Does underbilling equate to overbilling? Not exactly.
A Monitor Monday listener recently asked, “is it true that underbilling is just as bad as overbilling? Can you be accused of fraud when you make a mistake that saves the government money?”
This question comes up somewhat frequently, in part because people love to promote panic. I don’t know if such fear-mongering is an attempt to sell services by saying “you need to hire us so that you code perfectly,” or perhaps whether it’s driven by a desire to generate an exciting topic of conversation – but either way, it is wrong. Let me be clear: underpayments are not fraud. You can always be accused of fraud, but I would not lose a moment of sleep worrying about fraud accusations for underbilling.
Over the years, people have attempted to argue that any inaccuracy on a claim renders the claim false – and, therefore, possibly subject to penalty. There are even a few court cases that can be read as supporting such a position because they conclude that a claim can be false even if there is no harm to the government. That statement is true, but highly misleading. Those cases involve situations in which the government detected a false claim before payment – and, therefore, the defendant never received the improper payment. In these cases, the attempt to defraud the government was thwarted.
Defendants in those cases argued that since the government hadn’t lost money, the government couldn’t punish them. But just like you can’t murder your parents and claim mercy retroactively, as an orphan, or avoid a bank robbery conviction by claiming you dropped the money on the way to the getaway car, the “the government busted me before I got the money” defense is just about always unsuccessful.
But that is a very, very different situation than billing error that saves the government money. I am not aware of a single case in which liability was imposed on someone for an underpayment.
There are several cases in which the court concluded that a mistake on a claim that has no impact on reimbursement does not result in False Claims Act (FCA) liability. For example, in a False Claims Act case involving the defense industry, when a contractor used the wrong screw, but everyone agreed that the smaller screw had no meaningful impact on the helicopter in which the screw was used, the failure to follow the specifications perfectly was not material, and the claims were not “false” despite the error. That conclusion is consistent with the Supreme Court’s analysis in the Escobar case. The Supreme Court concluded that an error must be material in order for there to be False Claims Act liability. When an error does not affect reimbursement, it will not be considered material. Moreover, to have liability under the FCA, you must have improper intent. It is difficult to see how anyone can conclude that you had improper intent when you received less money than you were entitled to get.
There is one exception. If the underpayment on a claim is part of a scheme that somehow nets you additional money, then it would still be possible to have liability. But that would require a net overpayment. Situations in which your errors result in a net underpayment should not result in FCA liability.
If you run into a lawyer or consultant who is claiming underpayment will result in FCA liability, ask them for proof. I am confident they won’t have it.
When someone cries wolf, it is always good to make them locate the lupine before you believe them.
Listen to David Glaser every Monday on Monitor Monday, 10-10:30 a.m. EST.