Five federal fraud and abuse laws that apply to physicians

Medical coding compliance matters – a lot. Understanding and avoiding practices like upcoding, unbundling, or billing for unnecessary procedures keeps rural health care providers from violating federal fraud and abuse laws that could result in criminal penalties, civil fines, exclusion from federal health care programs, or loss of a state medical license.

The five most important federal fraud and abuse laws that apply to rural physicians are the False Claims Act, the Anti-Kickback Statute, the Physician Self-Referral Law (Stark Law), the Exclusion Statute, and the Civil Monetary Penalties Law. These laws are enforced by several government agencies, including the Department of Justice, the Department of Health & Human Services Office of Inspector General, and the Centers for Medicare & Medicaid Services). 

Health care fraud continues to be a major priority of the Department of Justice’s enforcement efforts. In 2024, the DOJ False Claims Act settlements and judgements exceeded $2.9 billion. Accurately documenting and billing for care given in rural health settings minimizes the risk of appearing to intentionally deceive payers for financial gain.
 

False Claims Act violations

It is illegal for rural health facilities to submit claims for payment to Medicare or Medicaid that you know or should know are false or fraudulent. Filing false claims may result in fines of up to three times the programs' loss plus $11,000 per claim filed. Under the civil False Claims Act, each time an item or a service is billed to Medicare or Medicaid it counts as a claim, so fines for False Claims Act violations can add up quickly.

Some examples of False Claims Act violations:

• Billing: Billing for services that weren’t provided, performing unnecessary procedures, or billing for non-FDA approved drugs.
• Invoicing: Submitting invoices for goods or services that were defective or not delivered or charging inflated prices.
• Unbundling: Submitting multiple billing codes instead of one billing code for a drug panel test in order to increase remuneration.
• Upcoding: Inflating bills by using diagnosis billing codes that suggest a more expensive illness or treatment.
• Forgery: Forging physician signatures when they are required for Medicare or Medicaid reimbursement.
   

Anti-Kickback Statute penalties

The Anti-Kickback Statute (AKS) is a criminal law. It prohibits knowing about and willful payment of remuneration to induce or reward patient referrals or generate business involving any item or service payable by federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients).

Remuneration could be anything of value. Here are some examples of Anti-Kickback Statute violations:

• Paying cash or other bonuses in exchange for a referral
• Offering free rental space for an office or clinic or a rate lower than market value  
• Gifting expensive accommodations, meals, or tickets to sporting or entertainment events
• Excessive compensation for speaking engagements, especially if the primary intent is to induce patient referrals to the company hosting the event

Anti-Kickback Statute penalties include fines, jail terms, and being excluded from participating  in federal health care programs.
 

Physician Self-Referral Law (or Stark Law)

The physician self-referral law, commonly referred to as the Stark Law, prohibits physicians from referring patients to receive "designated health services" payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless there is an allowable exception. For example, an orthopedist cannot refer a patient to an MRI center in which he has a financial interest. Financial relationships include both ownership/investment interests and compensation arrangements. Penalties for physicians who violate the Stark Law include fines and exclusion from participation in federal health care programs.

Some examples of Stark Law violations:

• Paying doctors or other health care providers for referring Medicare or Medicaid patients
• Receiving money or other compensation in exchange for referring patients
• Receiving more than fair market value for services
• Receiving compensation from an entity other than the one to which patients are referred
• Physicians referring patients to a health care entity where they have an ownership interest  

How Stark differs from AKS:

• The Stark Law, which covers a set list of designated health services, applies only to referrals from physicians, while AKS covers referrals for all services from anyone.
• The Stark Law is a civil statute; AKS is criminal.
• Each statute has different rules and penalties.
   

Exclusion Statute

The Office of Inspector General is legally required to exclude individuals and entities convicted of the following types of criminal offenses from participating in all federal health care programs:

• Medicare or Medicaid fraud, including any offenses related to the delivery of items or services under Medicare or Medicaid
• Patient abuse or neglect  
• Felony convictions for other health care-related fraud, theft, or financial misconduct
• Felony convictions for unlawful manufacture, distribution, prescription, or dispensing of controlled substances
   

How the Exclusion Statute affects excluded providers:

• Excluded physicians may not bill directly for treating Medicare and Medicaid patients, nor may their services be billed indirectly through an employer or a group practice.
• Medicare, Medicaid, and other federal health care programs such as TRICARE and the Veterans Heath Administration won’t pay for items or services that excluded providers furnish, order, or prescribe.
• No services, orders, or prescriptions furnished to a patient on a private-pay basis will be reimbursable by any federal health care program.

Rural health care practices, clinics, and hospitals reimbursed by federal health care programs are responsible for screening current and prospective employees and contractors to make sure they aren’t listed in OIG's list of excluded individuals and entities.  This applies to:

• Services performed by excluded ambulance drivers, dispatchers and other employees involved in providing transportation covered by a federal health care program that serves hospital patients or nursing home residents
• Services performed by excluded social workers who are employed by health care entities to provide services to federal program beneficiaries
• Administrative services, including processing claims for payment, performed for a Medicare intermediary or carrier or a Medicaid fiscal agent

If a health care entity employs or contracts with an excluded individual or entity and receives federal health care program payment for items or services that person or entity furnishes (directly or indirectly), the provider may be subject to a civil monetary penalty and/or an obligation to repay any amounts attributable to the services of the excluded individual or entity.
 

Civil Monetary Penalty Law

OIG may seek civil monetary penalties ─ and sometimes exclusion ─ for a wide range of misconduct. Some examples of Civil Monetary Penalty Law violations include:

• Presenting a claim a person knows or should know is for an item or service that was not provided as documented
• Presenting a claim a person knows or should know is for an item or service that is not reimbursable
• Anti-Kickback Statute abuses
• Providing false or misleading information that would influence a decision to discharge
• Making false statements or misrepresentations on applications or contracts to participate in federal health care programs
   

Stay informed

Rural health systems that don’t have sufficient medical coding compliance and medical billing fraud prevention processes in place are vulnerable to these laws and statutes, which could have far-reaching implications for staffing, reimbursements, and the ability to participate in federal programs that serve rural communities. Accurate coding performed and/or audited by certified professionals who are up to date on federal fraud and abuse laws and know what to look for to ensure rural health care fraud prevention is key to maintaining medical coding compliance.

NRHA adapted the above piece from ScribeEMR, a trusted NRHA partner, for publication within the Association’s Rural Health Voices blog.

About the author: Michelle Anderson brings 20 years of experience to her role as implementation manager at CodeEMR, a subsidiary of ScribeEMR, where she provides education, training, and medical coding compliance guidance to maximize value in each health care setting. She is an expert in medical coding and compliance, coding management, regulatory compliance, and health care operations, specializing in Federally Qualified Health Centers and Community Health Centers.