What is the False Claims Act in Healthcare?

Did you know that False Claims Act (FCA) settlements and judgments exceeded $6.8 billion in fiscal year 2025? This huge number should make healthcare providers worry about violating the act either deliberately or unintentionally.

In this guide, we will cover everything you need to know about the act, from real-world examples to types of fraud, state-specific statutes, and the qui tam provision.

Thus, if this is something you want to learn more about, continue reading!

Types of Healthcare Fraud Under the False Claims Act

Some of the common types of fraud under the False Claims Act are discussed below:

Billing for Services Not Rendered 

Submitting claims for medical procedures, office visits, or residential services that never happened.

Kickbacks and Self-Referrals

It involves offering, paying, or receiving financial incentives in exchange for patient referrals for services covered by federal programs. By doing so, practices violate the Anti-Kickback Statute and Stark Law.

Medically Unnecessary Procedures

What happens when the provider performs treatments, diagnostic tests, or surgeries that are not clinically required for the patient’s condition? In these circumstances, the provider’s goal is solely to increase billing volume, i.e., a common fraudulent activity.

Unbundling of Bundled Codes

Oftentimes, practices bill for multiple components of a single procedure separately rather than using a single bundled code. This results in a higher total payment than what the provider rightfully deserves.

Upcoding of Services

Another fraud under FCA can be when you assign a higher-level procedural code than the service performed to secure a larger reimbursement from the payer.

Phantom Billing for Supplies

Phantom billing can be described as charging for equipment, prescriptions, or medical devices that were either never delivered to the patient or were of a lower quality than what was billed.

Falsifying Certificates of Medical Necessity

There may be scenarios where healthcare practitioners misrepresent a patient’s condition or clinical documentation to justify coverage for expensive medical equipment or specialized care. This is also a type of fraud under the False Claims Act.

Examples of False Claims Act in Healthcare

Let’s review some of the real-world examples of the False Claims Act in healthcare:

PA Lifesharing, LLC ($1.2 Million Settlement)

Did you know that during the period January 1, 2022, and December 31, 2024, PA Lifesharing (PAL) submitted claims to Medicaid for services rendered by Direct Support Professionals (DSPs)? Besides, PAL knew that the DSPs were not qualified and properly trained to render one-on-one care services.

Once PAL was aware of the investigation, it fully cooperated with the US authorities. They even help self-identify the false claims. Therefore, on April 30, 2026, the US Attorney’s Office for the Middle District of Pennsylvania announced that PAL has agreed to pay $1,211,095.53. The settlement amount will be paid to resolve allegations that PAL violated the FCA and submitted false claims for Medicaid payments.

Eye Practice and Physician Owner ($415,000 Settlement)

Another recent False Claims Act violation was settled with a $415,000 penalty in April 2026.

The background? Mitchell Eye Center and Dr. Mitchell had contractual agreements with an independent medical diagnostics company, Eyecuity, PLLC (Eyecuity). During the period September 2018 through March 2020, Eyecuity paid Mitchell Eye Center for every referral that the eye center made for transcranial doppler (TCD) tests.  

Mitchell Eye Center physicians also signed order forms that Eyecuity had provided, indicating that patients had Vertebrobasilar Insufficiency (VBI) or Vertebro-Basilar Syndrome. They did so, while they did not have any reason to believe that patients had a diagnosis of VBI.

Therefore, the claims for the TCD tests that Mitchell Eye Center and Dr. Mitchell caused Eyecuity to submit to Medicare were false. Moreover, the TCD tests were not medically necessary, and the Mitchell Eye Center received payments from Eyecuity that violated the Anti-Kickback Statute.

Advanced Urology and Jitesh Patel ($14 Million Settlement)

In April 2026, another FCA case against Advanced Urology made headlines with a massive settlement amount of $14 million.

But what really went down? The case originated from a whistleblower lawsuit filed by a former employee under the qui tam provision. The investigation revealed that the practice allegedly billed federal healthcare programs for procedures that were medically unnecessary. These primarily included bladder biopsies and cystoscopies.

Moreover, the government alleged that the practice engaged in fraudulent billing by misrepresenting services to secure higher reimbursements.

Role of Whistleblowers (Qui Tam Actions) in Healthcare

The Advanced Urology FCA case discussed in the previous section is the perfect example of how whistleblowers can help maintain the integrity of healthcare systems. 

Under the False Claims Act, these individuals initiate qui tam actions to expose hidden misconduct. For context, qui tam is a provision that enables private individuals to file a lawsuit on behalf of the government. This helps expose fraudulent activities that drain taxpayer funds.

But who can be a whistleblower? They can be current or former employees, such as billers, coders, or clinicians who have insider knowledge of an organization’s fraudulent practices.

In successful whistleblower cases, the government may also reward the individuals with 15% to 30% of the recovered amount.

Who Benefits from the False Claims Act?

The FCA is designed not only to protect the state and federal government’s funds, but also to benefit the whistleblowers, patients, and the general public. Here’s how:

Federal and State Governments

Undoubtedly, the state and federal government are the primary beneficiaries of the False Claim Act. 

The following are some of its benefits to the government:

• It enables the government to recover up to three times the amount of money lost to fraud in addition to significant civil penalties.
• The act ensures that taxpayer funds for programs like Medicare and Medicaid are used for legitimate medical needs.
• With the qui tam provision, the government benefits from insider information.

Patients and the General Public

In the context of patients, the benefits of the False Claims Act are as follows:

• It protects patients from physical risks associated with surgeries that are not required by penalizing providers who perform medically unnecessary procedures.
• The act helps stabilize rising healthcare premiums and tax costs by reducing fraud.
• It also ensures that resources are not wasted on phantom billing or upcoding.

Whistleblowers

The FCA provides legal safeguards to the whistleblower along with a financial reward:

• They are entitled to a percentage of the recovered funds, typically between 15% and 30%. Note that the reward amount may vary depending on whether the government intervenes in the case.
• Some states provide robust anti-retaliation protections. These can include reinstatement, double back pay, and compensation for special damages if an employee is harassed or fired for reporting fraud.

Ethical Healthcare Practitioners

The benefits of FCA extend to ethical healthcare providers as well. That is, it prevents fraudulent entities from gaining an unfair financial advantage over compliant healthcare practices that follow strict billing and coding guidelines.

State-Level False Claims Acts

Many states are following their own version of the False Claims Act to combat fraudulent activities on a state level. Some of these states, and their specific statutes, are listed below:

Delaware

Delaware provides the state with strong pre-litigation tools and clear tax-related boundaries with the following statutes:

• The Attorney General can issue civil investigative demands to force the production of documents or testimony before filing a formal lawsuit.
• The act explicitly does not apply to claims or records made under the state’s tax laws.
• If the state intervenes, the whistleblower receives 15% to 25% of the proceeds. However, if the state does not intervene, the award increases to 25% to 30%.

New Jersey

New Jersey‘s False Claims Act includes the following specific statutes:

• The act specifically targets individuals who knowingly conceal or avoid an obligation to pay the state.
• Actions can be taken against a practice at most six years after the violation or three years after a state official knew of the facts, with a hard cap at ten years.
• The state also provides robust anti-retaliation protections to the whistleblower. That is, the employer shall not discharge, demote, suspend, threaten, harass, deny promotion to, or in any other manner discriminate against the employee (whistleblower).

Alaska

Alaska’s specific legislation focuses on the following statutes:

• The FCA is primarily centered on medical assistance (Medicaid) fraud.
• The state is authorized to recover the full value of the assistance provided, along with interest and civil penalties.

Iowa 

Iowa includes high civil penalties and a broad definition of state-funded claims:

• Violators are liable to the state for three times the amount of damages sustained by the government as a result of the fraudulent act.
• The court may reduce the damages to twice the amount of the state’s loss. But what are the conditions? If a person identifies a violation and provides all known information to the state within 30 days, before any audit or investigation has begun.

Impact of the False Claims Act on Medicare & Medicaid

Let’s review how the act impacts the federal programs, Medicare and Medicaid:

Medicaid Protection

Specific state statutes, such as Alaska’s HB 347, are tailored to recover the value of medical assistance provided through state-funded Medicaid programs.

Fund Restoration

The act allows the government to recover up to three times the amount of the original false claim, plus civil penalties.

Reduced Program Strain

The FCA helps maintain the solvency of federal healthcare programs for future beneficiaries by clawing back millions from fraudulent settlements.

Eliminates Unnecessary Procedures

Investigations into FCA violations often reveal practices that perform surgeries or tests that patients do not clinically require.

Standardizing Medical Necessity

FCA settlements penalize clinicians who misrepresent patients’ conditions to justify coverage.

Guarantees Compliance 

Most healthcare organizations and clinicians strive to maintain strict internal auditing and coding reviews to prevent violations of FCA.

Challenges in Detecting Healthcare Fraud Under the FCA

Discussed below are some of the key challenges authorities encounter while detecting fraud under the False Claims Act:

• The high volume of CPT and ICD-10 code updates creates a gray area. As a result, legitimate billing errors can be considered as intentional upcoding or unbundling.
• Oftentimes, distinguishing between intentional fraud and medical necessity can be difficult. The reason? Clinicians may argue that unnecessary procedures were simply a matter of clinical judgment.
• The high volume of Medicare and Medicaid claims makes it nearly impossible for manual audits to catch every instance of phantom billing.
• Many fraudulent schemes, such as kickbacks, are hidden from public view. That is, authorities can only uncover these if a whistleblower with specific knowledge files a qui tam action.
• Fraudulent entities often use reverse false claims to hide overpayments or avoid obligations to return money to the state. This demands deep forensic accounting to uncover the fraud.
• Establishing knowledge under the FCA is a high bar. It requires evidence that a provider acted with deliberate ignorance, actual knowledge, or reckless disregard, rather than making an honest administrative mistake.

Eliminate Audit Risks With MediBillMD

To summarize, the False Claims Act helps the state and federal government recover funds and safeguard the taxpayers’ money and patients. 

Hopefully, this detailed guide will help you clear any confusion you had on the topic. Understanding the act itself is the first step towards preventing audit risks and heavy financial penalties.

However, if you fear violating it, as you do not have a proper in-house billing team of certified professional coders (CPCs), you may outsource medical billing services to MediBillMD.