The American Hospital Association last week said it will create a fund to indemnify any hospital that agrees to act as a test case to fight federal fraud charges in court rather than settling.
The move marks a further stiffening of the AHA's resolve to combat what it sees as the over-aggressiveness of federal investigations of hospitals' Medicare billing practices. The association says the feds are overstepping their legal authority by treating every billing problem as fraud rather than considering the possibility of inadvertent errors.
The AHA and the Ohio Hospital Association unsuccessfully challenged the government's probe into hospital Medicare billing for certain laboratory tests, but the federal judge who dismissed the case suggested the associations find a hospital under investigation to take up the cause in court (Oct. 27, p. 12).
The AHA is hoping to persuade a hospital to do just that by offering it financial backing.
Richard Pollack, AHA's executive vice president for federal relations, said one factor keeping hospitals from challenging the federal government in court is the legal exposure.
A hospital that lost a fraud case under the federal False Claims Act-the law that the feds are using to pursue hospitals-could be liable for triple the amount of billing errors uncovered and a fine of $10,000 per error.
In the most drastic case, a hospital could be kicked out of the Medicare program and its executives subjected to fines and/or imprisonment.
Perhaps of lesser concern, the hospital likely would amass substantial legal costs.
To overcome the financial concerns of potential litigants, the AHA plans to create its own legal defense fund that would pay the legal costs of the hospital and cover any fines and penalties should the hospital lose its case.
"Going the distance opens (the hospital) up to exposure; they are going to be looking for some protection," Pollack said.
Thomas Nickels, the AHA's vice president of federal relations, said there is "significant interest among our members. It would not be hard to raise the funds. It is in all of the field's interest to fight this."
Nickels added that the AHA had not decided whether to raise the funds through a special assessment or through donations. How much will be needed won't be decided until the plaintiff is found and the case proceeds, officials said.
The AHA also has joined a new lawsuit challenging a separate federal fraudulent billing investigation of teaching hospitals and their faculty practice physicians. Several hospitals and physician groups also are plaintiffs (See related story, p. 4).
In a related development, the AHA, in conjunction with the accounting firm Coopers & Lybrand, last week released a compliance program the AHA says will make it easier for hospitals to avoid running afoul of federal Medicare billing regulations.
The AHA board of trustees recently passed a resolution urging all hospitals to voluntarily adopt compliance programs.