medicaid-fraud)

$63 Million Medicare Fraud – 2 Jailed

In February, 2 Miami residents were each jailed for six years for defrauding Medicare of $63 million. The pair ran the now defunct Health Care Solutions Network (HCSN) which was presented as a mental health treatment provider. The only problem is that the HCSN had little to offer in terms of actual treatment. Its “therapies” consisted of Bingo games and Disney movies.

The Network was adept at forging medical records. It forged records of treatments, and billed Medicare for it. In certain cases, it offered kickbacks to other service providers to refer patients to them. Their scheme is believed to have cost Medicare $63 million, hence the jail sentences. (http://www.justice.gov/opa/pr/two-miami-residents-sentenced-72-months-prison-their-roles-63-million-medicare-fraud-scheme)

Basically, those are the biggest frauds of 2015 so far. Just remember, this is a running list. Therefore, as more fraudsters are busted, jailed or fined heavily, we’ll let you know right here. Watch this space!