False Claims Policy

 - CURRENT AS OF:  08/07  

SUBJECT:  False Claims 
SEE ALSO:  Corporate Compliance, Ky. Rev. Stat. Ann. §§ 205.8451, .8463, .8465, & .8467, 31 U.S.C. §§ 3801-3812, 31 U.S.C. §§ 3729-3733, Deficit Reduction Act of 2005, Sections 6031, 6032


POLICY: UK Health Care shall provide detailed information to all employees, including management, and of any contractors and agents, about the following laws and the relevant UK Health Care/KMSF policies and procedures designed to prevent and detect fraud, waste, and abuse.

  • The federal False Claims Act.
  • The federal Program Fraud Civil Remedies Act.
  • State laws pertaining to civil or criminal penalties for false claims and statements.
  • All whistleblower protections provided under such laws.

PURPOSE:   The purpose of this policy is to satisfy certain requirements or anticipated requirements in connection with provisions of Deficit Reduction Act of 2005.   

PROCEDURE: UK/KMSF shall make this policy available to all employees, including management, and of any contractors and agents. UK/KMSF shall also revise this policy as necessary to comply with changes in the law.  

What are the false claims laws, qui tam provisions, and whistleblower protections provided to UK/KMSF employees, including management, and of any contractors and agents?

UK/KMSF employees, including management, and employees of contractors, and agents cannot submit "false" or "fraudulent" claims for payment to federal or state government public assistance and health care related programs.  Federal and state statutes and regulations relating to claims submitted to Medicare and Medicaid, as well as other federal and state funded health care programs are the focus of the following laws. The federal statute and the laws of the Commonwealth of Kentucky also provide protection for whistleblowers. UK/KMSF cannot take any retaliatory action against a whistleblower. Financial incentives encourage whistleblowers to come forward to file suit against entities who they find to be submitting false claims.

Fraud and Abuse are Legal terms and are defined below:  

  • Fraud is defined as "intentional deception or misrepresentation that individuals make, knowing it to be false, and that could result in some unauthorized benefit to them." 
  • Abuse is defined as "incidents or practices that are inconsistent with accepted sound medical practices.  Abuse may directly or indirectly result in unnecessary costs to the program, improper reimbursement, or payment for services that fail to meet professionally recognized standards of care, or that are medically necessary."

Federal False Claims Act

Originally enacted in 1865 by Congress, the federal Civil False Claims Act, 31 U.S.C. § 3729, et seq. ("FCA"), uncovered several instances of fraud among defense contractors during the Civil War. President Abraham Lincoln wanted this legislation during the Civil War to address widespread abuse by military contractors who were selling defective products and materials to the Union Army and charging excessively high prices for their services. 

The current FCA, which was amended in 1986, provides the government with authority to identify and recover monies paid out fraudulently. The government has had billions of dollars returned to it because of the current FCA. Corporations and individuals have, either through litigation or settlement, returned monies or paid fines because of allegations of improperly obtaining federal health care program finds. FCA is a proven means to detect fraud, by encouraging individuals, called "whistleblowers" or "relators," to uncover and report fraud to the government. The ability for whistleblowers to report fraud creates a strong incentive for UK/KMSF to continue its vigilance in their pursuit of compliance and avoid liability for multiple damages and penalties under the FCA.

1. FCA Prohibitions

The federal FCA prohibits any individual or entity from knowingly submitting false or fraudulent claims, causing submission of such claims, making a false record or statement in order to secure payment from the federal government for such a claim, or conspiring to get coverage for such a claim so it is paid. Under the statute the terms "knowing" and "knowingly" mean that a person: 

  1. Has actual knowledge of the information;
  2. Acts in deliberate ignorance of the truth or falsity of the information; or 
  3. Acts in reckless disregard of the truth or falsity of the information.

Two examples of activities prohibited by the FCA are knowingly billing for services that the beneficiary did not receive, and knowingly upcoding treatments provided to beneficiaries. Upcoding is the practice of billing for a more highly reimbursed service or product than the one provided.

2. Penalties

Individuals or entities violating the FCA may be liable for a civil penalty for each false claim of not less than $5,500 and not more than $11,000, plus up to three times the amount of damages sustained by the federal government.

3. Qui Tam & Whistleblower Protection Provisions

The United States Attorney General, under the FCA, may bring actions alleging violations by individuals and entities. The FCA allows private citizens to file a lawsuit in the name of the United States for false or fraudulent claims submitted by individuals or entities that do business with or receive reimbursement from the United States. These lawsuits have another name, which is qui tam action. A qui tam action, or lawsuit brought under the FCA by a private citizen begins when that citizen files a civil complaint in federal court, under seal, and service of a disclosure of material evidence occurs on the United States Attorney General. The United States Attorney General must within sixty days investigate the allegations in the qui tam lawsuit and decide whether it will join in the lawsuit. If the United States Attorney General joins in the lawsuit, the federal court will unseal the complaint. In addition, the government through either the Department of Justice or the local United States Attorney's Office may prosecute the lawsuit. If the government decides not to join in the lawsuit, the whistleblower may pursue the lawsuit alone. Sometimes the government will join in the lawsuit later, if there is a good reason for doing so.

The federal government may collect up to three times the amount of money that the individual or entity billed or received in error.  The government may also collect a fine for each claim or case of fraud.  The whistleblower receives a monetary reward that is a percentage collected by the government because of the lawsuit.  This amount ranges between 15% and 25% of the dollars that the government recovers during its investigation and settlement/litigation. As an incentive to bring these cases, the FCA provides that whistleblowers who file a qui tam action may receive a reward of 15-30% of the monies recovered for the government, plus attorneys' fees and costs. The court may reduce this award, if for example the court finds the whistleblower planned and initiated the violation. The FCA also provides that "whistleblowers" who bring lawsuits that are clearly frivolous are liable for the individual or entities' cost for defending the lawsuit, including its attorneys' fees.

The FCA provides certain protections for whistleblowers against retaliation for bringing a qui tam action or lawsuit under the Act. Employers discharging, demoting, discriminating, or harassing whistleblowers because of the lawsuit may also be liable to make the employee whole, which could include reinstatement, double back pay, and compensation for any special damages including litigation costs and reasonable attorneys' fees.  Further, if there is a criminal conviction of the whistleblower related to his role in the preparation or submission of the false claims, the Court may dismiss the whistleblower from the civil action without receiving any portion of the proceeds.

Federal Program Fraud Civil Remedies Act

The Program Fraud Civil Remedies Act of 1986 ("PFCRA"), provides for administrative remedies (fines) against persons who make, or cause to be made, a false claim or written statement to certain federal agencies, including the Department of Health and Human Services ("HHS"). The goal of PFCRA is to lower the amount of dollars diverted by fraud, and generally applies to claims of $150,000 or less. PFCRA provides that any person who makes, presents or submits, or causes to be made, presented, or submitted a claim that the person knows or has reason to know is false, fictitious, or fraudulent is subject to civil money penalties of up to $5,000 per false claim or statement and up to twice the amount claimed in lieu of damages. The HHS Office of the Inspector General investigates and enforces PFCRA actions, which must have the approval of the United States Attorney General prior to going forward against the person. PFCRA enforcement can begin with a hearing before an administrative law judge. Recovering the penalties may be through a civil action brought by the Attorney General or through an administrative offset against "clean" or correct claims.

State False Claims Act

The Commonwealth of Kentucky has not adopted any false claims acts or statutes that contain qui tam or whistleblower provisions that are similar to those found in the federal False Claims Act.  It has adopted, however, a generally applicable Medicaid anti-fraud statute that makes it unlawful for a person to submit false and fraudulent claims to the Kentucky Medicaid program.  The statute also makes it unlawful for any person to present false information regarding an institution or facility so the Commonwealth may license or recertify it as a Medicaid provider. Violations of the statute are both civil and criminal offenses and are punishable by substantial fines and imprisonment. Kentucky Revised Statutes ("KRS") §§ 205.8451, 205.8463, 205.8465, and 205.467. 

The Commonwealth's Office of the Inspector General of the Cabinet for Health and Family Services ("State OIG") is responsible for investigating and detecting the existence of fraud and abuse and exercising oversight of Medicaid provider participants. The State OIG works with the federal government. Federal agencies that the State OIG works with may include federal OIGs, the US Attorney's Office, the Department of Health and Human Services, the Federal Bureau of Investigation, and the Kentucky Attorney General's Office. The State OIG toll-free hot line to report instances of Medicaid fraud is (800) 372-2970.

The Commonwealth of Kentucky recognizes a public policy exception to the "employment at will doctrine" when its courts review cases involving whistleblowers and their employers. Under this exception, an employer could not terminate an employee for bringing to its attention, or the attention or federal or state authorities, issues such as up-coding, lack of medical necessity, etc.  In addition, KRS § 61.102, which is designed to protect certain public employees from reprisal, may be applicable.  

In addition, Kentucky's criminal code has various laws for prosecuting fraud including the provisions of KRS Chapter 514 (theft and related offenses), KRS Chapter 516 (forgery and related offenses), Chapter 517 (business and commercial frauds), Chapter 518 (miscellaneous crimes affecting businesses, occupations and professions), Chapter 519 (obstruction of public administration) and Chapter 523 (perjury and related offenses).  Also, there are other criminal statutes that the Commonwealth Attorney General may be able to use to prosecute individuals and entities for actions that are fraudulent or in some way jeopardize the future financial integrity of the Medicare or Medicaid program.

UK/KMSF Policies & Procedures for Detecting & Preventing Fraud, Waste, & Abuse

UK/KMSF regularly reviews and revises the policies and procedures that implement its Compliance Plan.  These policies and procedures provide employees, contractors, and agents guidance on the appropriate manner to execute specific job functions while also detecting and preventing fraud, waste, and abuse of taxpayers' monies funding the Medicare and Medicaid programs.  The UK Standards of Conduct provide the foundation for the avoidance of the appearance of or actual impropriety when employees, contractors, and agents attempt to carry out the UK and UK/KMSF mandates for ethical conduct that supports the federal and state governments' goals in maintaining the integrity of the Medicare and Medicaid programs.

UK/KMSF Prohibitions Against Retaliation & Whistleblower Rights & Protections

UK/KMSF takes issues regarding false claims, fraud, and abuse seriously.  UK/KMSF encourages all employees, management, contractors, and agents to be aware of the laws regarding fraud and abuse and false claims and to identify and resolve any issues immediately.  Issues are resolved fastest and most effectively when given prompt attention. UK/KMSF, therefore, encourages its employees, managers, contractors, and agents to report concerns to their immediate supervisor when appropriate.  If the supervisor is not the appropriate contact or if the supervisor fails to respond quickly and appropriately to the concern, then the individual with the concern should be encouraged to discuss the situation with UK/KMSF human resources manager, the Compliance Officer, another member of management, or call the UK Comply Line at 1-877-898-6072.

As noted in the UK/KMSF Compliance Plan,  employees, contractors, and agents shall not engage in illegal retaliation, (whether personal or job related) that is directed against an employee who, in good faith, reports to a government agency or official alleged unlawful conduct that may or has resulted in fraud, waste or abuse of Medicare or Medicaid funds.

Additionally, the Compliance Plan mandates that there shall be no retaliation that tends to discourage, restrain, depress, dissuade, deter, prevent, interfere with, coerce, or discriminate against an employee, contractor, or agent reporting facts or information that he or she believes, in good faith, to be actual or suspected illegal, unethical, or abusive conduct. It is the intent of UK/KMSF that employees, contractors, or agents, who, in good faith, report compliance concerns, not suffer adverse consequences because of such report.