The Ohio Hospital Association last week ended a five-year battle with HHS over a national investigation into hospital laboratory billing with a settlement that relieves its members of the more onerous and costly provisions of corporate integrity agreements.
More importantly, OHA officials and lawyers said, the settlement leaves intact a federal appeals court ruling that upheld hospitals' legal standing to challenge government billing investigations directly in federal court rather than through lengthy administrative hearings.
In a written statement, American Hospital Association Executive Vice President Richard Pollack said, "Today's favorable settlement should inject more balance into government False Claims Act investigations" because it gives hospitals the option of going to court for relief from federal actions.
HHS and the U.S. Justice Department officials declined to comment on the settlement or its impact.
The OHA had filed a civil lawsuit in 1996 against former HHS Secretary Donna Shalala alleging that the government didn't have the authority to investigate laboratory claims dating back to 1989. It also said hospitals had operated without clear guidance when they billed laboratory tests as individual claims instead of as a bundle.
More than 150 Ohio hospitals have paid the government millions of dollars-and signed corporate integrity agreements-to settle allegations that they illegally unbundled laboratory tests in order to receive higher Medicare reimbursement. The investigation, which began as the Ohio Hospital Project in 1996 and became the national probe Operation Bad Bundle, had recouped more than $63 million from 288 hospitals nationally, including the Ohio facilities, as of March 31 of this year.
In exchange for dropping their lawsuit challenging the probe, the Ohio hospitals will no longer have to submit detailed corporate integrity agreement reports to HHS each year and can instead file letters certifying their compliance with the agreements, OHA Vice President Mary Yost said.
In addition, Ohio hospitals that discover Medicare overpayments will be allowed to deal with their fiscal intermediaries in an administrative process, rather than contacting HHS' inspector general's office.
Yost said the association has signed the settlement agreement with HHS and awaits formalities before the suit is dismissed. The settlement applies solely to Ohio hospitals. The outpatient lab unbundling investigation is ongoing, but it's no longer employing the statewide hospital audit sweeps that were used in Ohio.
"The scope of the investigation was broader in Ohio, and one accomplishment of this suit was narrowing that investigation," said OHA attorney James Flynn, of the Columbus firm of Bricker & Eckler.
The suit, which was later joined by the American Hospital Association, established an important legal precedent for hospitals, Flynn said. Rejecting a key federal defense, the 6th U.S. Circuit Court of Appeals ruled in December 1999 that hospitals have legal standing to challenge government investigations in court and aren't confined to Medicare administrative proceedings. While the court's decision provides what lawyers call "persuasive precedent" in states lacking a legal ruling on the issue, it only establishes actual precedent in the 6th Circuit's jurisdiction of Kentucky, Michigan, Ohio and Tennessee.
A U.S. District judge in Cleveland threw out the lawsuit in September 1997, saying she lacked jurisdiction in the case because the associations had no standing to sue. The OHA and the AHA appealed the decision to the 6th Circuit, which in its December 1999 decision reversed the district court ruling and ordered a trial on the merits of the case.
The Justice Department, which represented HHS, sought a rehearing by the full 6th Circuit. In May 2000, the government's request was denied, and in January the government's request for a hearing by the U.S. Supreme Court was denied as well. Flynn said settlement talks began in earnest in March. No trial date was ever set.