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Healthcare Billing Under the Regulatory Microscope

Today, healthcare providers face heightened financial risk as their billing practices come under increased scrutiny.  Federal and state government regulators are dedicating unprecedented resources to recover monies paid under Medicare, Medicaid, and TRICARE (the health care program for the military) reimbursement programs. Commercial payors also are investigating provider billing procedures to detect improper coding and double-billing practices. Healthcare fraud recoveries reach into the billions of dollars annually to restore valuable assets to federally funded programs and prevent billions more in losses.

The False Claims Act (FCA) is the weapon the government employs to combat and seek restitution for fraudulent billing practices within the healthcare sector. Congress enacted the FCA during the Civil War to seek redress from unsavory contractors who were overbilling or providing inadequate weaponry and supplies to the government. In 2016, one hundred fifty three years after its passage, the FCA and its more expansive enforcement provisions as amended by the Affordable Care Act have become one of the federal government’s most powerful anti-fraud tools.   

The FCA allows either the government or a non-government affiliated individual (also known as a whistleblower or relator) with knowledge of a potential fraudulent billing practice to file suit. Whistleblowers typically are billing agents, former employees or disgruntled medical services affiliates of the entity that they are suing who wish to reap a portion of the awarded damages, which typically range from 15%-30% of the total recovery depending on whether the government elects to be a part of the suit. Such awards can be significant given that in Fiscal Year 2015, the Department of Justice (“DOJ”) raked in $3.6 billion in FCA settlements and judgments. In fact, 2015 marked the fourth consecutive year that the United States’ recovery under the FCA exceeded $3.5 billion. Fraud in the healthcare industry accounted for approximately $1.9 billion or 54% of the FCA damages. This trend suggests that aggressive enforcement of the FCA is here to stay.  

Regulatory tension and compliance with evolving billing and coding requirements are challenging issues with which every US healthcare system, physician group, treatment center and professional medical facility must grapple.  Commencing in October 2015, the number of International Classification of Disease-- ICD-10--Diagnosis Codes providers must utilize to bill for their services increased dramatically from 17,000 to 140,000, while similarly, the ICD-10 (PCS) Procedure Code Systems increased from 4,000 to 76,000.  

Healthcare providers are caught in the regulatory cross hairs, seeing it played out in news headlines. As of February 2016, more than 500 hospitals in 43 states have agreed to pay $273 million in government /whistleblower settlements involving cardiac devices that were allegedly implanted in patients in violation of Medicare coverage requirements. Medicare covers implantable cardio-verter defibrillators (ICDs), electronic devices that are implanted near and connected to the heart, only for patients who have certain clinical characteristics and risk factors. The whistleblowers received more than $41.5 million.

Healthcare regulatory liability errors and omissions coverage can mitigate the serious exposure presented by regulatory actions, investigations and audits involving the False Claims Act (including qui tam suits), and voluntary disclosure of billing errors to the government or commercial payors. Such insurance should cover defense and investigative costs, civil fines and penalties as well as multiplied damages. While insurance programs typically exclude amounts that the healthcare provider must repay (i.e., restitutionary amounts), the inherent cost of a complex and lengthy investigation, government action or audit and the attendant fines and penalties can be prohibitive. Insurance products must continue to evolve to assist healthcare providers in managing these costly regulatory exposures.   

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