District Court Case Highlights Provider’s Duty to Investigate Billing Errors under the False Claims Act-Audit Case

A federal district court in Wisconsin recently ruled that a private whistleblower could proceed with her allegations that a physician practice violated the Federal False Claims Act by acting with “reckless disregard” to the existence of additional overpayments after billing errors were discovered during routine audits. The case, United States ex rel Keltner v. Lakeshore Medical Clinic, Ltd., highlights the need for providers to investigate how extensive possible billing errors may be once the provider becomes aware of the error through routine audits, complaints, or other ways. The failure to do so may subject the provider to False Claims Act liability for knowingly avoiding an obligation to return an overpayment to the federal government.

Despite only being a ruling by a federal district court on a motion to dismiss, the case has received a great deal of attention due to the possible implications for future False Claims Act prosecutions. The case involved a large physician practice that discovered during a routine audit that a few of its physicians had upcoded several of the Evaluation and Management CPT codes. The plaintiff alleged that even though the practice corrected the specific claims identified in the audit, it failed to attempt to identify how widespread the upcoding problem may have been and eventually stopped conducting the audits. The court ruled that these allegations were sufficient to support the claim that the practice had knowingly avoided an obligation to return overpayments by acting in “reckless disregard” to the existence of additional overpayments.

The court’s ruling is based on the additional False Claims Act liability imposed on healthcare providers, among others, under the Fraud Enforcement and Recovery Act of 2009 (FERA). Prior to FERA’s passage, the False Claims Act was violated when a person knowingly submitted a false claim for payment to the federal government or knowingly made a false statement in support of such claim. FERA broadened the statute by prohibiting a person from knowingly and improperly avoiding an obligation to pay the government even without requiring a false statement to conceal the overpayment. Knowingly not refunding an overpayment is a false claim. Knowledge under the False Claims Act exists when the person has actual knowledge that the claim or statement is false or acts in “deliberate ignorance” or in “reckless disregard” of the truth. 31 U.S.C. § 3729(b)(1).

It is important to keep in mind that the district court did not hold that the provider was guilty of a False Claims Act violation. The significance of the case is that the court allowed the False Claims Act allegation to proceed when the practice had returned the specific overpayments identified in the audits. Providers should be on notice that the federal government believes the providers have a duty to investigate possible overpayments. When a routine audit identifies billing errors, the provider should conduct a more in-depth review of additional charts to determine if the billing errors were an isolated mistake or a widespread pattern. As this case has shown, courts will allow False Claims Act allegations to proceed against providers that choose to ignore potential overpayments. Providers should also keep in mind that once they have determined the overpayment exists, the provider has sixty (60) days to notify the government and refund the overpayment. This notification and refund is typically sent to the provider’s Medicare contractor.


“District Court Case Highlights Provider’s Duty to Investigate Billing Errors under the False Claims Act-Audit Case.”

Louisiana Hospital Association Impact Law brief, Volume 28, (No. 5)

Michael R. Schulze, Co-written with Chris Sellers. June 28, 2013

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