Creative FCA cases seen replacing national initiatives

The good news for hospitals is that no sweeping new enforcement initiative is looming on the national horizon. The bad news is that the government continues to find creative ways to employ the False Claims Act.

The government’s enforcement agenda increasingly is being taken over by whistle-blowers, says Craig Holden, a health care attorney with Ober Kaler in Baltimore. "We are seeing more and more relators who are repeat relators," he reports. "They made millions of dollars in big cases, and they come back and file new cases against others."

Holden says one new trend may be the use of the False Claims Act to prosecute Stark II violations. "The government is clearly setting up a record to enforce Stark through the False Claims Act," he says. Holden points to the Department of Justice’s (DOJ) contention that Stark II offers "a straightforward framework" for identifying false claims. (DOJ used those words in a fall 2000 memo to Congressman Pete Stark [D-CA].)

"I would submit that Stark II is the antithesis of a straightforward framework,’" Holden counters. Nevertheless, he notes that several cases recently have been prosecuted on this basis.

Ed Rauzi, a health care attorney with Davis Wright in Seattle, says the newest use of the False Claims Act is in the area of pharmaceuticals — for example, claiming that the information given to the parties that calculate average wholesale prices for Medicare and Medicaid was somehow false. "I think that is the newest development," he says. Rauzi says one major reason for this is the increasing amount of money being spent on pharmaceuticals.

According to Holden, the recent Columbia HCA settlement can be used almost as a roadmap by health care providers because of the range of issues it includes, such as lab unbundling, DRG upcoding, community educators (claiming costs for people doing marketing in home health), cost-report issues, home health management fees, and medical necessity issues with respect to hospital-based home health agencies.

Holden also notes a recent qui tam case that was settled for a modest $1.5 million. The case was premised on the health system’s failure to report and repay a known $794,000 overpayment. Notably, he says the relator was a former employee of a consultant the hospital had hired to scrutinize cost reports. The government now is investigating the consultant and all its clients.

"The interesting point raised by this is the extent to which providers have a duty to repay overpayments," says Holden. He notes a provision in the Medicare statute that that if a provider is aware of an event that affects its right to have received money and fails to repay it with the intent to convert it unlawfully, that is a crime.

According to Holden, it is a "strangely worded" statute the government may never have used before. But he warns that a proposed regulation published in January would give providers 60 days to notify the carrier or intermediary once an overpayment is identified and to repay it. It is silent on the sanction for not doing so, and remains a proposed regulation. But hospitals should keep an eye on this, he cautions.

Rauzi also warns that while major national initiatives may appear to be waning, there still are numerous areas of payment that can spell trouble for providers. Rauzi says he has never seen a payment methodology that was not seriously flawed under the surface. "I would say there is nothing more irretrievably broken than the outpatient prospective payment system," he warns.