Medicare Compliance & Reimbursement

The American Hospital Association recently addressed what some in the industry see as a troubling trend: the government's use of the False Claims Act as a hammer for collecting settlements from providers.

In a September letter to U.S. Attorney General Eric Holder Jr. and HHS Secretary Kathleen Sebelius, the trade group asks the cabinet-level Health Care Fraud Prevention and Enforcement Action Team to do a policy review of FCA initiatives currently underway. The False Claims Act doesn't apply to "billing errors, mistakes or even nonculpable overutilization," as the Department of Justice explained to Congress related to amendments expanding the FCA's authority to pursue violations, AHA points out in its correspondence.

Yet the government is initiating "aggressive FCA investigations" when it uncovers evidence of a mistake or overutilization. This makes "FCA enforcement through negotiated 'settlement' a self-fulfilling prophecy," the trade group concludes.

The letter goes on to make a case for review of what it refers to as the "kyphoplasty initiative," which AHA says is being advanced by the United States Attorney for the Western District of New York.

"Notwithstanding the fact that kyphoplasty claims have long been subject to changing and ambiguous regulations and guidelines," AHA writes, "the kyphoplasty initiative appears to observers to rely on data mining to establish a presumption that hospitals are liable for 'knowing' violations of the civil FCA and subject to treble damages and penalties." (For more information on the kyphoplasty cases, see the article on page 155 of this issue.)

The form letters that hospitals are receiving across the country offer "to compromise any such liability if the hospital 'cooperates,'" AHA reports. "It strongly suggests that the prerequisite to a 'double damages' compromise is for the hospital to undertake a prescribed onerous, burdensome and very costly self audit and to provide the United States Attorney's Office with the results of that audit in a prescribed form."

AHA notes that "understandably, some hospitals have elected to settle FCA claims rather than to force DOJ to prove its allegations." The trade group goes on to say it's concerned that absent greater oversight from the DOJ and HHS, "such settlements will be taken as vindication of a theory, and of tactics."

The AHA concludes by saying that it believes the DOJ and HHS "can restore confidence in the working relationship" between their departments and hospitals "by offering providers a clear assurance that such oversight authority will be exercised."

Déjà Vu, Says Trade Group

In its letter, AHA also observes that the letters in the kyphoplasty cases are "disconcertingly similar" to ones the government sent out before issuing the original "Holder Memo" in 1998 (Guidance on the Use of False Claims Act in Civil Health Care Matters).

The government released the "Holder Memo" (named for the current Attorney General Eric Holder Jr. who was then deputy attorney general) in the wake of hospitals crying foul over how the government was using the FCA in the lab unbundling initiative, according to attorney Robert Liles, with Liles Parker in Washington, D.C.

The lab unbundling cases involved hospitals that were allegedly billing Medicare for individual lab tests that were actually conducted at the same time on automated equipment. "Hospitals targeted in the [lab unbundling] initiative felt strongarmed by the initial demand letters [from the government] which cited possible liability under the False Claims Act," says Liles, who was involved in writing and implementing the Holder Memo in his role at the DOJ at the time. "A number of hospitals sought to avoid further litigation and wrote a check in an effort to resolve the allegations."

AHA got Congress involved in the issue, resulting in a number of congressmen writing letters to the DOJ complaining about how the U.S. Attorney's offices were using the FCA, Liles recounts. As a result, the DOJ formulated the Holder Memo guidance to help ensure prosecutors applied the FCA "in a fair and more judicious manner," he says (read the memo at www.justice.gov/dag/readingroom/chcm.htm).

In Liles' experience, the DOJ attorneys have been following the guidance in FCA cases. And he notes that today most FCA cases originate not from government initiatives but rather from qui tam (whistleblower) lawsuits, which the government is statutorily obligated to look into.

That being said, the FCA does pose some real concerns for providers, Liles says (for details, see page 155). And to get Congress to change the FCA or get the government to stop bringing so many cases, industry organizations would have to write more letters like the AHA letter, says attorney Antonia Giuliana, with Kelley Drye & Warren in New York, N.Y. More providers would also have to take FCA cases to trial and prevail. Yet "most companies and individuals that are hit with these cases aren't willing to take the risk of going to trial," she says.

"Any solution will have to be a political solution," Giuliana concludes, and at this point, she doesn't see much relief being in sight.

Attorney Brendan Cyr, also with Kelley Drye & Warren, agrees, noting there may be more letters like the one from AHA or some "political pushback" down the road. But for now, "we are kind of at the beginning of the ramp up." Meantime, providers faced with kyphoplasty FCA cases may have some good defenses, says Giuliana (for details, see the article on page 155).