GAO: Justice Department backs off False Claims Act

The General Accounting Office says it's too soon to tell if the Department of Justice has lived up to the promise it made eight months ago to curb its overzealous use of the False Claims Act in prosecuting health care fraud. The DOJ's decision to quietly drop 351 cases against hospitals in a controversial laboratory unbundling initiative leads some experts to believe Justice may go after easier targets, like physicians.

"We remain concerned, that the Department of Justice may resume its practices or redirect them toward physicians or those in the medical community who are even less well equipped to defend themselves," says William Agrast, counsel and legislative director for Rep. William Delahunt (D-MA). Last year, Delahunt co-sponsored a bill designed to gut the False Claims Act, which many regard as having too low a burden of proof.

DOJ denies it, but most experts agree Delahunt's bill, along with a sister bill introduced in the Senate, prompted the department to issue its own internal "guidance" on the use of the False Claims Act on June 3, 1998. A tacit agreement was reached that if the DOJ complied with its guidance, Congress wouldn't take action on either bill. The General Accounting Office (GAO) was assigned to evaluate whether the DOJ had been successful.

Not much has changed with the Feb. 1 release of the GAO report, however. Indeed, how judiciously the DOJ used the False Claims Act remains largely a matter of opinion.

Sanford V. Teplitzky, JD, with the firm of Ober, Kaler, Grimes and Shriner in Baltimore, says he hasn't seen any real change in the DOJ's approach to prosecuting health care fraud. "I haven't seen changes in existing investigations," he says. "Whether they're changing how they're starting investigations, or how they're deciding which investigations to begin, I don't know. But with the ongoing investigations, I don't see them saying, 'Wait, we need to rethink these things.'"

Vickie J. Williams, JD, with the firm of Bennett, Bigelow and Leedom in Seattle, says she's noticed at least a few differences, however. "It does appear to me that the Department of Justice and the Office of the Inspector General are being a little more careful about jumping in [to an investigation] with both feet," she says. "They seem to be more willing to investigate a little further or listen to the provider's side of the equation before they aggressively throw resources into an investigation."

The best evidence of DOJ's supposedly kinder and gentler approach is the number of cases closed without adverse action in its laboratory unbundling initiative. (See chart, above.) As the GAO points out in its report, this initiative "has been the subject of considerable criticism by the medical community." Essentially, many hospitals contend the initiative has little or no legal basis. They also claim the DOJ's so-called "demand letters" in which the department threatened prosecution under the False Claims Act unless hospitals paid up promptly, amount to extortion. GAO refuses to speculate, however, on why the DOJ dropped so many of its lab unbundling cases since June 3, although it may address the issue in its next report.

Mary Grealy, JD, Washington, DC, counsel for the Chicago-based American Hospital Association, says the DOJ declined to prosecute the lab unbundling cases because they were bad cases to begin with. "They weren't fraud, there weren't patterns of abuse. It was ridiculous," she says.

Teplitzky says the number of closed cases only supports what the health care industry's been saying for years: "The Department of Justice has had hundreds and hundreds of these things out there that should never have been opened in the first place. The fact that they're closing them is promising news. But since we don't know which cases they're closing, it's hard to draw any additional conclusions from the numbers."

With the next GAO report due on Aug. 2, industry experts aren't rushing to any final judgements on the DOJ's compliance with the False Claims Act guidance. Delahunt's bill and its sister in the Senate are ready for another run if the DOJ doesn't continue its progress, Grealy says. "If we find that cases where there were minimal error rates have been referred back to the fiscal intermediaries rather than to the U.S. attorneys offices, then we will agree the guidelines are working," she says. "Otherwise, we will have a problem and will have to go back to Congress."

Agrast also wants to see Justice stressing compliance rather than punitive action, at least when there's no evidence of deliberate wrongdoing. And he's encouraged by the preliminary results. "Anecdotally at least, it appears that there's been a significant shift, and we're hopeful that it won't be necessary to go back to the legislation."