The False Claims Act (31 U.S.C. §§ 3729–3733) is the federal government's most powerful enforcement tool against fraud on the United States Treasury. It applies to any individual or business that directly or indirectly contracts with and is paid for goods or services by the United States government — including every healthcare provider who bills Medicare, Medicaid, TRICARE, or any federally funded program.
The statute creates liability for any person or business that knowingly submits, or causes to be submitted, a false or fraudulent claim with the intent to secure payment or approval from a federal office or agency. Critically, 'knowingly' under the FCA does not require specific intent to defraud. The statute defines knowledge to include: (1) actual knowledge of the falsity; (2) deliberate ignorance of whether the claim was true or false; or (3) reckless disregard for the truth or falsity of the claim. If an organization should have known it was billing the government improperly — and failed to put adequate compliance systems in place — this is sufficient to establish FCA liability.
When a False Claims Act qui tam complaint is unsealed and served on the defendant, it arrives with a significant informational asymmetry built into the case. The relator — often a former employee, competitor, or insider — has been working with the government for months or years before the defendant had any knowledge that a lawsuit was filed. The relator's counsel has had substantial time to develop the factual theory; the defendant must now move immediately to close that gap.
A false claim can arise in numerous ways, many of which would not be obvious to a healthcare provider or government contractor operating in good faith:
Submitting claims for patient encounters, procedures, or items that were never actually provided.
Billing for a more expensive procedure code than the one actually performed.
Separating component parts of a procedure that should be billed as a single bundled code to obtain higher reimbursement.
Submitting claims for services rendered by a provider excluded from federal programs by OIG — even if they are employed by a group practice that is not excluded.
Signing certifications of compliance (cost reports, enrollment applications) containing false material information.
Following United States ex rel. Guilfoile v. Care LLC and circuit court authority, any claim tainted by an Anti-Kickback Statute violation may itself constitute a false claim — dramatically expanding FCA exposure into compensation arrangements.
Knowingly concealing or avoiding an obligation to repay overpayments — for example, failing to return an identified Medicare overpayment within the 60-day repayment window required by 42 U.S.C. § 1320a-7k(d).
Qui tam relators most frequently are: former billing coders, compliance officers, or practice administrators with direct knowledge of billing practices; current employees who have been secretly cooperating with the government during the seal period; competitors who have obtained information about the defendant's practices and calculated that their relator's share of a large recovery exceeds the cost of litigation; or patients who believe they were billed for services not received. The relator knows which records are most damaging, which employees have the most relevant knowledge, and which aspects of the billing practice most closely resemble the government's standard fraud theory.
When a government subpoena arrives — signaling that a qui tam complaint has likely been filed — the pre-intervention period is the single most valuable window in the entire case. The government has not yet decided whether to intervene. This is when defense strategy has the greatest ability to affect the final outcome.
MB Law directs a comprehensive review of billing records, documentation practices, compensation arrangements, and the compliance program — all under attorney-client privilege. The goal: understand the facts before the government does, identify the strongest and weakest aspects of the defense, and develop a coherent narrative.
Based on the subpoena's document categories and the nature of the practice, MB Law develops a working assessment of the government's liability theory — which specific billing codes are at issue, what time period, what type of false claim (upcoding, services not rendered, AKS violation as predicate).
The most favorable outcome for the defendant is a government decision not to intervene. MB Law prepares a comprehensive factual and legal presentation to the assigned AUSA and DOJ Civil Division demonstrating why declination is appropriate: weaknesses in the relator's theory, evidence of good-faith compliance efforts, the cost-benefit of litigation from the government's perspective, and the collateral damage a full investigation would inflict on an otherwise compliant organization.
If the internal investigation reveals genuine billing irregularities, MB Law evaluates whether voluntary disclosure under the OIG Self-Disclosure Protocol or CMS SRDP is preferable to waiting for the government to develop its own case. Early voluntary disclosure typically results in single-damages settlement; government-developed cases are resolved at treble damages.
The government's damages expert calculates alleged overpayments. The defense must identify methodology flaws — incorrect claim matching, failure to account for legitimately rendered services, use of improper benchmark rates.
The FCA requires 'knowing' submission of false claims. Evidence of compliance program investment, reliance on billing consultants, absence of internal red flags, and documentation of good-faith efforts is critical to undermining the government's knowledge case.
The relator's employment history, the circumstances of their departure from the organization, any personal disputes with management, their financial stake in the litigation outcome, and any prior inconsistent statements are all legitimate subjects for aggressive defense discovery and cross-examination.
The first-to-file bar (31 U.S.C. § 3730(b)(5)) prohibits a relator from pursuing a qui tam complaint if a related complaint is already pending. The public disclosure bar (31 U.S.C. § 3730(e)(4)) bars qui tam suits based on publicly available information unless the relator is an 'original source.' Both bars can be dispositive if applicable.
A qui tam complaint is one of the most serious legal threats an organization can face. The pre-intervention period is when the defense has the greatest power to affect the outcome. Contact MB Law immediately upon receipt of any government subpoena or notice of investigation.
FCA per-claim penalties are adjusted annually for inflation under the Federal Civil Penalties Inflation Adjustment Act. Current 2025 range: $13,946 to $27,894 per false claim. In healthcare fraud cases involving thousands of discrete billing events, per-claim penalties alone can dwarf the underlying damages.
| Penalty Type | Statutory Basis | Current Amount | Notes |
|---|---|---|---|
| Civil — Treble Damages | 31 U.S.C. § 3729(a)(1) | 3× the government's actual losses | A $500,000 overbilling = $1.5M in civil damages before penalties are added. |
| Civil — Per-Claim Penalty | 31 U.S.C. § 3729(a)(1) | $13,946–$27,894 per claim (2025) | A provider with 1,000 false claims faces $13.9M–$27.9M in penalties alone. |
| Criminal — False Claims (Felony) | 18 U.S.C. § 287 | Up to 5 years + $250,000 fine (individual); $500,000 (company) per count | Requires proving the defendant had knowledge the claim was false. |
| Criminal — False Claims (Misdemeanor) | 18 U.S.C. § 287 | Up to 1 year + $100,000 (individual); $200,000 (company) per count | Applied when specific intent cannot be proved beyond reasonable doubt. |
| Healthcare Fraud (parallel criminal) | 18 U.S.C. § 1347 | Up to 10 years per count; 20 years if serious bodily injury; life if death results | The DOJ's preferred parallel criminal charge in healthcare fraud prosecutions. |
| Program Exclusion (OIG) | 42 U.S.C. § 1320a-7 | Mandatory or permissive exclusion from all federal healthcare programs | Effectively ends a provider's ability to bill Medicare/Medicaid — career-ending. |
| Civil Monetary Penalties (OIG) | 42 U.S.C. § 1320a-7a | Up to $20,000 per false claim + 3× the amount claimed | OIG's independent civil penalty authority — runs parallel to FCA civil liability. |
The majority of False Claims Act investigations are not initiated by federal agencies conducting proactive audits. They are initiated by private citizens — called relators — who file qui tam lawsuits under 31 U.S.C. § 3730(b). The relator is most often a current or former employee, a competitor, a patient, or a billing compliance officer who observed conduct that appeared to constitute fraud on the government. The financial incentive is powerful: the FCA allows relators to keep between 15% and 30% of any government recovery. In large healthcare fraud cases, this can amount to millions of dollars for the relator.
A qui tam lawsuit must allege that an individual or business has defrauded the federal government by submitting one or more false or fraudulent claims. Because relators are frequently insiders — people who worked inside the organization and had direct access to billing systems, internal communications, and compliance records — they often have detailed factual knowledge that makes their complaints difficult to challenge.
The relator's attorney files a complaint in federal district court. The complaint is filed under seal pursuant to 31 U.S.C. § 3730(b)(2) — not served on the defendant, not publicly accessible. Only the assigned judge and designated officials at the U.S. Attorney's Office receive copies. The defendant typically has no knowledge that a lawsuit has been filed.
By statute the seal period is 60 days. In practice, extensions of six months are routinely granted and renewed for years while the government investigates. Cases have remained under seal for five or more years. During this entire time, the defendant is operating its business with no knowledge of the pending litigation.
If the complaint appears substantiated, the DOJ assigns the matter to the relevant U.S. Attorney's Office and the relevant agency OIG — most commonly HHS-OIG for healthcare fraud. The government investigates through: OIG subpoenas requiring production of corporate, billing, financial, and communications records; FBI interviews of current and former employees; CMS data analysis comparing the defendant's billing patterns against national and regional benchmarks; and in some cases undercover operations.
When OIG subpoenas are issued, the defendant learns for the first time that a federal investigation is underway. At this stage, the defendant typically does not know a qui tam complaint has been filed — only that they are under federal scrutiny. This is the most critical juncture: the decisions made in the days and weeks following receipt of the subpoena will significantly affect the entire trajectory of the case.
After completing its investigation, DOJ makes a decision on whether to intervene — take over and actively litigate the case. Intervention requires approval from DOJ's Civil Division in Washington, D.C. The government intervenes in approximately 25–30% of filed qui tam cases. When the government intervenes: the case is unsealed and served on the defendant; DOJ typically amends the complaint to add Anti-Kickback Statute violations, common law fraud, and unjust enrichment claims; and the government's full litigation resources are deployed. When the government declines, the relator may proceed independently.
Settlement negotiations between the government and the defendant run in parallel with the investigative process. The government has strong institutional incentives to settle: settlements are faster, cheaper, and provide certain recovery. Defendants have equally strong incentives given the potentially catastrophic exposure from treble damages and per-claim penalties. Well over 90% of FCA cases that are resolved are resolved through settlement rather than trial. However, depending on the complexity of the case, it can take months before the government begins evaluating the matter and longer still before it is resolved.
A government-intervened FCA settlement typically includes: payment of an agreed monetary amount (commonly single or double damages); a Corporate Integrity Agreement (CIA) requiring OIG-monitored compliance for 3–5 years; potential exclusion proceedings if individual practitioners were involved; and a release of FCA civil claims — but typically not criminal liability, which remains separately negotiable.
If found liable or upon settlement, the relator retains 15–25% of the recovery if the government intervened, and 25–30% if the relator litigated substantially without government intervention. In a $10M recovery, the relator's share ranges from $1.5M to $3M — a powerful incentive that explains why qui tam filings have increased consistently year over year.
| Stage | Goal |
|---|---|
| Subpoena Receipt (Day 1) | Prevent spoliation claims. Understand exposure before producing anything. |
| Document Production | Protect and minimize production footprint. Avoid producing documents that expand the government's theory. |
| Government Outreach | Influence the intervention decision. A well-presented defense narrative can result in declination. |
| Intervention Decision Period | Achieve best outcome whether government is in or out. |
| Settlement Negotiation | Minimize financial exposure. Preserve the organization's ability to continue operating. |
| Post-Settlement CIA Compliance | Achieve and maintain CIA compliance. Avoid stipulated penalties. |
The CMS Self-Referral Disclosure Protocol (SRDP) and the OIG Self-Disclosure Protocol (SDP) allow providers to voluntarily disclose potential FCA violations before a qui tam complaint is filed or the government initiates an investigation. A strategically executed voluntary disclosure can result in settlement at single damages rather than treble damages, avoidance of exclusion proceedings, and preservation of the government's trust in the provider's compliance posture.
However, voluntary disclosure is a complex and high-stakes decision. Premature or poorly framed disclosure can expand the government's view of the problem rather than containing it. The 60-day repayment window under 42 U.S.C. § 1320a-7k(d) is real — but the disclosure itself must be carefully structured.
If your organization has identified a potential overpayment or billing irregularity, contact MB Law before initiating any voluntary disclosure. MB Law will assess the full scope of the issue, evaluate the disclosure options, and structure any disclosure to achieve the best available outcome.
Early legal intervention can significantly impact the outcome of a federal investigation or prosecution.
Mansoor Broachwala, Esq. — Licensed in Illinois since 2017
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