Managing risk within a health care organization is no easy task. And as government agencies aggressively use the False Claims Act (FCA) to enforce the exhaustive and complex regulations governing insurance programs, these organizations are facing an increase in liabiilty risk never seen before. 

That’s according to a recent white paper, “Managing the Growing Risk of False Claims Act Liabilities,” published by ACE Group. The paper makes the case that, essentially, any health care organization participating in Medicare, Medicaid or other government-sponsored insurance program must pay close attention to the FCA’s regulations and develop a risk management framework to address it. 

According to the Institute of Medicine, the U.S. health care system wasted $750 billion on unnecessary and overpriced medical tests and treatments, administrative fees, medical fraud and missed prevention opportunities. 

Health care organizations now face increased investigations and audits by Recovery Audit Contractors (RACs). In fact, for the first six months of 2013, nine out of 10 hospitals reported experiencing RAC activity. This should not be too surprising, howerver, since RAC auditor compensation is directly tied to recovered funds. In addition to RAC audits, health care organizations also face the possibility of audits by Zone Program Integrity Contractors (ZPICs) and Medicaid Integrity Contractors (MICs).

“We believe that trend is going to continue,” said Keith Lavigne, senior vice president, ACE USA Professional Risk, during an interview at the 2014 RIMS Conference & Exhibition. “It’s overwhelming what we’re seeing with the OIG and DOJ.”

In fact, billions of dollars have been collected under the FCA via a multitude of actions brought directly and indirectly by the OIG, DOJ, whistleblowers and billing auditors, according to the white paper, which Lavigne co-authored. “The government’s unrelenting enforcement led to record-setting recoveries of over $5 billion in 2012 and another $4.3 billion in 2013, with recoveries for health care fraud totaling more than $6 billion,” the paper states. “Recoveries over four years, dating from January 2009 to the end of fiscal 2013, totaled a record $17 billion.”

Recent settlements:

  • A South Carolina nonprofit hospital system was ordered to pay $273 million to resolve violations of the FCA and the Stark Law. The jury found the system entered into employment agreements with physicians that were not consistent with fair market value or commercially reasonable.
  • A Florida dermatologist agreed to pay $26.1 million to settle allegations that he accepted kickbacks from a pathology laboratory and billed Medicare for unnecessary services. The settlement is one of the largest ever involving an individual under the FCA.
Lavigne stresses that health care organizations should develop a self-audit program, which should include a dedicated audit team and compliance committees to oversee the audit process.