NC agency bests government fraud unit
NC agency bests government fraud unit
After prevailing in court, it seeks legal costs
A North Carolina home health agency and hospice, which last fall prevailed in a grueling 21¼2-year legal battle with government health care fraud investigators, is now seeking compensation from the government for its legal fees, totaling over $500,000. In a climate of ever more aggressive government pursuit of fraud and abuse in home care and hospice, this story should put hospices on notice of what can happen to an innocent agency.
Early in the morning of Jan. 19, 1995, scores of government agents with guns and handcuffs, representing a joint federal/state Medicaid anti-fraud task force, showed up at the Goldsboro headquarters of Home Health and Hospice Care (HHHC), a nonprofit agency serving 48 counties in Eastern North Carolina.
The agency is also certified as a hospice, although it is not a member of Hospice for the Carolinas, and carries a census of 60 hospice patients as well as operating a 12-bed inpatient hospice facility in Goldsboro. However, its hospice services were not targeted in the probe. HHHC is known for its aggressive marketing, other hospice managers in the state tell Hospice Management Advisor.
Agents initially refused to show their federal search warrant, herded the agency's staff into the lobby, refused to let them answer ringing phones, and even denied one nervous employee permission to use the bathroom. Eventually agents carted off 5 million documents from the agency's eight offices, including all current charts. For months after, staff had to drive 50 miles to a warehouse in Raleigh to photocopy active charts as a government agent watched.
No charges of fraud were ever filed against HHHC from this investigation, a joint effort involving the Federal Bureau of Investigation, the Internal Revenue Service, the state Medicaid Investigations Fraud Unit, and the U.S. Attorney's office. A series of court hearings have all focused instead on the legality of the government's search warrant.
U.S. Magistrate Judge Alexander Denson, who had granted the original search warrant based on the agents' reports of three confidential informants, also heard the home care agency's challenge of the legality of this search warrant. He ruled that the agents had knowingly, or with reckless disregard for the truth, given false information about five key areas of alleged records falsification and fraudulent billing at HHHC. The government appealed this ruling on technicalities to U.S. District Judge Malcolm J. Howard and then to the 4th U.S. Circuit Court of Appeals, both of which sided with the home care agency.
The U.S. attorney's office declined to appeal the decision one final step, to the U.S. Supreme Court, and at that point HHHC's attorneys filed to be reimbursed for legal costs under a federal law called the Equal Access to Justice Act. "If you were the prevailing party in a dispute with the government, you have the right, once the case is settled, to file a petition in federal court and ask the judge to review what your client had to spend in defending itself and advancing its case," says attorney Tim Finan with the Goldsboro law firm Everett, Womble and Finan. HHHC is requesting $533,000. While it is a rare kind of legal proceeding, with no set timetable, Finan says it's likely that the judge will eventually award some or all of this request.
No apologies for government overreachingGloria Dupree, public information officer for the U.S. Attorney's Office in Raleigh, tells HMA, "We can't make any comments because the court case is pending." Although task force agents were found by three courts to have seriously overstepped their authority and overreached in the pursuit of home care fraud, there has been no apology or any acknowledgement of wrongdoing by the agents.
The most troubling aspect of this case, for Finan, arose in a June 1996 meeting with the U.S. Attorneys in charge of the case, requested by HHHC's attorneys to disclose the results of their internal investigation. "We gave the government an opportunity to stop the investigation, by voluntarily sharing with them information the court would later find, and we essentially got handed our hats and coats," he relates.
"I'll never forget what happened next. We went through and laid out the things we had found, and the conclusions were inescapable. We asked them to look into it, and one of the government attorneys looked right back at us and said, `We are the government. We do not make mistakes.' I was looking her right in the eye. This woman was absolutely serious."
HHHC president Beverly Withrow estimates that the company lost at least $5 million because of the investigation, including planned joint ventures with hospitals that backed out after the highly publicized raid. The agency's patient census remained flat. "Our staff had a difficult time after it happened. Some doctors stopped referring, but the majority were supportive, because we're in a rural community and everybody knows everybody else," she relates. "We're on a strong enough footing that we will survive," even without reimbursement for legal fees.
"It's difficult to keep an agency running when something like this is going on, and to deal with the morale of employees. Are there going to be padlocks on our door tomorrow? The executive's challenge is to make them understand we are cooperating and we will cooperate, but we will be exonerated," Withrow says.
Communication proves crucial to moraleHow does the executive shore up morale? "First is to always run a good, honest company, with good, honest employees. Then you need to communicate with the workers. We now have 10 satellite offices. Every time something else occurred in this case, our corporate attorney and I would travel from office to office, with all the information we were at liberty to give them, reassuring them that we hadn't done anything wrong," Withrow says.
What else can home care or hospice agencies do in the face of such a anti-fraud sweep? "If they've got a search warrant, you have to let them search," Finan responds. "I'd suggest having a senior manager go and follow them around, if they are willing, but do not obstruct them. Call your attorney, and then call the U.S. Attorney's office to see what information they would give," he says. HHHC's board immediately met and authorized an internal investigation. "Their view was: `If something's wrong, let's make a settlement with the government, but if not, let's not be a victim,'" Finn relates. "It's better to be proactive. I would not just sit back and wait, even if I was sure I was innocent."
HHHC was also investigated by the government in 1989. At that time it returned $100,000 for overpayment and billing errors, but was not found to be guilty of fraud. It had also been in the process of establishing a formal corporate compliance plan at the time of the raid, Withrow relates, and has since returned to that project.
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