Billing Error or Fraud: Where Enforcement Draws the Line

A coding mistake and a knowing scheme to defraud a health care benefit program are governed by different bodies of law. The civil False Claims Act reaches false claims submitted in reckless disregard of their truth or falsity, without proof of specific intent to defraud. The criminal healthcare fraud statute, 18 U.S.C. § 1347, requires proof the physician acted knowingly and willfully. Where a claim, or a pattern of claims, falls on that spectrum bears on whether a physician faces treble damages and civil penalties, a federal indictment and imprisonment, or both.

The Civil False Claims Act Reaches Reckless Disregard

The civil False Claims Act, codified at 31 U.S.C. § 3729, defines "knowing" and "knowingly" to mean actual knowledge that a claim is false, deliberate ignorance of the truth or falsity of a claim, or reckless disregard of the truth or falsity of a claim. The statute states expressly that these terms require no proof of specific intent to defraud. The 2000 compliance guidance for physician practices from the HHS Office of Inspector General (OIG), which predates the Supreme Court decision below, says the Act does not encompass mistakes, errors, or negligence, and gives as an example of reckless disregard a physician who assigns the billing function to an untrained office person without inquiring whether that person has the knowledge and training to file claims accurately. In United States ex rel. Schutte v. SuperValu Inc. (2023), the Supreme Court held that the Act's knowledge element refers to a defendant's own knowledge and subjective beliefs, not to what an objectively reasonable person may have known or believed, and in a footnote left open whether acting in the face of a risk so obvious that it should have been known also counts.

Criminal Liability Requires Knowing and Willful Conduct

The criminal healthcare fraud statute imposes a higher bar. Under 18 U.S.C. § 1347, the government must prove the physician knowingly and willfully executed, or attempted to execute, a scheme to defraud a health care benefit program or to obtain money through false pretenses. The statute adds that a person need not have actual knowledge of section 1347 or specific intent to commit a violation of it. OIG's guidance for physician practices says that for criminal penalties, criminal intent to defraud must be proved beyond a reasonable doubt.

The Consequences Diverge Sharply

The two statutes diverge because they answer different questions. Civil False Claims Act liability exposes a practice to treble damages and a per-claim civil penalty, adjusted for inflation. Under the separate Civil Monetary Penalties Law, which OIG's guidance says has the same standard of proof, HHS may also exclude a provider from federal health care programs. Criminal liability under Section 1347 exposes the physician personally to imprisonment of up to 10 years, rising to 20 years if the scheme causes serious bodily injury and to any term of years or life if it causes death. The Anti-Kickback Statute requires knowing and willful conduct, though not actual knowledge of the statute itself, while CMS describes the referral and billing prohibitions of the Stark Law as strict liability, and a claim that includes items or services resulting from an Anti-Kickback violation is a false or fraudulent claim for purposes of the False Claims Act.

The line OIG draws between an innocent erroneous claim and a fraudulent one is knowledge: whether the claim was intentionally or recklessly false.

What OIG Guidance Says About Documentation

OIG's compliance guidance for physician practices says documentation serves a second function when a bill is submitted for payment, as verification that the bill is accurate as submitted. It says the codes reported on a claim should be supported by documentation in the medical record, and that keeping documentation of a practice's compliance efforts, such as educational activities, internal investigations and the resulting remedial action, can benefit the practice should it ever be questioned regarding those activities. It adds that a compliance program can show that a practice is making good faith efforts to submit claims appropriately.

Why Early Legal Counsel Is Critical

It is critical that physicians promptly retain experienced healthcare defense counsel upon receiving an audit notice, subpoena, or other government inquiry into billing practices. Early legal intervention can assert the physician's rights, help prepare responses to investigator and auditor requests, identify defenses tied to the documentation on file, and allow counsel to communicate with the government on the physician's behalf.

How Health Law Alliance Can Help

Health Law Alliance defends healthcare professionals and companies under federal investigation, before indictment, after indictment, and through trial. The firm brings 25+ years of experience. If your practice is facing a billing audit, a subpoena, or a fraud investigation, contact us for a free, confidential consultation.