The attorneys at DiRuzzo & Company represents health care providers in audits/investigations (and subsequent litigation) with the U.S. Department of Health and Human Services (“HHS”), the Centers for Medicare & Medicaid Services (“CMS”), and the U.S. Department of Justice (“DOJ”) for potential civil and criminal False Claim Act violations.

The civil False Claims Act, 31 U.S.C. §§ 3729-3733, is the Federal Government’s primary tool to recover losses due to fraud against the United States. The civil False Claims Act establishes a civil action for the recovery of damages (including treble damages) and penalties from those who submit false or fraudulent claims. In contrast, the criminal False Claims Act, 18 U.S.C. § 287, provides for criminal liability and has a statutory maximum punishment of up to 5 years in federal prison as well as criminal fines and restitution.

The DOJ is statutorily empowered to issue a “civil investigative demand” (“CID”) under 31 U.S.C. § 3733 to investigate potential violations of the civil False Claim Act. A CID can be issued when the Government has reason to believe that any person or entity may be in possession, custody, or control of any documentary material or information relevant to a civil False Claims Act investigation. A CID can only be issued prior to the commencement of formal civil proceedings under the civil False Claims Act or making an election under the civil False Claims Act. 31 U.S.C. § 3733(a)(1).

However, unlike most other provisions, the civil False Claims Act allows a private citizen to “bring a civil action for violation of Section 3729 for the person and for the United States Government.” 31 U.S.C. § 3730(b). The Government, however, retains the right to proceed with the action, and has “responsibility for prosecuting the action.” In the event the Government proceeds with the action, the individual who initially brought the action is entitled to receive “at least 15 percent but not more than 25 percent of the proceeds of the action.” 31 U.S.C. § 3730(d)(a). If the Government does not proceed with the action, the individual can prosecute the action. In that event, the individual is entitled to receive “not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement,” plus reasonable expenses and attorneys’ fees. 31 U.S.C. § 3730(d).

The Affordable Care Act imposed the requirement that within 60 days after the date on which an overpayment has been “identified” (or the date any corresponding cost report is due), report and return the overpayment and notify the recipient of the reason for the overpayment. See 42 U.S.C. § 1320a-7k(d). CMS has defined an “identified overpayment” to mean “an overpayment when the [entity] has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment.” 42 C.F.R. §§ 422.326(c), 423.360(c). After the 60-day period expires the overpayment converts to a false claim (i.e. a “reverse false claim”) under 31 U.S.C. § 3729(a)(1)(G). Reverse false claims liability applies when a person or entity knowingly (1) makes, uses, or causes, to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the government, or (2) conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government.

Congress intended the civil False Claims Act to be read broadly and reach all fraudulent attempts to cause the Government to pay out sums of money or to deliver property or services. Accordingly, a false claim may take many forms, the most common being a claim for goods or services provided in violation of contract terms, specification, statute, or regulation.

The courts have been clear that the appropriate inquiry for a court considering whether the violation of a statute, regulation, or contract provision gives rise to civil False Claims Act liability is whether a nexus exists between that statute, regulation, or contract provision, and the health care providers’ claim for payment, i.e., whether compliance is a prerequisite to payment or the right to retain payment. Cases in which courts have found that a knowing failure to comply affects the health care providers’ right to payment fall into three categories: (1) the items or services for which the claim is submitted were defective; (2) the claimant falsely expressly certified compliance with applicable requirements; and (3) the claimant failed to comply with a statute, regulation, or contract provision that was a prerequisite to payment. Violations of the Anti-Kickback Statute and the Stark Laws implicate the latter two categories.

The Stark Laws provide a straightforward basis for application of the implied certification theory of civil False Claims Act liability. The statute expressly prohibits the submission of claims for improperly referred services, see 42 U.S.C. § 1395nn(a), as well as program payment for those services, see 42 U.S.C. §. 1395(g). This preclusion of Medicare coverage for Designated Health Services referred in violation of its prohibition is central to the civil False Claims Act analysis. Courts addressing the issue have held unanimously that civil False Claims Act liability will attach to knowing submission of a claim prohibited under the Stark Laws.

Because civil False Claims Act liability will attach to a health car providers’ alleged failure to comply with a particular statute or regulation that has a sufficient nexus to payment to render him/her/it ineligible to receive or retain the payment claimed from the United States, a violation of the Anti-Kickback Statute can give rise to liability under the civil False Claims Act. Federal courts have specifically recognized, compliance with the Anti-Kickback Statute is a prerequisite to payment of federal funds and therefore can form the basis for a civil False Claims Act claim.