When Billing Mistakes Become Fraud: Understanding Risk Under the False Claims Act
- 1 day ago
- 3 min read
Many healthcare providers assume billing errors are only a problem if they are intentional. Unfortunately, that assumption can be costly.
Under the False Claims Act (31 U.S.C. §§ 3729–3733), repeated billing mistakes can rise to the level of fraud, even when there was no intent to deceive. Enforcement agencies routinely pursue cases based on systemic billing errors that demonstrate reckless disregard for billing rules and payment accuracy.
In short: mistakes that go uncorrected can become liability.
Accidental Errors vs. Reckless Disregard
An isolated billing error is rarely the issue. What raises regulatory concern is a pattern, such as:
The same billing or coding error occurring repeatedly
Errors identified internally or externally but not corrected
Failure to conduct monitoring or audits
Lack of education or corrective action
Ignoring Medicare coverage rules or billing guidance
Under the False Claims Act, liability does not require intent to defraud. Submitting claims with reckless disregard or deliberate ignorance of billing requirements is sufficient to trigger enforcement.
Small Errors, Big Consequences
The False Claims Act authorizes:
Treble (triple) damages
Civil monetary penalties assessed per claim
Recovery actions by the government or whistleblowers (qui tam actions)
Because penalties are assessed per claim, small recurring billing errors (when repeated over time) can quickly become financially devastating.
Medicare Is Ramping Up Revocations and Preclusions
In addition to FCA enforcement, CMS has significantly increased Medicare revocations and preclusions, and one of the most common bases for action we are seeing is:
Abusive billing practices
Importantly, intent is not required.
CMS may revoke Medicare enrollment or place a provider on the Preclusion List when billing patterns demonstrate:
Submission of claims that do not meet coverage or documentation requirements
Repeated improper billing after education, warnings, or audits
Billing behavior that shows a disregard for Medicare rules
Key Regulatory Authority
42 CFR § 424.535(a)(8)
Allows CMS to revoke Medicare enrollment for abusive billing practices, including a pattern or practice of submitting claims that do not meet Medicare requirements.
42 CFR § 422.2 and § 423.100
Governs placement on the Medicare Advantage and Part D Preclusion Lists, which prevents payment for services or prescriptions, even if the provider is otherwise licensed.
Revocation or preclusion can result in:
Loss of Medicare billing privileges
Ineligibility for Medicare Advantage and Part D reimbursement
Termination from commercial payer networks
Significant reputational and operational harm
High-Risk Billing Behaviors Frequently Flagged
Certain billing behaviors consistently appear in audits, investigations, and revocation actions:
1. Upcoding: Billing a higher level of service than documentation supports. When repeated, this is often cited as evidence of abusive or reckless billing.
2. Unbundling: Separately billing services that should be reported under a single comprehensive code, contrary to CPT or Medicare guidance.
3. Billing Non-Covered Services Without Proper Notice: Submitting claims for services that are not covered without properly informing the patient or without obtaining a valid Advance Beneficiary Notice (ABN) when required.
CMS guidance is clear that ABNs must be:
Issued before the service
Properly completed
Specific to the service being denied
Failure to comply increases both payment and compliance risk.
CMS Program Integrity Guidance Providers Should Know
CMS outlines its expectations in multiple program integrity resources, including:
Medicare Program Integrity Manual (PIM), Chapter 15 : Provider Enrollment, Revocation, and Re-enrollment Bars
Medicare Program Integrity Manual, Chapter 8: Monitoring, audits, and identification of improper billing patterns
42 CFR Part 424: Medicare enrollment requirements and revocation authority
These resources make clear that providers are expected to actively monitor billing behavior, identify patterns, and take corrective action, not simply rely on payers to deny claims.
What Compliance Really Means
Compliance does not require perfection. It requires documented, good-faith effort, including:
Routine billing audits and monitoring
Identification of error trends
Timely corrective action and education
Documentation of steps taken to prevent recurrence
Practices that can demonstrate active oversight and correction are in a far stronger position than those that assume claims processing systems will catch problems.
The Bottom Line
Billing errors do not have to start as fraud to become fraud. When mistakes are repeated, ignored, or left unaddressed, they can trigger False Claims Act liability, Medicare revocation, or preclusion.
A proactive, right-sized compliance program isn’t just a regulatory requirement, it’s protection.
Catching small issues early can prevent devastating consequences later.
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