Learn the Ins and Outs of Healthcare Fraud, Abuse, and Compliance

Posted on 24 Jul, 2018 |comments_icon 0|By Elizabeth Debeasi

Whether you’re provider, medical coder, practice, practice manager, or auditor, you need to be knowledgeable of federal regulations that relate to fraud, abuse, and compliance.

Stay in the know: The five most important Federal fraud and abuse laws that apply to physicians are the False Claims Act (FCA), the Anti-Kickback Statute (AKS), the Physician Self-Referral Law (Stark law), the Exclusion Authorities, and the Civil Monetary Penalties Law (CMPL).

CMS defines fraud as:

  • Knowingly submitting false claims, causing a false claim to be submitted, or falsifying facts to obtain payment for which no payment would normally result.
  • Knowingly receiving, soliciting, offering, and or paying a fee to persuade or reward referrals for items of services reimbursed by Federal healthcare programs.
    1. Making any prohibited referrals for certain designated healthcare services. Examples include: Distorting a diagnosis so that a claim can be paid
    2. Intentionally upcoding services
    3. Billing a Medicare patient over the allowed amount
    4. Changing claim forms to receive higher payment

CMS defines abuse as:

  • Any practice that directly or indirectly results in unnecessary costs to Medicare.
  • Any practice that is not consistent with providing patients with services that are medically necessary, that meets professionally recognized standards, and that is priced fairly.


  • Upcoding
  • Unbundling
  • Billing excessive charge amounts for services and supplies
  • Billing unnecessary medical services

Tip: Providers can be subject to criminal and civil penalties for abusive and fraudulent activities. Fraud is intentional but abuse may be unintentional.

Master the Anti-Kickback Statute

This statute makes it illegal to knowingly and willfully offer to pay, solicit, or receive any fee directly or indirectly or to reward referrals of items or services that can be reimbursed by any Federal healthcare program. There are harsh penalties in place for violating the Anti-Kickback Statute. Penalties from $25,000 to $100,000 per kickback in addition to three times the amount of the fee can be imposed. There also may be criminal penalties including fines, imprisonment, or both.

Example: Doctor Lawson, a gastroenterologist, sees patients in Dr. Smith’s clinic two days a week. Dr. Smith is a general surgeon who specializes in weight loss surgeries. Dr. Smith has offered Dr. Lawson free rental of office space in exchange for Dr. Lawson’s referrals of patients wishing to receive weight loss surgery. This is a direct violation of the Anti- Kickback Statute.

Grasp the Physician Self-Referral Law (Stark Law)

The Physician Self-Referral Law, otherwise known as the Stark Law, prohibits physicians from making a referral for certain designated services payable by Medicare or Medicaid to any entity in which the physician or immediate family member has some type of ownership or invested interest or has an arrangement for compensation, unless an exception applies.

Example: An exception could be a provider-owned radiology company in a very rural area. If that company is the only one that provides the community with those services, it may be granted an exception under Stark.

  • Stark Law applies to certain designated healthcare services including:
  • Laboratory services
  • Radiation therapy
  • Occupational and physical therapy
  • Radiology services
  • DME and supplies
  • Home health services
  • Inpatient and outpatient hospital services
  • Prosthetic and orthopedic supplies and devices
  • Outpatient prescription drugs
  • Parenteral and enteral nutrients, equipment, and supplies

Watch out: The penalty for violating the Stark Law may include fines or civil monetary penalties (potentially up to $15,000) for each service.

Example: Harris refers his patients to Harris Pharmacy and Supplies. He and his wife own the pharmacy, and his wife performs daily operations as the pharmacist. The referral of his patients to this pharmacy is a direct violation of the Stark Law.

Remember: Stark and Anti-Kickback may seem very similar in nature.

Tackle the Federal False Claims Act

The Federal False Claims Act protects the Federal Government from being overcharged or sold substandard goods or services. This prohibition directly relates to a person knowingly or deliberately falsifying information related to claims or having an intention of defrauding. Proof of the intent to defraud is not required to be found in violation of the Federal False Claims Act.

Violations of the Federal False Claims Act may include:

  • Conspiracy to commit a violation
  • Billing for services that have not been performed
  • Knowingly providing broken or untested equipment or devices as new and in working order
  • Unbundling codes
  • Double billing
  • Billing for brand named drugs when generic drugs are provided
  • Fabricating notations in medical records
  • Submitting billing for expired drugs
  • Submitting claims for a physician when a non-physician practitioner provided the service

Watch out: The penalty for violating the Federal False Claims Act may include fines for up to three times the amount of the reimbursements sustained by the Federal Government because of the false claim. In addition, up to $22,363 can be charged per false claim filed. Additional consequences may include imprisonment, fines, or both.

Example: Dr. Ford completed rounds at the hospital. He noticed that several patients on the floor were asleep and knew they would not remember if he paid them a visit or not. Dr. Ford decided to enter chart notes as if he provided services for the patients and billed those claims to Medicare. This is a direct violation of the Federal False Claims Act.

Gain Proficiency in the Civil Monetary Penalties Law (CMPL)

This law gives authorization to impose penalties for healthcare fraud violations. Penalties may vary depending on the type of violation made. As of 2018, the Department of Justice announced the new civil monetary penalties. The penalties increase annually due to inflation.

Penalties for certain offences may range from $11,181 to $22,363 per claim. The penalty may also include a fine for up to three times the amount claimed for each line of service or up to three times the amount of the fee offered, solicited, received, or paid.

Tip: Remember that providers and healthcare facilities are ultimately responsible for all claims submitted on their behalf!

Know the Stakes: the Exclusion Authorities

OIG is legally required to exclude individuals and entities from participation in all Federal healthcare programs if convicted of the following types of criminal offenses:

  1. Medicare or Medicaid fraud, as well as any other offenses related to the delivery of items or services under Medicare or Medicaid
  2. Patient abuse or neglect
  3. Felony convictions for other health-care-related fraud, theft, or other financial misconduct
  4. Felony convictions for unlawful manufacture, distribution, prescription, or dispensing of controlled substances.

Beware: The list doesn’t end here. OIG has discretion to exclude individuals and entities on several other misdemeanor grounds.

If you are excluded by OIG from participation in the Federal healthcare programs, then Medicare, Medicaid, and other Federal healthcare programs, such as TRICARE and the Veterans Health Administration, will not pay for items or services that you furnish, order, or prescribe.

Important: All providers and healthcare organizations are responsible for ensuring that they do not employ or contract with excluded individuals or entities in any capacity in which Federal healthcare programs may reimburse for the items or services furnished by excluded individuals or entities.

This responsibility requires screening all current and prospective employees and contractors against OIG’s List of Excluded Individuals and Entities, an online database that can be accessed from OIG’s Exclusion Web site.

Learn More

Get up to speed on federal regulations and build a practice-wide culture of compliance with The Physician Practice Compliance Sourcebook 2018. This comprehensive and practical reference tool will fill in and reinforce your compliance knowledge and equip you to establish and maintain a risk-proof infrastructure.


Elizabeth Debeasi
Marketing Writer/ Editor

Elizabeth works on an array of projects at TCI, researching and writing about modern reimbursement challenges. Since joining TCI in 2017, she has also covered the nuts and bolts of cybersecurity, compliance with federal laws, and how to tap into the advantages of Telehealth services.

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