Health Plan Audits: Penalties & Risks

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If wrong-doing is identified, based on health plan audits or evaluation of information, the company and company’s officials could face certain penalties, fines, and risks.  The penalties and fines will be based on the type of offense, how egregious the offense is, how long it has been going on, how much harm it has done to the patient, provider, health care system (e.g., Medicare money paid based on a False Claim), or based on how much trouble the health plan could get in with CMS/Medicare because the company did not fulfill their contractually agreed upon duties.  

Here are some things the company and/or company’s officials can potentially expect:

  • Repayment of claims incorrectly billed and subsequently reimbursed by the health plan 
  • Termination of contract with health plan and de-delegation.  Termination of the contract may involve notification to providers and/or patients and the like
  • Reputational damage to the company and its officials
  • Exclusion from Federal Programs (an individual or company can be excluded from seeing patients who have insurance coverage through a Federal Program and receiving payment from a Federal Program)
  • Corporate Integrity Agreement – part of a negotiated settlement of a federal investigation between the government and provider (company), where the provider agrees to defined obligations and the government refrains from excluding them from Federal programs
  • If federal/state regulations are impacted, then possible investigation from government agencies
  • 2022 Civil Monetary Penalty for a False Claims Act (FCA) violation
    • FCA definition https://www.law.cornell.edu/wex/false_claims_act: “Federal statute setting criminal and civil penalties for falsely billing the government, over-representing the amount of a delivered product, or under-stating an obligation to the government.  The False Claims Act may be enforced either by the Justice Department or by private individuals in a qui tam [whistleblower] proceeding.”
    • In February 2022, the DOJ indicated that they recovered over $5.6 billion in false claims act settlements, of which over $5 billion was attributed to the health care industry
    • Per claim penalties from $12,537 - $25,076
    • Example:  
      • If 100 false claims are submitted & reimbursed for a total amount of $100K, the possible liability is $300K (because the government can recover 3x (aka treble) the damages for the violations)
      • If a court imposes civil monetary penalties for each false claim submitted ($12,537 - $25,076 per claim), the total penalties could be between $1.25M - $2.5M
      • In addition to the penalties, the government can choose to impose fines for the False Claims Act violation
  • The Anti-kickback Statute (AKS) [42 U.S.C. § 1320a-7b(b)] “is a criminal law that prohibits the knowing and willful payment of "remuneration" to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies.” [https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/]
    • Violations could bring both criminal and civil penalties
      • Civil Monetary Penalties ($50,000 per kickback plus three times the inducement amount), fines, jail time, and exclusion from participating in any Federal healthcare programs
    • Some arrangements may be protected under a safe harbor.  A healthcare attorney should be consulted prior to finalizing the arrangement to ensure that it is not violating the anti-kickback statute

In her October 28, 2021 Memorandum, Deputy Attorney General Lisa Monaco stated, “When making determinations about criminal charges and resolutions for a corporate target, prosecutors are directed to consider all misconduct by the corporation discovered during any prior domestic or foreign criminal, civil, or regulatory enforcement actions against it, including any such actions against the target company’s parent, divisions, affiliates, subsidiaries, and other entities within the corporate family.  Some prior instances of misconduct may ultimately prove less significant, but prosecutors must start from the position that all prior misconduct is potentially relevant.”

It is critical to have to proper policies, procedures, processes, and intent in place to prevent misconduct and costly violations.  Whether you are a part of a startup healthcare organization or have been in the healthcare space for a long time, it is important to establish and annually review your policies, procedures, and processes.  This will reaffirm the company’s dedication to compliance with federal/state/local/health plan rules, regulations, laws, and contractual obligations, as well as ensure changes made within the previous year are evaluated and documented.

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