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HCA stock price

On the defensive

HCA case highlights fiscal, legal pressures on execs

By Joe Carlson
Posted: August 11, 2012 - 12:01 am ET

With potential whistle-blowers lurking in every operating room in the country, hospital executives must become more vigilant in actively seeking out and investigating medical procedures that could be construed as unnecessary, medical and legal experts say.

Heart procedures and the implantation of cardiac devices in particular have come under scrutiny by federal prosecutors and plaintiffs' attorneys because of their high costs and utilization rates. Those factors, combined with the overall public alarm over Medicare fraud, have led to a growing number of inquiries such as the one announced last week into Nashville-based hospital chain HCA.

The company, which operates 163 hospitals, disclosed in an Aug. 6 quarterly earnings call with investors that the U.S. attorney's office in Miami requested to see the results of medical-necessity reviews that the company is doing on its interventional cardiology services.

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HCA disclosed in a filing with the Securities and Exchange Commission that day that company officials have reviewed cardiology cases at about 10 hospitals, mostly in Florida, but the search for such reviews remains ongoing. HCA didn't give a timeline for when the information will be turned over.

The day of the disclosure, HCA's stock price dropped 4% but has since rebounded (See chart). Simultaneously, HCA defended its clinical practices in a four-page statement pre-empting a New York Times story posted online later that evening reporting that the chain had internally uncovered evidence of unneeded procedures between 2002 and 2010.

Key legal observers said in interviews that the federal probe of HCA may have its roots in a federal whistle-blower lawsuit under the False Claims Act that remains under seal. Also known as “qui tam” lawsuits, such cases often remain secret for years, even from the targets of the litigation, as government lawyers investigate allegations leveled by private individuals.

“These types of cases are often brought by whistle-blowers because you really do require some sort of insider information about how medical procedures are taking place to get it started,” said Stephen Meagher, the California whistle-blower attorney whose lawsuits against HCA sparked an investigation that led to the company—then known as Columbia/HCA Healthcare Corp.—to pay a $1.74 billion between 2000 and 2003 to resolve Medicare fraud allegations.

Meagher said he does not represent a whistle-blower today in any case against HCA. However, two former high-ranking federal prosecutors in Florida confirmed in interviews with Modern Healthcare that the federal inquiry of HCA appears to be based on insider materials provided by a whistle-blower. And HCA's statement to investors noted that it could not predict the effect of “any potential claims under the federal False Claims Act.”

HCA officials and the federal prosecutor's office in Miami declined to comment.

Meanwhile, one plaintiff's law firm—Leopold Law in Palm Beach Gardens, Fla.—confirmed to Modern Healthcare that it has received inquiries from HCA patients about a possible malpractice lawsuit involving cardiac procedures. But history shows that lawsuits and investigations based on questions of medical necessity are tough to win in court because so much depends on subjective physician judgment.

“Yes, medical-necessity cases can be hard to prove,” said A. Brian Albritton, former U.S. attorney in Orlando, Fla., and now an attorney with Phelps Dunbar. “They're often based on statistical abnormalities rather than direct evidence that a specific procedure was unjustified.”

In 2003, Dallas-based hospital chain Tenet Healthcare Corp. paid $395 million to settle claims with more than 750 former patients who filed lawsuits against the company; Tenet also paid more than

$54 million to resolve state and federal allegations that physicians at one of its hospitals provided medically unnecessary cardiac procedures.

Whistle-blowers who initially brought that case against Tenet's Redding (Calif.) Medical Center received an $8.1 million share of the government settlement. Tenet sold the hospital after the allegations came to light.

Experts say that while cardiology procedures are high-margin service lines that subsidize unprofitable ones, the business strategy comes with high risk as it also attracts a healthy dose of legal scrutiny.

In 2010, for example, St. Joseph Medical Center in Towson, Md., paid $22 million and entered a corporate integrity agreement to resolve federal whistle-blower litigation without admitting to allegations that it profited from medically unnecessary cardiac procedures by Dr. Mark Midei. The doctor denied the allegations that cost him his medical license, but the hospital is still in litigation with some of the 585 former patients notified about the situation.

A different Maryland cardiologist, Dr. John McLean, was convicted and sentenced to eight years in prison last year for performing unnecessary procedures on more than 100 patients at another hospital, Peninsula Regional Medical Center, Salisbury, Md., whose administrators agreed to pay the federal government $1.8 million and enter a corporate integrity agreement with HHS for failing to stop McLean's unneeded procedures.

In the Pittsburgh area, UPMC Hamot hospital in Erie, Pa., is fighting a False Claims Act lawsuit from one of its former cardiologists, Dr. Tullio Emanuele, alleging that the hospital paid kickbacks to a medical practice that is accused of conducting medically unnecessary cardiac procedures in which two patients died. The hospital and physicians have denied the allegations in court filings and requested the lawsuit be dismissed.

Dr. John Harold, a cardiologist associated with the Cedars-Sinai Heart Institute in Los Angeles and president-elect of the American College of Cardiology, said that in the face of such scrutiny, physicians and hospitals need to ensure they can document and explain their decisionmaking with cardiac cases.

HCA's disclosure of the federal probe on Aug. 6 coincided with the publication of a critical story in the New York Times that quoted a former nurse saying he witnessed medically unnecessary procedures at an HCA hospital. Although the newspaper reported that the nurse's allegations were proven true by an internal review, the hospital did not renew the nurse's contract shortly after, according to a trove of internal company records the Times obtained.

“One of the most unfortunate things about this story is that the worker lost his job for raising concerns. From a societal perspective, that is of great concern,” said Dr. Raymond Gibbons, a cardiologist with the Mayo Clinic, Rochester, Minn., and past president of the American Heart Association. “That is just awful. If we lose that as a mechanism because people are afraid of losing their jobs, the long-term consequences of that are very bad.”

Wide variations in the rates of surgical procedures and in physicians’ adherence to clinical guidelines have opened the door to scrutiny from the government, plaintiffs’ attorneys and patients.
Wide variations in the rates of surgical procedures and in physicians’ adherence to clinical guidelines have opened the door to scrutiny from the government, plaintiffs’ attorneys and patients.
Gibbons said he has no particular knowledge of the HCA situation beyond what the newspaper published.

According to interviews and testimony cited in the Times story—which ran online late on Aug. 6 and in print the following day—physicians at three current or former HCA hospitals in Florida had performed unnecessary cardiac procedures on patients, at least two of whom suffered harm from the care.

Although the story reported that the company did investigate the claims and strip some physicians of their credentials, HCA declined to comment to the Times whether it notified patients about unneeded procedures.

One internal e-mail cited by the paper allegedly quoted an HCA employee who said the company had successfully used confidentiality rules to shield a damaging internal review on medical necessity from the state attorney general's office. HCA disputed that in the story, saying it provided “substantially all of the information in the report” to authorities.

HCA's unsigned written comment on the forthcoming newspaper story said medical necessity of procedures including cardiac catheterization and stent implantations are the result of physician-led decisions that are “the subject of much debate within the cardiology community.” That debate leads to significant variations in volumes across the country, within geographic regions, and even among the same medical staffs, in some cases, HCA said in the statement.

“Variation and disagreement among physicians indicates the difficulty in determining the medical necessity of these procedures,” the HCA statement said, noting also that HCA's volumes of cardiac interventions are comparable to the national averages.

The Dartmouth Atlas of Health Care, a research project at Dartmouth College in Lebanon, N.H., has documented regional variations in healthcare among Medicare patients. For example, with coronary interventions, Arkansas patients received 14.3 procedures per 1,000 enrollees, compared with 6.1 in New Hampshire, the data showed. Florida, at 10.2, was almost exactly equal to the national average of 10 in 2007, the most current data available.

More recently, academic analyses of data in the National Cardiovascular Data Registry produced two studies for the Journal of the American Medical Association that in 2011 found high rates of heart procedures that may not have been justified by evidence.

In one study, investigators concluded that 22.5% of implanted cardioverter defibrillators did not meet Medicare coverage guidelines. A federal probe into ICD use at hundreds of U.S. hospitals is ongoing, with a resolution possible as soon as this fall. Ninety-five HCA hospitals are under review in that investigation, the company reported previously in SEC filings.

Mayo's Gibbons said the national cardiac overuse problem stems from Medicare's fee-for-service system, which creates systemic incentives for high volumes instead of quality of care. It's not a new observation, he said, noting that President Lyndon Johnson spoke about it not long after signing Medicare into law. “He said we have a problem, we need to change the payment system,” Gibbons said. “It was the late '60s. That was 45 years ago. We haven't changed it yet.”

Late Friday after the stock market closed, HCA issued an updated statement, this one addressing some of its clinical and business practices in anticipation of what it said is a second New York Times story critical of the hospital chain.

The two-page update to the original four-page statement addressed such issues as emergency room practices, rates of pressure ulcers and private-equity investments from several sources, including Bain Capital, the Frist family and KKR. In the updated statement, HCA said it uses industry-accepted standards in seeking reimbursement for emergency care. The company said the rate of pressure ulcers at its hospitals is well below the national average for all hospitals. And, it said, “KKR and Bain Capital, as well as the Frist family, have been valued partners, and we look forward to their continued involvement with the company.”

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