OIG, DOJ back down on use of False Claims Act

The federal government may finally be putting the brakes on its aggressive use of the False Claims Act, its most devastating weapon against health care fraud and abuse.

In response to a letter sent late last month by several members of Congress to Attorney General Janet Reno, the Department of Justice and the HHS Office of the Inspector General have issued new standards governing how they will refer and prosecute federal false claims cases. The new standards are clearly meant to blunt allegations that the DOJ improperly pursues cases in which providers are guilty only of making simple billing mistakes.

In a striking departure from the DOJ's previous hard line opposition to watering down the act, Deputy Attorney General Eric H. Holder Jr. told Congress on June 4 that the department "recognizes that legitimate concerns have been raised about our activities in this matter, and we have taken action to address them."

These actions include:

1. Clarifying the steps U.S. attorneys must take before pursuing a False Claims Act investigation.

2. Establishing working groups to oversee the development and implementation of national initiatives such as the 72-hour window project.

3. Allowing providers to discuss the allegations made against them before issuing a demand for settlement.

In its guidance, the DOJ also lists several things that prosecutors may consider as mitigating factors in a health care fraud investigation, including "the impact that an enforcement action may have on the availability of medical services in small or rural communities as well as the resulting financial and practical burdens on a health care provider."

By providing "mechanisms" to evaluate the potential impact a fraud investigation could have on a facility and the community it serves, the DOJ contends that it's not necessary for Congress to impose a de minimus threshold, such as the one proposed by the Health Care Claims Guidance Act. (See related story on False Claims Act legislation, page 3.)

Under a de minimus standard, providers who receive overpayments from Medicare less than a given amount could be fined by no more than the full amount of the claim plus interest. The DOJ claims that the imposition of a specific, quantifiable threshold would hamper its flexibility in dealing with fraud cases.

Meanwhile, the OIG has issued its own "best practice" guidelines, which it will use when developing and participating in national enforcement projects. Most significantly, the OIG has decided to set "an appropriate minimum monetary threshold and/or percentage error rate" to serve as a guide in determining which health care providers it will refer for overpayment recoupment, says June Gibbs Brown, the Inspector General. "Cases involving providers who exceed the project's threshold may be developed for potential referral to the DOJ or other appropriate enforcement agency for consideration under a civil or criminal authority."

The minimum threshold will vary from project to project and will be based on factors such as a provider's total Medicare/Medicaid revenues, prior audits and number of erroneous claims, and overpayment liability.

Also as part of its new guidelines, the OIG says it will take steps to ensure that investigative protocols and settlement agreement terms are applied consistently among different judicial districts. It may also establish "a gradation of compliance measures" based on such factors as the size of the provider and the scope of the misconduct, Brown says.

While critics welcome these concessions on the part of federal investigative agencies, they emphasize that the issue isn't settled. "We're happy with the guidelines," says Dionne Dugall, spokesman for the Chicago-based American Hospital Association (AHA). "It's a significant step forward. But there's still a lot of clarification needed, for things like the percentage error rate and where it's going to be set. We want to know how the guidelines are going to be enforced, and if a hospital is still liable even after it follows the instructions of the fiscal intermediaries. All these things the guidelines don't really make clear."

According to Holder, the DOJ plans to meet with health care representatives "in the near future" to discuss the guidance and address any concerns. After six months, the guidance will be reviewed and its impact assessed, Holder adds.