The hospital industry's efforts to curb the government's appetite for Medicare fraud investigations suffered a major setback last week when a judge threw out the American Hospital Association's lawsuit against HHS.
The AHA, along with its co-plaintiff, the Ohio Hospital Association, was seeking a court order to bar HHS from continuing its ongoing investigation of hospital Medicare billing practices for certain laboratory tests.
In a Sept. 18 decision made public last week, U.S. District Judge Kathleen McDonald O'Malley in Cleveland dismissed the AHA/OHA lawsuit, agreeing with HHS that the court had no jurisdiction to hear the case.
HHS successfully argued the federal district court had no standing to question or interfere with the government's investigation and negotiations with individual hospitals.
The AHA and OHA, which sued HHS last October, argued the agency was improperly trying to apply new Medicare billing rules to investigate old Medicare claims. They contended it was illegally holding hospitals liable for old claims under the federal False Claims Act.
Violations of the act carry substantial penalties, including possible imprisonment and stiff financial fines. The AHA and OHA said HHS is using the act, in effect, to extort money from hospitals targeted in the laboratory-billing investigation.
Although their case was dismissed, the associations relished O'Malley's hints that she agreed HHS is being heavy-handed.
In her 14-page ruling, O'Malley cited the "very real possibility" that HHS' position on hospitals' laboratory-billing practices is "wrong" and said its investigative tactics with hospitals "seem heavy-handed."
"Those statements we felt very, very good about," said Mary Yost, an OHA spokeswoman.
The OHA and AHA are considering an appeal of the decision, as well as taking their complaints to Capitol Hill. That's an alternative O'Malley mentioned in her ruling.
O'Malley also said hospitals could get the judicial review they're after by "calling the Secretary's bluff" and refusing to settle.
It's an option the AHA said might happen. "You'd have to find an institution whose leadership and board would be willing to swallow hard and take that step," said Richard Wade, the AHA's senior vice president for communications.
HHS' investigation, one of at least three nationwide Medicare billing probes of hospitals, targets how hospitals bill Medicare for certain laboratory tests. HHS says hospitals should be billing for those tests collectively rather than unbundling the tests and billing Medicare separately.
The investigation began in 1996 in Ohio and has since spread to at least 13 other states. To date, about 40 hospitals, including 24 Ohio hospitals, have reached settlements with the government totaling $13 million in payment recovery and fines, according to a spokesman for HHS' inspector general's office.