A medical billing company that never submits a claim to Medicare under its own name can still be named as a defendant under the False Claims Act. So can a management services organization that codes and transmits claims for a physician group. The statute reaches anyone who knowingly presents, or causes to be presented, a false claim, and DOJ has used that language to reach the vendor as readily as the provider whose billing number appears on the claim. An indemnification clause buried in a billing services agreement does not change who the government decides to sue.
Causing a False Claim Under the Statute
The False Claims Act imposes liability on anyone who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,” and separately on anyone who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A)-(B). Neither provision requires the defendant to have submitted the claim itself. A billing company that keys in an inflated code, or a management entity that runs the billing function for a chain of clinics, can cause the claim that follows even though neither treated the patient. DOJ's March 2026 settlement with CVR Management LLC, the company that managed the Center for Vein Restoration and Center for Vascular Medicine clinics, shows the theory reaching a management entity directly: CVR paid $4 million together with the clinics and a treating physician over medically unnecessary vein treatments billed to Medicare, Medicaid and TRICARE. CVR managed and billed for the practices whose claims the government considered false, and that was enough to name it as a defendant alongside the physician who treated the patients.
The Knowledge Standard Applied to a Billing Vendor
The Act's knowledge standard does not require the government to prove the vendor set out to defraud anyone. “Knowing” and “knowingly” reach actual knowledge, deliberate ignorance, and reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required. 31 U.S.C. § 3729(b)(1). For a billing vendor, reckless disregard carries the most weight, since a vendor processing claims for dozens of providers is presumed to know more about billing rules than any single provider-client does. The HHS Office of Inspector General's Compliance Program Guidance for Third-Party Medical Billing Companies singles out percentage-based compensation, where the vendor is paid a share of what it collects, as a structure that increases the risk of upcoding. 63 Fed. Reg. 70138 (Dec. 18, 1998). In the CVR settlement, the whistleblowers behind the underlying qui tam complaints received $752,000 of it.
Indemnification Clauses and Percentage Fees Under Investigation
Billing services agreements routinely include an indemnification clause allocating responsibility for coding errors between the provider and the vendor. That clause binds the two private parties to each other. It does not bind the Department of Justice, which is not a party to the contract and has no obligation to honor its allocation when deciding whom to name. A provider that negotiated indemnification from its billing company can still be sued directly, and the reverse holds too, because each caused a claim to be presented regardless of which one agreed to cover the other's mistake. A settlement resolving one party's exposure does not resolve the other's, and either can carry its own corporate integrity agreement or OIG exclusion as a separate condition of resolving the case, on top of whatever the indemnification clause requires it to pay its co-defendant.
The Provider's NPI Still Carries the Exposure
A provider that outsources billing does not outsource its own exposure. Medicare's electronic claims enrollment agreement makes the enrolled provider responsible for claims submitted under its billing number by its employees or its agents, including a contracted billing company. The claim is presented under the provider's National Provider Identifier no matter who typed it, so the provider remains a proper defendant even where the billing company made every coding decision. Once a relator files suit, how a qui tam lawsuit unfolds determines when the provider first learns it has been named alongside a vendor it may never have audited. A provider that later learns its vendor overcoded claims and does nothing creates a second, independent problem: retaining a known overpayment beyond the 60-day reporting window is its own reverse false claim under 31 U.S.C. § 3729(a)(1)(G) and 42 U.S.C. § 1320a-7k(d), regardless of who caused the original error. What a provider can show about the instructions it gave its billing vendor, and what the vendor confirmed back, is often the difference between defending an isolated vendor mistake and defending the provider's own reckless disregard.
An indemnification clause settles who pays between the provider and the billing company, not who the government decides to sue.
Why Early Legal Counsel Is Critical
It is critical that providers and billing companies promptly retain experienced healthcare defense counsel upon receiving a subpoena, a civil investigative demand, or notice that a relator has filed a False Claims Act complaint naming either party. Early legal intervention can protect both parties' rights, ensure the knowledge and causation issues are raised with the right evidence, avoid inadvertent admissions to investigators, and preserve defenses that depend on billing correspondence created before the investigation began. Delaying representation can foreclose defenses available only earlier in the process, particularly where the case turns on what the provider told its vendor and what the vendor told back.
How Health Law Alliance Can Help
Health Law Alliance defends both providers and the billing companies and management entities that serve them when a False Claims Act investigation or qui tam suit reaches either side of a billing relationship. If your practice or your billing vendor has received a civil investigative demand, a subpoena, or notice of an unsealed relator's complaint, contact Health Law Alliance's False Claims Act defense attorneys for a free, confidential consultation, and see our overview of responding to an FCA investigation for what happens next.
