Ohio case could rewrite rules for alleging fraud
Ohio case could rewrite rules for alleging fraud
If feds lose, use of the False Claims Act would be very limited, experts say
The U.S. Sixth Circuit Court of Appeals has breathed new life into a lawsuit that could dramatically impact the way the government currently wields the False Claims Act in cases of alleged Medicare overbilling. The ruling reversed a decision by a district court in Ohio not to hear a challenge to the federal government’s laboratory unbundling initiative brought by the Ohio Hospital Association and American Hospital Association (AHA) in 1996.
The two hospital groups argued that the government was using the False Claims Act to investigate billing practices that had never been explained to hospitals. But the government moved to dismiss the case, claiming the court did not have jurisdiction. And despite harsh language from the lower court judge about the way the way the Secretary of the Department of Health and Human Services (HHS) was pursuing the hospitals, the judge ruled the case could not be heard.
The stormy protest by the hospital groups did lead to the government’s quiet decision to stop the practice of sending out demand letters. Nevertheless, 105 Ohio hospitals have settled unbundling investigations with the government for a total of $31 million.
"In this case, there was never a regulation or and then suddenly HHS and the Department of Justice [DOJ] are sending demand letters to hospitals claiming they owe large sums of money," says Tom Nickels, senior vice president of the Chicago-based AHA. "They basically said that if they don’t pay up, they will be subject to $5,000 or $10,000 per claim in damages," he adds. "That is why it is significant and why it goes well beyond the False Claims Act."
According to Circuit Judge David Nelson, HHS Secretary Donna Shalala threatened a number of Ohio hospitals with draconian penalties under the False Claims Act if those hospitals did not pay double the amount of alleged overpayments received under the Medicare program for performing certain outpatient laboratory tests.
The hospitals argued that at the time they submitted reimbursement claims for the tests in question, the billing standards by which they routinely measured the amount of their claims were consistent with HHS rules and regulations.
"The Secretary has never initiated a rulemaking proceeding under the Administrative Procedure Act to formalize the billing standards she now espouses," asserted Nelson. "Neither has she initiated administrative proceedings to recoup the alleged overpayments." According to Nelson, the Secretary instead allegedly opted to use the FBI and other components of DOJ to coerce the hospitals into retroactively accepting revised standards and paying large sums of money under threat of even greater penalties if they declined settlement.
Nelson ruled that the lower court was right in accepting the Secretary’s contention that she is not personally subject to suit for her alleged misuse of the False Claims Act. But he said the lower court erred in accepting the Secretary’s argument that jurisdiction to grant declaratory relief is barred under the Medicare Act.
According to Mary Grealy, president of the Healthcare Leadership Council in Washington, DC, the lower court is now likely to convene a full hearing on the facts. If the case is ultimately decided in favor of the hospitals, she says it will be clear that the Secretary cannot merely charge that hospitals billed inappropriately and ask DOJ to pursue them using the False Claims Act. "What the hospitals objected to all along in this case was that the fiscal intermediaries in many instances did not tell them to bundle these tests and submit them for payment," says Grealy. "They were just not given that information."
The ball is now in the government’s court," says Nickels. If the government appeals, the case will either go to a panel of appellate judges or the Supreme Court and that could potentially be argued this year, he predicts. If the government opts not to appeal, the case will be remanded back to the District Court. "That will probably be take place in the next year or two," he adds. "But ultimately, especially if it does go back to trial, this could easily take several years."
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.