The federal government has shown its cards in its investigation of Medicare outlier payments to Tenet Healthcare Corp. A filing the government made in two federal racketeering lawsuits filed against Tenet in Florida may have revealed all.
One healthcare defense lawyer who reviewed the filing in U.S. District Court in Miami said the federal government has a weak hand.
Both lawsuits allege that Dallas-based Tenet illegally schemed to boost its own outlier payments and wrongly deprive the plaintiff hospitals of outlier payments, which are designed to soften the financial blow to hospitals of the most expensive Medicare cases. One lawsuit was filed by Florida Attorney General Charlie Crist on behalf of the state's 13 public hospitals (March 7, p. 12). The other complaint was filed as a national class-action suit on behalf of all nongovernment hospitals.
The government filed its "friend of the court" brief in response to Tenet's motion to dismiss the two lawsuits, which have been consolidated, and to give the federal government's position since the issues in the two lawsuits could affect the government's potential case against Tenet.
Much of the government's filing points to a 1999 case in the 9th U.S. Circuit Court of Appeals in San Francisco in which Tenet took a legal position the government contends is contrary to the company's position in the current case.
The government was unable to point to Medicare statutes or regulations that said, explicitly, that participating in Medicare limits the charges a hospital can set for its services, said Robert Salcido, formerly a lawyer in the U.S. Justice Department and now a healthcare defense lawyer with Akin Gump Strauss Hauer & Feld in Washington.
"What (the filing) reveals to me is how weak the government's case is," Salcido said. "If the government had a strong case, it would simply say, 'The statute says X, and you did Y.' Statutes are the gold standard. If there was a clear statute or regulation saying that the charges had some limits that Tenet exceeded, then it's an easy case, but the government can't do it."
The government said in the brief that it "emphatically disputes Tenet's assertions that it was entitled to claim outlier payments based on whatever it wanted to charge and without any consideration of its actual costs."
In its memorandum supporting its motion to dismiss, Tenet cited a portion of the Medicare Provider Reimbursement Manual that states that the CMS "cannot dictate to a provider what its charges or charge structure may be." But the government said in its filing that other language in the same part of the manual upholds the CMS' authority to decide whether those charges can be used to apportion costs for reimbursement purposes.
The government also contends that to read the regulations as allowing hospitals to set charges without a test of reasonableness would produce absurd results, such as allowing a hospital to set charges with no relation to costs to generate more outlier payments.
The government said it is investigating allegations that Tenet generated $1.6 billion in improper outlier payments by doing just that, a practice the government calls "turbocharging." The government also maintains that the outlier statute makes clear that outlier payments are to be paid only to reimburse hospitals for extraordinary cases, not merely instances where a hospital has inflated its charges.
Tenet declined to comment beyond its court filings. In December 2002, shortly after the initial furor about Tenet's high outlier payments, the company said its practice of rapidly increasing gross charges, or list prices, was the main cause of its very high outlier payments.
In January 2003, Tenet voluntarily adopted an outlier policy that foreshadowed changes the CMS made to its regulation later in the year.
The government said its investigation is to determine whether Tenet violated the federal False Claims Act, which would carry significantly heavier penalties than two common-law theories the government could pursue. The False Claims Act carries penalties of up to three times the amount illegally obtained, whereas the common law provides just the return of the improperly gained reimbursements, Salcido said.
A state attorney general forcing the federal government to show its hand in the middle of an investigation indicates a lack of coordination between law enforcement at the state and federal levels, Salcido said. "You'd like coordination between law enforcement officials who have joint interests," he said, "but where there's no rule requiring that, a lot of people are going to go out and pursue their own agenda."
The federal government was aware of the lawsuit before it was filed, said JoAnn Carrin, a spokeswoman for the Florida attorney general. To her knowledge, federal officials did not seek to delay the filing of the lawsuit, Carrin said.
A hearing on the motion to dismiss is scheduled for June 20.