DOJ reigns in use of False Claims Act, study claims

The Justice Department appears to be keeping the promise it made to Congress last year to go easier on massive national investigations of hospitals, according to a new GAO report.

But it's still too early to tell whether DOJ has really softened its national crackdowns cautions Mary Grealy, Washington, DC, counsel for the American Hospital Association. The clincher will be if issues such as lab unbundling are not prosecuted as False Claims Act cases, but instead are resolved by fiscal intermediaries (FIs) as routine overpayments.

DOJ's ostensible change of heart came last year after complaints from hospital groups prompted Congress to threaten to restrict the government's ability to wield the False Claims Act. The Justice Department quickly issued new guidelines in June that essentially promised a more cooperative approach to nationwide fraud probes such as the notorious hospital lab unbundling and 72-hour DRG investigations. This meant an end to arbitrary demand letters that say, in effect, pay up or be sued, and consideration of extenuating factors such as whether the fiscal intermediary gave clear guidance.

According to the report, out of 400 lab cases, DOJ terminated 350 without penalizing the provider. Grealy says that shows that the issue was "something that never should have been handled by DOJ. It should have been given to the FIs."

However, a compliance officer at a Southern health system says the FIs were the ones at fault for the lab unbundling fiasco in the first place. "We did not receive any guidance from the FI," says the officer, who asked not to be identified. He also accuses the FIs of stinginess by sending just one copy of its memos to providers. "That's OK for a 25-bed hospital but not for a five-hospital health system," he adds. "By the time our CEO got it and passed it to the business office, it was six months before I got a Xerox of a Xerox."

The GAO survey of 93 U.S. Attorneys' offices found that "since the guidance was issued, almost seven times as many national initiative matters were closed as were opened." Of 2,101 cases involving national investigations, only about 110, or a slim 5%, were opened since June 3, 1998.

But these figures can be somewhat misleading, says Grealy. Some U.S. Attorneys are more aggressive than others. In Texas, prosecutors have backed off the lab unbundling issue and refunded previously collected penalties, while the investigation appears to be continuing in other states, such as Missouri, according to Grealy.