4 Things You Need to Know about Medical Necessity, Fraud, and the False Claims Act

Posted on 4 Dec, 2018 |comments_icon 0|By Bruce Pegg

If you’ve read TCI’s Medicare Compliance and Reimbursement Insider, then you already know the painful truth: If your practice receives Medicare reimbursement for services rendered to Medicare beneficiaries, and if you cannot prove medical necessity for those services, then you can be prosecuted under the False Claims Act (FCA).

The stakes are high. If you are found guilty, you can be fined up to three times the amount fraudulently obtained from the Federal Government (known as treble damages) and up to $11,000 per claim in civil penalties. You can also be permanently excluded from Medicare and Medicaid programs.

So, how can you avoid the government’s wrath? Here are four things you can easily do to keep your practice on the straight and narrow path of compliance, including three steps to follow if the unthinkable happens.

1. Know What Medical Necessity Means

Medical necessity is a broad concept that explains why a physician chooses to perform a specific service for a patient. Basically speaking, any treatment that is medically necessary should be based on evidence-based medicine, which means your provider has used the most accurate and most recent research to inform decisions that will eventually result in the best possible outcome for a patient with a given condition.

2. Know What to Document

To make life difficult, CMS does not define what it means by medical necessity, either in general terms or regarding specific conditions. However, it does provide guidelines as to what documentation you will need to prove that your physician has rendered services to a patient that are medically necessary. They include:

  • Clinical evaluations
  • Physician evaluations
  • Consultations
  • Progress notes
  • Physician’s office records, hospital records, nursing home records, and/or home health agency records
  • Records from other healthcare professionals
  • Test reports

3. Know How to Implement a Compliance Plan

The Affordable Care Act (ACA) requires you to have a compliance plan if you treat patients who are enrolled in Medicare or Medicaid. Such a plan is critical if you want to avoid being accused of providing services to patients that are not medically necessary — or any other kind of medical fraud for that matter.

According to the Office of the Inspector General (OIG), a good plan involves the following components:

  • Internal monitoring and auditing.
  • Compliance and practice standards.
  • A designated compliance officer or contact.
  • Appropriate training and education.
  • Appropriate responses to detected offenses, which involves corrective action.
  • Open lines of communication with employees.
  • Disciplinary standards enforced through well-publicized guidelines.

4. Know How to Voluntarily Disclose

Finally, if you find any evidence of fraud through an internal audit, or if the OIG accuses you of fraud under the FCA, you should know the act contains a voluntary disclosure provision, which you can undertake using these three steps:

  1. Return the money within a 60-day period after the suspected fraud has been found.
  2. Conduct a focused internal audit to determine the cause of the problem. This audit should go back through six years of your records.
  3. Return and report any other monies found in the audit, show how you found them, and submit an action plan that shows how you will correct the problem in future.

This act of good faith, along with a culture of compliance, will go a long way to soften the blow of any punitive sanctions should the OIG find your practice guilty of the charges.

Learn More

Get fast and effective answers to your Medicare questions with a subscription to Medicare Compliance & Reimbursement. Every issue of this monthly newsletter delivers coding and billing guidance, as well as high-impact tips to conquer the revenue-risking challenges that threaten your claims and compliance success.

Nail down current Medicare regulations and secure your revenue with TCI’s best-selling Medicare Compliance and Reimbursement Insider 2018. Packed with vital compliance and reimbursement guidance — as well as Clip-and-Save tools, readers’ Q&A, case studies, and field-tested best practices — you’ll lock down compliance, master clean claim submissions, and hold onto every well-earned dollar of reimbursement.


Bruce Pegg
Editor, Newsletters

An experienced teacher and published author, Bruce is TCI’s new voice of primary care, delivering advice and insights every month for coders in the fields of family, internal, and pediatric medicine through Primary Care Coding Alert and Pediatric Coding Alert. Additionally, he is the current editor of E/M Coding Alert. Bruce has a Bachelor of Arts degree from Loughborough University in England and a Master of Arts degree from The College at Brockport, State University of New York. He recently became a Certified Professional Coder (CPC®), credentialed through AAPC.

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