Health care news articles and blogs are replete with references to ACO’s, Exchanges, Navigators, and the like. These and similar topics are popular because they are new concepts and, for lack of a better term, “splashy.” By comparison, concepts like the False Claims Act (“FCA”) seem worn and tired.  

Do not lose sight of the basic building blocks on which all transactions and financial relationships are stacked: compliance with the FCA. Furthermore, all the while that there has been a flurry of activity on ACO building and the development of managed care networks, the federal government continues to expand its enforcement activities. As recently as October 10, 2013, Westlaw Insider posted information identifying Department of Justice statistics that reflect a dramatic increase in qui tam suits filed by physicians, nurses and hospital staff, and that report that the federal government appears to be on track to set even larger records with estimated collections of $5 Billion from January to July, 2013 alone (up from $4.9 Billion for the entire 2012 fiscal year ended September 30, 2012).

These figures are wholly consistent with the estimates by the OIG Semi-Annual Report to Congress in the Spring of 2013 that reported, for the period between October 1, 2012 and March 31, 2013, 436 criminal and 232 civil actions against individuals or entities that engaged in health care related offenses and $2.64 Billion in investigative receivables and another $640 Million in non-HHS investigative receivables but arising out of civil and administrative settlements and civil judgments related to Medicare, Medicaid and other Federal, State and private health care programs.  

Part of the increase in law enforcement activity arises out of statutory modifications of the FCA to close prosecutorial loopholes that had developed as a result of primarily federal case law in the United States. Three laws, The Fraud Enforcement and Recovery Act of 2009, The Patient Protection and Affordable Care Act signed into law on March 23, 2010 and The Dodd-Frank Wall Street Reform and Consumer Protection Act, have impacted the FCA and its interpretation. Among the other changes to the FCA include the following:

In a dramatic expansion of the definition of claim under the FCA, no longer must a claim be presented directly to the federal government but may include any claim “if the money or property is to be spent or used on the [federal government’s] behalf.” As there is an overhead component to every DRG payment, all downstream suppliers to hospitals are now exposed to attack even if they have no contractual relationship with the federal government or, indeed, no direct patient care function or health care license. In response, covenants regarding compliance with FCA statements have literally begun to appear in utility contracts with hospitals. Query the effect on a construction contractor that bills for storage unit repairs at a hospital facility when a member of the construction crew is debarred by Medicare? Does that bill now become null and void and is there an FCA allegation waiting to be asserted?

Concepts about intent have also been softened in a number of ways including an express statement that claims that violate the Anti-kickback Statute are, by definition, violative of the FCA. These changes create a high standard indeed given the still binding precedent that, if even one purpose of a proposed transaction is to make or receipt payment in return for a referral, the Anti-kickback Statute is violated.

The concept of materiality has also changed. Whether a provider intended to make a false statement in support of a false claim—the more traditional concepts of fraudulent activity—have been supplanted with whether the statements or records are “material” which has been defined as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.”

Relatedly, the definition of claim under the FCA has been expanded to include any person who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.”  Identified overpayments must now be paid over to the federal government without delay and without offset or an additional FCA violation will be triggered.  

As tired and worn as FCA issues may appear to be, ongoing refresher training is essential to avoid ever-expanding investigative and prosecutorial activity. Indeed, understanding the core operational guidelines for a hospital and effecting compliant billing and operations may be far more valuable to the long term success of a hospital than that shiny new binder full of ACO documents. In essence, do sweat the small stuff.

Philip Sprinkle is a Partner with the law firm of Balch & Bingham LLP where he serves as Co-Chair of the Firms’ Health Care Practice Group.