A recent General Accounting Office report reinforces what some hospital executives have maintained for years: Some overaggressive U.S. attorneys break their own rules, bring charges without evidence and don't play fair.
"This is a complete vindication of everything we've been saying for years," said Mary Grealy, who recently resigned as chief Washington counsel of the American Hospital Association (See story, p. 26). "The Justice Department has been using the False Claims Act without any legal or factual basis. I was stunned by the report."
The Justice Department's enforcement of the False Claims Act permits prosecutors to seek treble damages, penalties of $5,000 to $10,000 per incident of alleged fraud and exclusion from Medicare.
Since four national anti-fraud initiatives were launched in 1995, hospitals have complained that they have been targeted by zealous federal prosecutors who invoke the act unfairly and sometimes without evidence of wrongdoing. Each of the initiatives examines how hospitals bill Medicare for certain services provided to beneficiaries.
The AHA and other provider groups supported a bill in Congress last year that would have created "safe harbors" for hospitals that relied on claims information from government contractors or that already had an active compliance plan. The measure also would have required false claims to exceed a threshold before the Justice Department could pursue a case.
But the bill was derailed in June 1998 when HHS and the Justice Department independently released guidelines on the use of the False Claims Act (June 15, 1998, p. 2). Congress decided to give the Justice Department a chance to implement its guidelines and revisit legislation later if necessary.
The hospital industry has argued-and continues to argue-that the Justice Department is not following the guidelines. In response to the criticism, Deputy Attorney General Eric Holder Jr. sent a memo to all U.S. attorneys in February stating that the guidelines did not need more revision.
Concerned members of Congress used an unrelated appropriations bill to order the GAO to investigate the hospital industry's allegations and the Justice Department's response, and to issue two reports.
The first report, released in February, analyzed the actions of Justice Department officials who had been involved in the four national fraud investigations. In the second report, issued Aug. 6, the GAO evaluated the compliance of U.S. attorneys' offices with the Justice Department guidelines in relation to those four investigations (See chart, p. 21).
It found that compliance had improved but was still spotty. It specified several failures, particularly related to the lab unbundling initiative. For example, that initiative had investigated more than 100 hospitals in Illinois and 300 hospitals in Texas, but U.S. attorneys there dropped the cases, citing "serious data problems." The report said four U.S. attorneys' offices in Texas and Illinois took "actions during their investigations that would no longer be permitted by (the Justice Department's) guidance."
Before analyzing or verifying data, the U.S. attorneys had sent letters demanding investigations and requests for official documents, which charged hospitals with violations of the False Claims Act, the report said. The hospitals reviewed the data and protested what they believed were errors. The U.S. attorneys' offices later confirmed they were errors.
One office had charged hospitals based only on the fact that the facilities were the largest Medicare billers in their states.
While applauding some Justice Department compliance efforts, the report characterized its monitoring of U.S. attorneys' compliance as "superficial."
Edward Hopkins, a healthcare fraud lawyer with Broad and Cassel in West Palm Beach, Fla., said, "Whenever you have 93 U.S. attorneys operating independently, you're going to have a few cowboys out there who'll shoot first and ask questions later."
Hopkins said he is encouraged by the cooperation of the groups that work on specific initiatives, the lawyers in the Justice Department's civil division and assistant U.S. attorneys who have healthcare expertise. He said their collaborative efforts have led to more-consistent enforcement and better compliance by U.S. attorneys' offices.
Dan Boston, a spokesman for the Federation of American Health Systems, said the report shows the Justice Department doesn't understand the way the healthcare system works. "We're very pleased that Congress has continued to maintain its oversight of the False Claims Act," he said.
John Bentivoglio, the Justice Department's special counsel for healthcare fraud, said the department agrees with many of the findings in the GAO report. But he pointed out that the questionable practices described are no longer used or preceded its guidelines.
He said U.S. attorneys' offices "have proceeded with caution in unbundling investigations in order to ensure that errors made in the past are not repeated and do not mar ongoing investigations."