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please see attachment for research guideline.. the 13 pages does not include the cover page and reference pg.


Quality of Care and the False Claims Act


            The use of the Federal Claims Act to detect fraud in the health sector is an important development that has led to a significant improvement in the quality of care accessible to U.S. citizens. However, questions have been raised regarding the use of the law as a regulatory tool rather than a mechanism exclusively meant for enforcing certain standards with a view to preventing fraud. In this case, the contention is that there are other laws that are more suited to address quality issues, given that the FCA focuses exclusively on the level of quality offered in relation to total costs indicated in reimbursement claims. This paper examines the role of the FCA in promoting quality of care. It also addresses the disagreement over the scope of the FCA as well as emerging trends in the use of the FCA to improve the quality of care that is offered by health care providers.

The paper concludes that quality issues are part of FCA’s scope of scrutiny, and that enforcement and regulatory issues are interrelated, meaning that both must be addressed in the process of using the qui tam clause of the FCA to detect health care fraud. Lastly, there are some negative effects that come with the use of the FCA such as underutilization and closure of health facilities but they are easily outweigh by benefits in terms of improvement in quality of care.


Abstract 2

Introduction. 2

The Role of the False Claims Act in Promoting Quality of Care. 4

Disagreement Over Scope Of FCA: Should It Address Enforcement or Regulatory Issues?. 6

Current Trends in the Use of the FCA to Enhance Quality of Care. 8

Conclusion. 12

References. 14


The Federal Claims Act (FCA) was enacted during the American Civil War with the aim of protecting the Union Army from contractors who used unscrupulous means to cheat the government. During that time, numerous fraudulent contracts were being awarded, leading to massive loss of revenue by the government. The FCA imposes liability on individuals who submit false claims to the government while being aware of the falsity or fraudulent nature of those claims. The FCA has become popular mainly because of its qui tam clause, which enables a relator, or ordinary citizen, to file a false claims lawsuit on behalf of the federal government. The qui tam clause provides that such a citizen is entitled to some of the money that the government recovers from the defendant. 


In recent times, the FCA has been used as an effective tool for punishing those who present invoices to the federal government for services that were never provided. It has also been used to expose scandals involving double billings. In the health care sector, the FCA has been a useful tool for the federal government in its efforts to improve the quality of health care. Specifically, a lot of attention has been on the role of the FCA can play in ensuring that no fraud is committed through health care delivery via Medicare and Medicaid. The law’s qui tam provision has also been used to highlight situations where some health care providers are accused of providing negligent medical care (Werner & Yecies, 1997).

At the same time, however, a heated debate has emerged on whether the FCA should be used to address regulatory issues that directly related to quality of care. This debate has emerged because the FCA has traditionally been used in a manner that promotes the principle of non-interference with regulatory issues. Yet the federal government, in its attempt to contain health care rising costs, is increasingly relying on the FCA to deal with fraud in the sector. The aim of this paper is to explore the role of the False Claims Act in promoting quality of Care in the U.S. health sector. The thesis of this paper is that the role of the False Claims Act in promoting quality of care is uncertain because there is disagreement on whether the law should address regulatory issues or it should be restricted to handling fraud relating to billing and overutilization in the health sector.

The Role of the False Claims Act in Promoting Quality of Care

            The FCA is one of the many tools that government agencies can use to detect fraud in the health sector. Since fraud interferes with quality of care, it is also true to say that the FCA contributes to efforts aimed at ensuring that health care providers adhere to the requisite quality standards. However, to some extent, some doubts may be raised regarding the primacy of the FCA as an avenue for addressing quality of health care in government. This is primarily because the law was originally designed to address fraud cases relating to defense contracting. Although some amendments have been introduced to the law to make it relevant to other sectors, one may claim that it remains more relevant to defense-related fraud cases than quality issues in the delivery of health care.

In recent times, the federal government has intensified efforts to file complaints against health care providers in an attempt to fight fraud and improve the quality of health care (Werner & Yecies, 1997). The increased use of the FCA to fight fraud arises because fraud has become a major problem in the health care sector. Federal government estimates show that in 1994, about four percent of health care expenditures were lost through health care fraud (Pashke, 1994). Such massive financial losses are bound to have a negative impact on the quality of health care that citizens receive, hence the move by government to use the FCA in an attempt to apprehend the fraud perpetrators.

In Medicare and Medicaid, health care fraud is a major challenge, and it mostly involves false billing. For example, some health care providers inflate the charges after providing care to patients covered under Medicare and Medicaid. False billing also occurs when insurers charge Medicare and Medicaid even when a patient is covered by private insurance. Similarly, unscrupulous healthcare providers often charge for inpatient services even when a patient actually received outpatient services in order to receive higher Medicare/Medicaid payments. In some cases, health care staff exploit faults in computer systems to overbill or record false bills. Some health care providers order unnecessary tests in order to maximize profits, leading to overutilization. Similarly, patients are sometimes advised to undergo surgery even before alternative measures such as medication have been taken.

As this fraud continues to unfold, the federal government is keen not to bring about negative publicity to the country’s health care system. Public opinion can have a negative influence on the uptake of health care services if the health care sector was perceived to have been widely affected by fraud. People may lose confidence in the quality of the services being offered by health care providers. This explains why many legal actions taken under the qui tam clause of the False Claims Act are settled expeditiously and rather secretively.

Another unfortunate situation manifests itself in the air of uncertainty that often surrounds the use of the FCA to improve the quality of health care. Moreover, federal authorities are wary of “parasitic” lawsuits in which relators simply provide information that is in the public domain to court as a basis for bringing legal action against health care providers and insurance companies. Since revelations of fraud attract a lot of public attention, the federal government faces a dilemma of cracking down on fraud while at the same time maintaining public confidence in the health sector. This dilemma has greatly contributed to the emergence of a culture of secrecy in the way quality issues arising from health care fraud are addressed.


An assessment of court cases in which health care fraud has been unearthed under the FCA creates the impression that the FCA has not had a far-reaching impact on the quality of health care. However, upon looking beyond case law, one may realize that the FCA, specifically the qui tam clause, has had far-reaching implications in terms of discouraging health care professionals from engaging in fraud. For example, defendants who have already committed fraud may be discouraged from engaging in new fraudulent activities for fear of being harmed by an avalanche of lawsuits and negative public opinion in the event that a whistleblower unearths the fraud. A case in point where a health care provider suffered from deteriorating public opinion involved Columbia/HCA, a company that was compelled to pay a $1.7 billion fine for defrauding the federal government through Medicare/Medicaid (Wynne, 2004). The negative publicity that was triggered by this scandal threw into disarray the company’s plans to launch a $1 billion investment in private hospitals across Australia.

Disagreement Over Scope Of FCA: Should It Address Enforcement or Regulatory Issues?

There are disagreements on what the FCA’s exact scope should be as far as the pursuit of improved quality of health care is concerned (Krause, 2002). If these disagreements continue, the health care providers are likely to be alienated as part of a wider scheme by federal officials to divert resources away from the health sector for fear of embezzlement through overutilization and false billing. On the one hand, those who support the application of the FCA’s provisions in enforcing compliance for health care programs that are funded by the federal government such as Medicare argue that providers implicitly and explicitly undertake to comply with all applicable standards relating to the delivery of quality health care services (Fabrikrant & Solomon, 2000). In fact, they certify that this compliance is the condition on which they are being allowed to participate in and bill for those programs. On the other hand, opponents of the use of the FCA to punish regulatory non-compliance contend that this contradicts the established principle that expressly indicates that FCA should never be used as a tool of regulatory compliance (Fabrikrant & Solomon, 2000).

A major question is whether neglect should be considered fraud under the FCA. In an era when the federal government is quietly fomenting a revolution in the health care sector to address growing expenditure, concerns are likely to emerge regarding the use of the FCA as the primary weapon for enforcing compliance. By so doing, the federal government seems to have transformed an “enforcement tool” whose objective is to monitor billing practices into a fully-fledged “regulatory tool” that forces health care facilities to improve their quality of care (Schindler, 2009). This means that the government risks being seen to be supplanting the agencies that have traditionally performed the role of promoting quality such as the tort system and licensing boards.

            Nevertheless, one may argue that it is impossible to avoid regulatory elements in the process of enforcing the FCA in the health sector. This is because there is an overlap between enforcement issues such as billing and overutilization and regulatory measures aimed at improving quality of care. For example, billing fraud leads to loss of money that would have been used to purchase medical equipment of higher quality and efficiency. Another example is where a health services provider bills a patient for a surgery in order to make a higher profit when it would have been cheaper to treat the patient using medication. When health care professionals go ahead and perform the needless surgery on the patient, this amounts to poor quality of care because it amounts to subjecting the patient to needless agony and perhaps a higher health risk merely for financial gain.

            One way to address the concerns of health care providers regarding the scope of the FCA is to review case law. One of the relevant cases on may look at is Mikes v. Straus. In this case, Patricia Mikes (plaintiff) filed a suit against Marc Straus (defendant), using the qui tam clause, claiming that the latter sent false requests to the government for reimbursement for spirometry services (Silverman & Rocke, 2002). In this case, the court ruled that a certification of compliance that is false cannot be relied on for qui tam action under the FCA if payment is not highlighted as a condition for that certification. The court also stated that for liability to be actionable under the FCA, the performance of the health care service should be so deficient that it is equivalent to complete non-performance.

Another relevant case is United States v. NHC Healthcare Corp, where the court ruled that even when a legitimate dispute relating to “proper care standards” has been presented, liability under the provisions of the FCA cannot be said to exist (Krause, 2004). Like in the Mikes v. Straus, the court held that for liability to exist, the standards of care must be so poor that no performance may be said to have occurred at all. These two cases create the impression that it may be wrong to overestimate the role of the FCA in address issues relating to quality of care in the health sector.

            The most appropriate context where the FCA can be used to address poor quality of care is one where no service was rendered at all. It may be difficult to bring in the qui tam in a determination of liability where a court has to make a decision in which perfect care and gross neglect form two ends of a continuum. This phenomenon has a profound effect on Medicare and Medicaid, which pay nursing homes based on a wide range of services. In contrast, the reimbursement systems of nursing homes involve “pay for service” schemes, which make them susceptible for criminal cases under billing fraud statutes such as the FCA.

Current Trends in the Use of the FCA to Enhance Quality of Care

            In recent times, a number of changes have occurred in the way the FCA is being used to enhance quality of care in the U.S health sector. A major component of this change is the growing emphasis on situations where the quality of care is so poor that it may be said to be non-existent, in which case any claim for reimbursement is treated as a false claim. In such a case, it should be possible for the health care provider to be liable for fraud under the FCA. This trend has created a situation where patients and their families demand acceptable quality levels. Similarly, it has forced nursing homes, hospitals, and clinics to adhere to certain minimum quality standards as a condition on which they can claim for reimbursement from Medicare and Medicaid. Thus, the pursuit of quality creates an ideal situation in which money intended for use in health care actually goes to health care, thus giving the government an avenue of ensuring that it is getting the right value for its money.

            There is also another emerging trend, whereby different types of litigation are being used, mostly commonly medical malpractice and the qui tam clause of the FCA. The objective of using these two laws is not only to fight fraud but also enhance quality of care. The idea behind the use of these laws is to ensure that citizens gain access to high quality of care at an affordable cost. With malpractice litigation, health care providers are worried that the standards of care that they maintain are not acceptable. However, two main challenges hinder the achievement of the overall objective of quality of care. First, damages are often relied upon in malpractice action, yet they are not always the best measure of the quality of care offered. Significant damages may not exist even in situations where the quality of care is poor, thereby making it impossible for malpractice recovery to occur. This creates a situation where malpractice litigation fails to offer sufficient deterrence for quality deterioration. Many providers escape from malpractice litigation simply because they offer low quality of health care that has no far-reaching long-term impact on the patient. Second, health care providers have resorted to increasing health care costs in response to the threat posed by malpractice litigation. They do this by over-treating and over-testing in an attempt to shield themselves from any malpractice action.

            Incidentally, the FCA addresses both of the problems that arise from malpractice litigation. First, it does not depend on damages or health outcomes. Rather, it depends on the actual quality of care. It focuses on quality of care because providers actually sign reimbursement claim forms in which they claim to have offered a specific type of care to the patient. Thus, the objective is simply to determine whether the stated quality of care was provided. If the quality of care is found to be poor, the provider may be accused of making a false claim, thereby leading to a lawsuit. In this case, the lawsuit would provide additional deterrence that complements the one that is normally provided by malpractice litigation. Second, the FCA also addresses the challenge of over-treatment and the consequent increase in health care costs by encouraging under-treatment. Thus, whereas malpractice litigation encourages over-treatment, FCA encourages under-treatment. This means that using the two laws at the same time may enable the federal government to deal with both challenges. It is worthwhile to note that both malpractice litigation and FCA encourage improvement in quality but in different ways. In malpractice, focus is on the treatment outcome. In contrast, the qui tam provision of the FCA focuses on the level of care quality offered.

Unfortunately, FCA actions that seem to create a safety net for malpractice may in some cases bring about negative effects on quality of care (Buck, 2013). Although the U.S. health sector is struggling to contain malpractice, it is also facing a situation where a court can easily determine that a specific test or medical procedure was not necessary (Buck, 2013). This, though, can only happen if there is time for a review of the whole situation; however, this is not always possible because many decisions are normally made during emergencies characterized by many extenuating circumstances, thereby making it impossible to determine whether it was really necessary for a certain treatment to be conducted.


In essence, the federal government is facing a situation where too much pressure is being applied on providers to operate within a confined zone of practice characterized by a thin line between safe practice and malpractice (Buck, 2013). In such a situation, good health practitioners may be compelled to adopt to promote underutilization as a way of protecting themselves from litigation under FCA. This problem is particularly predominant in inpatient psychiatric care, which is being closely scrutinized by the federal government due to lost credibility. In recent times, this care system has received negative publicity because of growing association with malpractice and fraud (Erwin & Philibert, 2006). Since ailments and treatments relating to psychiatry are difficult to define and monitor, insurers have been reluctant to increase psychiatric benefits. Consequently, psychiatric health facilities are likely to discharge patients too early, which may be an indication of poor quality of care. This is a good example of a situation where FCA litigation can potentially cause harm to the wellbeing of the very people it was meant to protect.

One court case that highlights the negative effects that the FCA can have on the very people it sets out to protect is that of the Sacred Heart Hospital. The hospital was accused of submitting fraudulent claims to the government. The relator in this case was an interim administrator at the hospital, who reported to the authorities that the hospital’s computers contained error codes that interchanged codes for secondary and principal diagnoses of patients, leading to a $900,000 increase in the bill that the hospital sent to Medicare (Pashke, 1994). The hospital owned up to the mistake but attributed it to inexperienced IT technicians and a faulty computer system. The case ended with a settlement of $3.5 million, 20 percent of which went to the relator (Pashke, 1994). After paying this settlement, the hospital, which traditionally cares for migrant workers, needy people, and prisoners, the hospital was unable to continue with its operations as a non-profit organization, leading to its sale and subsequent transformation into a for-profit health care institution. It is unfortunate that a charity health care facility was shut down simply to promote the objectives of Medicare and Medicaid.

In spite of the negative effects of this law, the benefits outweigh the costs in terms of the way it addresses fraud and quality of care. Today, health care providers have gained greater awareness regarding the need to manage their operations more efficiently as a way of avoiding fraud and enhancing health care quality levels. An important part of management practices for these healthcare facilities entails checking their computer systems to ensure that no mistakes exist that could cheat the government or facilitate questionable practices that may amount to poor quality of care.

To some operators in the health sector, FCA’s provisions constitute a major threat. However, this threat is necessary because prevention is imperative in a situation where millions of people continue to depend on Medicaid and Medicare for health cover. If these health care programs were to collapse under the weight of fraud, those people would be left without a means of accessing quality health care at reasonable costs. It would be unethical for a few health care providers to make obscene profits at the expense of the wellbeing of millions of taxpayers whose efforts greatly contribute to the continued existence of Medicare and Medicaid.


The False Claims Act is an effective law that enables whistleblowers to file lawsuits of false claims on behalf of the federal government. Initially, the law was meant for use in detecting fraud in defense contracting. However, its use in other areas, including the health sector has increased. This paper has examined how the law contributes to quality of care in the health sector. From this investigation, the FCA is undoubtedly an important tool that the federal government uses to punish those who engage in fraud in the health sector, mainly through double billing, overutilization, and remuneration claims for services that were never delivered. Incidentally, all these fraudulent activities tend to have a negative impact on quality of care that is accessible to citizens.

Unfortunately, an air of uncertainty often surrounds the U.S. government’s use of the FCA to improve the quality of health care. This is because it touches on issues of regulation, which goes against the traditional principles governing the way the law is enforced. Ideally, the law focuses on the issues of enforcement, such as false billing, double billing, and overutilization. Inevitably, however, it is impossible to address fraud-related issues without addressing certain regulatory aspects. This is because health care fraud is said to occur when a health care provider does not offer the level of care for which he is seeking reimbursement from various government health care programs such as Medicare and Medicaid.

Moreover, analysis shows that the FCA may have some negative effects such as underutilization and closure of health facilities due to financial instability following revelations of alleged fraud and subsequent settlements involve huge sums of money. Fortunately, there are other quality-related safety nets that counterbalance the effect of underutilization, such as malpractice litigation. In conclusion, the benefits of the FCA in promoting quality of care outweigh the costs involved. This means that the paper has disproved the thesis that the role of the False Claims Act in promoting quality of care is uncertain. Despite disagreement over enforcement and regulatory issues, the law continues to address many regulatory and enforcement issues that affect quality of care in the U.S. health sector.


Buck, I. (2013). Caring Too Much: Misapplying the False Claims Act to Target Overtreatment. Ohio State Law Journal, 74, 463-479.

Erwin, C. & Philibert, R. (2006). Shocking Treatment: The Use of Tasers in Psychiatric Care. The Journal of Law, Medicine & Ethics, 34(1), 116–120.

Fabrikrant, R. & Solomon, G. (2000). Application of the Federal False Claims Act to Regulatory Compliance Issues in the Health Care Industry. Alabama Law Review, 51, 105-116.

Krause, J. (2002). ‘Promises to Keep:’ Health Care Providers and the Civil False Claims Act. Cardozo Law Review, 23, 1363-1371.

Krause, J. (2004). Healthcare Fraud and Quality of Care: A Patient-Centered Approach. Journal of Health Law, 37(2), 161-195.

Pashke, C. (1994). The Qui Tam Provision of the Federal False Claims Act: The Statute in Current Form, Its History and Its Unique Position to Influence the Health Care Industry. Journal of Law and Health, 9, 163-186.

Schindler, D. (2009). Pay for Performance, Quality of Care and the Revitalization of the False Claims Act. Health Matrix, 19, 387-422.

Silverman, S. & Rocke, S. (2002). Nursing home quality-of-care cases after Mikes v. Straus. Journal of Health law, 35(3), 327-358.

Wynne, J. (2004). Hazards in the Corporatisation of Health Care. New Doctor, 80, 2-5.

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