How to Get a 2,333% ROI?

Three affiliated home health companies in Tennessee agreed to pay $1.8 million to settle False Claims Act (FCA) liability. That’s a lot of money, but it’s only about four percent of the $42 million in potential liability that, according to BNA, federal prosecutors say the homes faced for false Medicaid billing.  If the prosecutors are correct, the homes reaped a whopping 2,333% return on their $1.8 million settlement payment.

In 2010 the companies made a voluntary disclosure to the US Attorney’s office, reporting that during an internal audit they had discovered potential Stark Law violations going back to 2002. The homes supplemented their original 2010 disclosure with further disclosures as their internal investigation continued.

The Stark violations were based on improper financial arrangements between the homes and physicians who referred patients to them. A Stark violation taints all related Medicaid claims and causes them to violate the FCA. The government says the homes also failed Medicare requirements due to false or invalid certifications.

If the $42 million figure sounds unbelievable to you, take a look at how FCA liability is calculated. First, damages are calculated at three times the entire amount of every tainted Medicare or Medicaid claim. Then, there is a penalty of up to $21,916 for each tainted claim.

As a simple example, assume that a home care company submitted 100 Medicaid claims for $100 each, knowing that each claim should have been $90. Under general contract law, the liability would be $1,000: 100 X $10.

In contrast, FCA liability could be as high as $30,000 (100 X $100 X 3) plus penalties of $2,191,600 (100 X $21,916), for a total of $2,221,600—for a $1,000 overcharge.

Why would the government settle for four cents on the dollar? For one thing, it avoids both the risk and cost of litigation. For another, it encourages other Medicare and Medicaid providers to come forward and self-disclose and self-correct. And, of course, the prosecutors may have exaggerated the homes’ potential liability.


The settlement was announced in the US attorney’s September 5 press release.

Speak Your Mind