Saturday, May 4, 2013

The False Claims Act is Not a Compliance Tool

The False Claims Act is Not a Compliance Tool

The False Claims Act is Not a Compliance Tool

Philip Betbeze, for HealthLeaders Media , May 3, 2013

If you've not been following the news surrounding the use of the False Claims Act to snare providers for Medicare fraud, let me catch you up. On April 2, the 6th U.S. Circuit Court of Appeals in Cincinnati overturned a lower court's $11 million judgment against MedQuest Associates Inc., a diagnostic imaging company. MedQuest had been accused of a False Claims Act violation—in other words, fraud—for violating Medicare's conditions of payment.
So what's the big deal? What's $11 million to an operator of more than 90 diagnostic imaging centers? Well the decision's importance has little to do with the amount in question. Some attorneys think it will be precedent-setting, in that good faith efforts to comply with the myriad (and that's putting it lightly) regulations involved in Medicare contracting are ultimately worth the effort.

That's because the court ruled that since the regulations MedQuest was accused of violating are not conditions of payment, bringing a suit for violations of the False Claims Act (as the Department of Justice did in this case) is not appropriate.
Instead, said the court, such violations are addressable within the administrative sanctions CMS has available, including suspension and expulsion from the Medicare program.

The suit, which was fueled by information disclosed by a former MedQuest employee whistleblower, asserted that the company used physicians in its employ who were not designated to monitor the procedures. There was no question over whether the work was done or whether the violations occurred.
What MedQuest did, however, isn't fraud. At least in the eyes of the court.
"What's most significant legally is that the 6th Circuit said that the FCA is a powerful and blunt instrument and is not appropriate to police regulatory compliance issues in the complex medical arena," says Ty Howard, a partner in the white collar crime defense and healthcare groups at the Nashville-based law firm of Bradley Arant Boult Cummings.
A former federal prosecutor of white-collar fraud, Howard says the court isn't necessarily saying that what MedQuest did is OK, but that the remedy should not come through the FCA. "That's significant for the industry, because with the use of this powerful tool with its trebling damages—the judgments rack up quickly."
Howard says the MedQuest decision is precedent-setting when viewed in conjunction with another suit filed under the FCA that the same court overturned last fall.
In a case brought against Renal Care Group Inc., a dialysis provider, the 6th Circuit overturned another interpretation of the FCA as overly broad. In that suit, the Sixth Circuit ruled that medical service providers that have established separate corporate entities to maximize corporate profits and take advantage of separate Medicare reimbursement programs do not inherently violate the False Claims Act.

That's especially true since Renal Care sought guidance from regulators regarding Medicare regulations that could be interpreted in different ways—in other words, that are ambiguous.
These decisions are a relief to a wide range of healthcare providers who are promoting a culture of compliance, but who fall short, nonetheless. After all, CMS is still free to suspend or exclude firms that make these kinds of mistakes, and they don't have to clutter up the court system to do so.
It's common sense, and it makes you realize that when you're dealing with an entrenched bureaucracy, common sense isn't so common.
Howard says the rulings and precedent can be boiled down to the difference between two phrases: "condition of payment" and "condition of participation."
"By submitting a claim, you have to be in compliance with a myriad of regulations. If the violation surrounds a condition of payment, that can give rise to FCA," he says. "But if it's a condition of participation, that is not going to rise to FCA liability."
That doesn't mean you can afford to be lax in Medicare billing or oversight. Suspension and exclusion are still options, and, as Howard points out, "those are not insignificant penalties."

But disgruntled workers are out there, and given the fact that they can share in any recovery in fraud cases, whistleblowers will continue to serve as an important tool against fraud. But perhaps the outcomes of these cases will make people who are looking for an easy payday think twice before running to the Department of Justice when an "I" is dotted wrong on a claim.
While an appeal to the Supreme Court is possible, Howard says it is unlikely, and even if appealed, the Supreme Court, of course, picks and chooses the cases on which it will rule judiciously.
Perhaps now the Department of Justice will take a similar approach in deciding which potential fraud cases to pursue.
"Many of these cases never get into court. If you're risk-averse, and face criminal penalties as well, that is huge leverage for the government," says Howard. "It's heartening to know that sanity is being restored in these types of cases. The real hope is that the government will take a more judicious view of these cases and take cases that really merit it."
While it's often claimed that the legal resources of the federal government are unlimited, that only seems true to an individual or company facing the legal might of the U.S. Government.
When you look at the big picture, the department has to make choices. Let's hope they make better ones in the future to catch those who are truly defrauding Medicare, and not through lax oversight of payment rules.

Philip Betbeze is senior leadership editor with HealthLeaders Media.

Adventist Health pays US, CA $14.1M to resolve false claims act allegations