GAO slams Justice over its use of the False Claims Act

Another new GAO study cautions the Justice Department to move carefully before filing False Claims Act suits. The report, commissioned by congressional critics of DOJ’s investigative tactics, acknowledges the health care industry’s concerns regarding the use of the FCA.

"Hospital groups have raised legitimate concerns about how the Justice Department used computer data from various sources as the sole basis for alleging liability under the False Claims Act," GAO concludes. It also recommends that providers be given time to analyze the data underlying a demand letter before the Justice Department threatens legal action. DOJ is already responding to those concerns through its new guidance to U.S. Attorneys as well as the formation of special working groups.

The GAO report can help hospitals in settlement negotiations with the government, says Mary Greeley, JD, senior Washington, DC counsel for the Chicago-based American Hospital Association (AHA). The AHA emphasizes the DOJ’s obligation to back up its demand letters with clear data, as well as the obligation of fiscal intermediaries to give clear instructions. The AHA isn’t yet sure whether the GAO study, coupled with the DOJ’s guidance, offers hospitals legal grounds for challenging prior settlements.

The report includes the following topics:

- The tiers of the 72-hour investigation.

DOJ is using a multi-tiered system in its campaign against violations of the 72-hour rule, which bars hospitals from billing for outpatient services that were already paid for through inpatient payments. In New Jersey, for example, hospitals were divided into four tiers. Tier Zero included those with overpayments of $1,000 or less. They only repaid the overpayment plus interest. Tier One included those with fewer than .0676 errors per bed. They also avoided penalties. Tier Two hospitals had between .0725 and .1385 errors per bed. They paid a penalty of 75% of actual overpayments. Tier Three hospitals had between .1425 and .4592 errors per bed, and they paid a hefty penalty of 200% of potential overpayments and 100% of actual overpayments. As of April, 3,000 hospitals had received DOJ demand letters, of which 2,400 have settled for about $58 million. Of those who settled, 1,700 fell into Tiers Zero and One.

- Possible problems with DOJ data in lab unbundling investigations.

In Ohio, notes GAO, "some tests that in fact were identified on different days may have been identified as duplicates." However, Ohio settlements were usually based on hospitals’ self-audits rather than data from U.S. Attorney’s offices, says GAO.

In Texas, DOJ and the U.S. Attorney in Texas both told GAO demand letters should have been less aggressive, and more advance research was needed before auditing providers. Yet they also maintain that hospitals were always given additional time for an internal investigation if they requested it.

- Questionable timing of OIG audits. OIG says hospitals ignored several of its reports on abuse of the 72-hour rule, which prompted the agency to turn the issue over to the DOJ. But GAO found that hospitals weren’t given much time to correct the problems in the audit reports. For example, the third report covered December 1987 to October 1990. The results of the second audit weren’t released until August 1990. And the fourth audit prior to the DOJ investigation did find a substantial decrease in improper claims, though OIG claims that reflected better edits rather than any change in hospital billing practices.