False Claims Act Basics for Small Practices and Telehealth Companies

If a practice bills Medicare, Medicaid or another federal health program, the False Claims Act (FCA) is the law that turns billing mistakes into potential fraud cases. It dates to 1863, but it is now the government's main civil tool against health care fraud. In fiscal year 2025, the Department of Justice reported more than $6.8 billion in FCA settlements and judgments, the highest in the law's history, and over $5.7 billion of that involved the health care industry.

This guide is written for owners and managers of small medical and dental practices, med spas that bill any federal program, and telehealth companies. It covers what the law prohibits, how much it costs, how whistleblower suits work, and the overpayment rule that catches many honest practices off guard.

What the False Claims Act prohibits

The FCA (31 U.S.C. 3729 to 3733) creates liability for anyone who knowingly:

Submits, or causes someone else to submit, a false or fraudulent claim for payment to the federal government.
Makes or uses a false record or statement that is material to a false claim.
Improperly avoids or reduces an obligation to pay money back to the government. This is often called a "reverse false claim," and the statute's definition of an obligation includes keeping an overpayment.
Conspires to do any of the above.

"Knowingly" is broader than it sounds. Under the statute, it covers actual knowledge, deliberate ignorance of whether information is true, and reckless disregard of whether it is true. The government does not have to prove a specific intent to defraud. Simple negligence is not enough, but ignoring red flags can be.

Kickbacks and self-referrals connect to the FCA. HHS's Office of Inspector General (OIG) notes that a claim resulting from a kickback, or made in violation of the Stark self-referral law, may be treated as false or fraudulent. That means a bad referral arrangement can become an FCA case on top of the underlying violation.

What it costs: damages and per-claim penalties

FCA liability has two parts:

Treble damages. Three times the government's loss.
A civil penalty for each false claim. Under the Department of Justice's most recent inflation adjustment, published July 3, 2025, the penalty is $14,308 to $28,619 per claim for penalties assessed after that date (for violations after November 2, 2015).

There was no increase for 2026. Because the October to November 2025 government shutdown prevented the Bureau of Labor Statistics from publishing October 2025 inflation data, the Office of Management and Budget cancelled the 2026 adjustments. DOJ confirmed in a July 15, 2026 notice that it will keep using the 2025 levels.

The per-claim penalty is what makes small practices nervous. Each claim line can count, so a pattern of incorrect billing over a few years can produce penalties far larger than the dollars actually overpaid.

Self-reporting can reduce damages. The statute lets a court reduce damages to no less than double the government's loss when the person reported the violation within 30 days of learning of it, cooperated fully, and reported before any action began and without knowing of an investigation.

How qui tam (whistleblower) suits work

Most FCA cases do not start with the government. They start with a private person, called a relator, filing a "qui tam" suit on the government's behalf. The relator is often an insider: an employee in billing, a clinician, a former manager or a business partner.

The basics under 31 U.S.C. 3730:

Filed under seal. The complaint is filed confidentially and is not served on the defendant for at least 60 days while the government investigates. The court can extend the seal for good cause, so a practice may not know a case exists for some time.
Government decides. DOJ can intervene and take over the case, or decline. If it declines, the relator can continue on their own.
Relator's share. If the government intervenes, the relator generally receives 15% to 25% of the recovery. If not, 25% to 30%. The defendant also pays the relator's reasonable attorneys' fees and costs.
Retaliation protection. Employees, contractors and agents who are retaliated against for FCA-related actions can recover reinstatement, double back pay, interest, special damages and fees.
Time limits. A case generally must be brought within six years of the violation, or within three years of when the responsible government official knew or should have known the facts, but no more than ten years after the violation.

Whistleblower filings are at record levels. DOJ reported 1,297 qui tam suits filed in fiscal year 2025, up from the previous record of 980 in 2024.

The 60-day overpayment rule

This is the part of the law most likely to affect a well-run practice. Under the Affordable Care Act, a Medicare or Medicaid overpayment must be reported and returned within 60 days after it is identified. An overpayment kept past that deadline can become an "obligation" under the FCA, which is how a refund problem turns into a reverse false claim.

CMS changed the rule in its calendar year 2025 Physician Fee Schedule final rule, effective January 1, 2025. Under the current regulation (42 CFR 401.305):

"Identified" now uses the FCA standard. An overpayment is identified when a person knowingly receives or retains it, with "knowingly" defined by reference to the FCA. The older version also counted overpayments a provider could have found through reasonable diligence.
Time to investigate. If a practice has identified an overpayment but has not finished a timely, good-faith investigation into related overpayments from the same cause, the 60-day deadline is suspended until the investigation ends or 180 days after identification, whichever comes first.
Six-year lookback. The duty applies to overpayments identified within six years of the date they were received.
Other suspensions. The deadline is also suspended in some other situations, such as when OIG or CMS acknowledges a self-disclosure submission.

Risk areas worth a closer look

DOJ's fiscal year 2025 announcement highlighted managed care, prescription drugs and medically unnecessary care as focus areas. For small practices and telehealth companies, the common pressure points include:

Coding level. Billing a higher-level visit than the documentation supports.
Medical necessity. Services, tests or visits that the record does not justify.
Telehealth billing. Using telehealth codes, modifiers and place-of-service rules correctly, especially as Medicare's temporary flexibilities change.
Referral and marketing arrangements. Payments to marketers, lead sources or referral partners that could raise Anti-Kickback Statute questions.
Who performed the service. Billing under one clinician's number for work done by another without meeting supervision or incident-to rules.
Refunds. Credit balances and known overpayments that sit unresolved past 60 days.

A practical review checklist

Practices often build a simple, documented routine around questions like these, and bring in healthcare counsel or a qualified coding auditor where needed:

Do we audit a sample of claims each year, with documentation compared to the codes billed?
Is there a written process for what happens when someone spots a possible overpayment, including who starts the 60-day clock and who leads the investigation?
Can staff raise billing concerns internally without fear of retaliation, and do those concerns get a documented answer?
Have we reviewed every arrangement where money changes hands with a referral source, marketer or platform?
Are telehealth visits documented and coded under the current Medicare rules?
Do we know when to talk to counsel about self-disclosure options?

Where NutriCove fits

NutriCove builds AI automation systems for medical offices, such as an AI receptionist, missed-call text back, booking and patient follow-up. These tools handle front-office communication, not coding or billing decisions, and they do not replace a compliance program or legal review. As the service page notes, platforms like GoHighLevel need their HIPAA add-on and a signed BAA before patient health information goes in. If you are looking at front-office automation, see how it works for medical offices.

Sources

This article is general information, not legal or medical advice. Talk to a qualified attorney or licensed professional about your situation.