Mitigating FCA Liability Amid The Coronavirus Pandemic

If history repeats itself, there’s reason to believe government funds used to contain COVID-19 and help businesses navigate economic fallout will provide impetus for a wave of False Claims Act investigations and litigation.

In the five years following a series of stimulus bills passed by Congress amid the Great Recession, for example, the U.S. government and private whistleblowers filed close to 4,000 FCA cases, and recovered nearly $23 billion.

As companies that do business with the government, including those in health care, rise to the occasion to meet immediate government needs in the midst of a crisis, and trillions in funding being dispersed, scrutiny – both now and in the years to come – is a forgone conclusion.

As such, government contractors will need to protect themselves against FCA liability, and health care companies and providers, whether they bill for objectively essential services or toe the line of medical necessity, will need to take a close inventory of their practices, and structure a proactive approach to compliance at a time when mitigating risk is more important than ever.

Stay-at-Home & Elective Procedure Orders

State and federal officials across the country have issued a steady stream of orders and directives in an attempt to contain the spread of COVID-19, and preserve critical health care resources and system capacity to care for sick patients. This includes, among many others:

Prohibiting Elective Procedures: In order to conserve precious health care resources and facility capacity, states have adopted measures to restrict non-essential medical procedures. In Texas, Executive Order GA 09 requires all health care providers to postpone procedures that are not medically necessary to “correct a serious medical condition of, or to preserve the life of, a patient.” Though that includes many types of cosmetic, orthopedic, and other medical specialty procedures, the order does contain exceptions, such as those for procedures which, when performed to standard, do not deplete hospital capacity.

Recent rulings allowing lack of medical necessity claims to proceed under the False Claims Act – including one from the Ninth Circuit Court of Appeals – have spurred a rapidly evolving trend in which medical necessity errors can be tried under the FCA as “knowingly false” acts. In the age of the coronavirus pandemic, this may extend potential FCA liability to providers and practices who do not comply with prohibitions against elective procedures.

For these reasons, it becomes crucial to evaluate a practice in regard to GA-09, and to determine whether care may qualify and proceed under an exception.

Federal Stimulus, Federal Oversight

Lack of medical necessity is not the only are of concern when it comes to FCA liability in the COVID-19 world. The CARES Act, the largest stimulus package in U.S. history, along with other federal funding to follow, will undoubtedly be subject to strict government oversight, targeted audits and investigations, and whistleblowers attuned to potential waste, fraud, and abuse. As the economy wanes, and unemployment rises, there may be additional forces (i.e. former employees) propelling government intervention and enforcement.

While there will always be bad actors, an injection of billions of dollars in aid will likely attract those who intend to defraud. This risk and the massive flood of federal money in the form of emergency funds will likely elicit stringent oversight and create an environment of zealous enforcement that’s likely to ensnare numerous businesses, practices, and providers – including those unwary contractors and medical professionals whose offenses amount more to mistakes and clumsy practices than malice.

The bottom line: deficient policies and careless practices may trigger investigations and enforcement under the False Claims Act in all its glory – draconian penalties, and treble damages included.

Expect Aggressive False Claims Act Enforcement After COVID-19

The federal False Claims Act is perhaps the federal government’s most salient tool for fighting fraud against government programs, including Medicare, Medicaid, and Tricare.

Under the FCA, 31 U.S.C. § 3729-3733, it is illegal to:

  1. Knowingly file a false or fraudulent claim for payment; or
  2. Knowingly make a false statement or use a false record material to the claim for payment

“Knowingly” can be a deceptive term, as it includes acting with actual knowledge, as well as acting in deliberate ignorance or reckless disregard to the truth or falsity of information. If you knew or should have known of a false claim / statement, for example, you can be liable under the FCA.FCA violations are punishable by civil penalties up to $10,000, as well as treble damages (three times the amount of damages sustained by the government). Criminal penalties under sister statutes, such as the Anti-Kickback Statute (AKS), may also be levied.

As a powerful enforcement tool, the FCA has been used heavily following times of crisis and corresponding financial relief. This includes FCA claims against insurers who manipulated claims after Hurricane Katrina, contractors who failed to perform work post-9/11, and tens of billions in settlements paid by contractors and institutions over alleged conduct leading up to the 2008 Financial Crisis.

With $2 million allocated by the CARES Act to the HHS’ Office of Inspector General (OIG) for oversight activities, and calls for a Coronavirus False Claims Act task force, the post-COVID-19 environment will likely be shrouded by increased enforcement and FCA claims. Though there are effective ways to navigate an FCA claim, wage a defense, and improve outcomes through strategies like cooperation credits, it is always better to prevent, than to cure.

Potential Pitfalls

  1. Billing errors, including upcoding for testing or treatment of different types or amounts than those provided (CMS has developed two HCPCS codes that can be used to bill for certain COVID-19 diagnostic tests).
  2. Failure to exercise care in selecting diagnostic codes, including billing for unsupported diagnostic codes, or billing for every possible patient diagnosis.
  3. Billing for testing or treatment that is not medically necessary, including treatment of unsupported safety or efficacy,
  4. Substandard, untested, or unapproved treatments for COVID-19.
  5. False or misleading marketing statements to government-insured patients.
  6. False claims submitted by newly or provisionally licensed providers / contractors.
  7. Misrepresentations or omissions material to obtaining government relief.
  8. Falsely certifying service or product compliance provided to government

Given the demands on the health care system, the bar for pursuing providers on the front lines of COVID-19 may be set higher. In fact, provisions of the CARES Act provide immunity to certain providers with claims for emergency COVID-19 services, and recognize liability immunity for certain respiratory protective devices deemed a priority during the public health emergency.

Still, providers in the trenches may face allegations that emergency care was not provided in good faith. Similar risks exist for providers who operate under the CMS’ blanket waiver of Stark Law sanctions.

Best Practices to Protect Against FCA Liability

  1. Stay apprised of evolving guidance and regulatory requirements related to COVID-19
  2. Review and understand all conditions of payment, and adopt best practice to ensure compliance with requirements
  3. Keep detailed records of all transactions and correspondence, and document any waivers of requirements or modifications authorized by officials or agencies.
  4. Develop, audit, and update comprehensive compliance plans, and implement effective reporting systems to identify potential compliance issues.
  5. Be alert to anti-competitive conduct and collusive practices, including price fixing, that may form the basis of FCA claims.
  6. Educate employees of noncompliance risks, and train accordingly.
  7. Have a response plan in place in the event of an audit, investigation, or enforcement action that requires corrective action.
  8. Designate a compliance officer (or outsource) who will be responsible for leading compliance efforts, enforcing standards, and response initiatives in your medical compliance program.

Hendershot Cowart P.C. is actively tracking ongoing developments involving COVID-19 and our most critical practice areas – including health and medical law. If you have a potential matter, contact us to speak with an attorney.


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