Hospital Corporate Compliance & False Claims Act Risk Management

Hospital Corporate Compliance & False Claims Act Risk Management

The False Claims Act imposes treble damages and per-claim civil penalties on any person or organization that knowingly submits — or causes to be submitted — a false or fraudulent claim for payment to the federal government. For hospitals, FCA exposure arises from a wide range of billing and documentation practices: upcoded DRG assignments, unsupported evaluation and management codes, inappropriate facility fee billing, improper physician arrangement compensation, incorrect cost report entries, and billing for services rendered by excluded individuals.

The OIG's Work Plan identifies specific hospital billing areas for enhanced oversight every year — and DOJ's False Claims Act enforcement statistics consistently show hospitals among the largest targets of civil healthcare fraud enforcement. The financial consequences of an FCA investigation — including treble damages, per-claim penalties, and the legal costs of investigation and defense — can be existential for community hospitals and significantly damaging even for large health systems.

A robust, functioning compliance program does not guarantee immunity from FCA exposure. But it dramatically reduces the probability of systematic violations, significantly mitigates damages when violations are discovered, and demonstrates the organizational good faith that influences enforcement decisions and settlement terms.

Service Areas

Physician Arrangement Compliance

The Stark Law and Anti-Kickback Statute govern the financial relationships between hospitals and physicians — including employment arrangements, medical directorship agreements, co-management agreements, on-call coverage payments, and space and equipment leases. Arrangements that do not meet regulatory exceptions or safe harbors create significant FCA exposure. We conduct physician arrangement compliance reviews that assess each arrangement against applicable regulatory requirements and identify arrangements requiring restructuring.

Inpatient Admission & Two-Midnight Rule Compliance

CMS's two-midnight rule governs when hospital stays should be billed as inpatient admissions versus outpatient observation services. Systematic errors in admission status determination — whether favoring inpatient billing or inappropriately denying inpatient admission to patients who meet criteria — create both financial and compliance risk. We assess admission status determination processes, utilization review program compliance, and observation service billing practices.

Cost Report Compliance

Hospital Medicare cost reports are complex documents that determine a portion of Medicare reimbursement through cost-based payment mechanisms. Errors or misrepresentations in cost reports — including improper classification of costs, incorrect allocation methodologies, and failure to disclose related party transactions — create FCA exposure. We assess cost report preparation processes for compliance risk.

Corporate Integrity Agreement Management

Hospitals that have resolved FCA investigations through settlement often enter Corporate Integrity Agreements with the OIG that impose specific compliance monitoring, reporting, and certification obligations for a period of years. We provide CIA implementation and management support — building the compliance infrastructure required by the CIA's specific provisions and managing the reporting and certification obligations.