Medicare Compliance & Reimbursement

You don't have to profit from a billing snafu to have the feds come after you with a False Claims Act suit.

Medicare contractor First Health Services Corp. learned that lesson April 23 when it agreed to a $13 million FCA settlement with the Department of Justice. According to U.S. Attorney Roscoe Howard, the company's failure to fix a computer glitch caused it to pay providers and health maintenance organizations in Washington, DC millions of dollars for services provided to ineligible Medicaid beneficiaries.

The glitch caused beneficiaries' ineligibility dates to be overwritten with a default date of Dec. 31, 1999. That resulted in improper payments on behalf of thousands of ineligible recipients between 1993 and 1996, Howard's office says.

Warning: The case illustrates the expansive reach of the powerful False Claims Act. The DOJ's theory of the case was that First Health's failure to address the computer glitch amounted to a "reckless disregard" of the truth or falsity of the claims it was processing - making it liable under the FCA even though it wasn't intentionally trying to profit from fraud.

For its part, First Health Group Corp., parent company of First Health Services, denies liability. President of Services Teresa DiMarco maintains that the "fundamental issue" in the case was Washington, DC's "retroactive eligibility determinations." First Health Group notes that it is paying $5.5 million of the $13 million settlement, while the remainder will be paid by First Health Services' prior owner, First Data Corp.

Lesson Learned: Failing to promptly address software problems that affect Medicare and Medicaid billings can cost you big in the long run.