Medical Billings – State of Play

Despite assumptions to the contrary, the U.S. Government now pays nearly half the annual cost of health care spending nationally, a higher percentage than ever before. Each year the U.S. government reimburses billions of dollars to healthcare providers for care given to patients covered under federal programmes such as Medicare, Medicaid, and TRICARE. Also each year the Department of Justice (DOJ) reclaims substantial sums from those same providers due to fraud or incorrect billing.

The recovery of monies incorrectly or fraudulently-billed is carried out under the False Claims Act (FCA), also called the ‘Lincoln Law’. During the last four years this has become an increasingly stringent piece of legislation that has been deployed with ever-greater frequency. With a large financial incentive to investigate and a new administration, there is every expectation that the DOJ will continue to aggressively pursue FCA fraud in 2021. In fact, given the injection of funds through an expensive and wide-reaching stimulus plan to aid recovery following Covid-19, this may be an additional reason for the DOJ to increase recovery actions further still.

The FCA has proved a highly effective civil tool for the government to redress false claims for federal funds. In the last fiscal year, the DOJ obtained more than $2.2 billion in settlements from civil cases involving fraud and false claims, and the vast majority of that, over $1.8 billion, came from the healthcare industry. The number of cases brought against it by the government has more than doubled since 2019 and despite the disruption caused by the global pandemic, 2020 saw the highest number ever reported, with 922 new cases filed.

There are further reasons why the DOJ is likely to be more robust in recovering funds. Previous periods of economic strife, such as the housing and financial crisis in 2007-2008, led to far-reaching government stimulus plans, and with that came increased oversight and enforcement actions to ensure tax dollars were used for their intended purpose. To ease the economic woes caused by the pandemic, the Biden administration will release $1.9 trillion across multiple sectors, in addition to December’s $920 billion stimulus package.  With huge potential for abuse and fraud, heightened governmental scrutiny is guaranteed.

Yet it doesn’t take an act of deliberate fraud to be in breach of the FCA. Everyday negligence or common mistakes can end up costing healthcare businesses huge sums. A simple admin error, such as using the wrong product/procedure code, can result in a lawsuit, and whether an amount is paid can be immaterial – with the cost of defending against litigation alone potentially damaging.

Unsurprisingly, demand for medical billings insurance is starting to increase. Given the considerably increased risk exposure, many healthcare businesses are beginning to recognise that the historic approach of self-insuring against such lawsuits is not sustainable or cost effective. With national law firm Epstein Becker & Green warning that ‘the need to defend against these claims either already is—or may ultimately become—a reality for entities and individuals in the healthcare sector’, 2021 is shaping up to deliver the most intensive governmental scrutiny and challenge the sector has ever faced.