The government's attempt to equate substandard hospital care with fraudulent billing bore fruit last week when a Pennsylvania hospital agreed to pay $200,000 to settle allegations that it violated Medicare's conditions of participation.
The U.S. attorney in Philadelphia and HHS' inspector general's office settled July 25 with 120-bed Central Montgomery Medical Center in Lansdale, Pa., a for-profit acute-care hospital owned by King of Prussia, Pa.-based Universal Health Services. The government alleged that Central Montgomery knowingly violated Medicare conditions of participation by illegally restraining patients in medical-surgical settings during 10 months in 2002.
While the U.S. attorney's office in Philadelphia has pioneered the use of the False Claims Act in failure-of-care cases against nursing homes, this marked the first settlement involving similar allegations against a hospital.
"Applying this legal theory to hospitals will put hospitals at greater legal risk," said whistle-blower lawyer Stephen Meagher. "But at some level, this is not a huge expansion of what the government has used the False Claims Act for in the past. It's just that using Medicare conditions of participation with the False Claims Act is unusual."
Medicare regulations implemented in 1999 require hospitals to use less restrictive alternatives to control patients before implementing physical or chemical restraints. The government claimed that because Central Montgomery knew that its practices violated those Medicare conditions of participation, its bills for services rendered to those patients should be considered false claims. Restraints allegedly led to the death of a patient at Central Montgomery in August 2002, seven months after Pennsylvania Health Department surveyors cited the hospital's use of physical and chemical restraints. The U.S. attorney delivered subpoenas to the hospital in October 2002 and has negotiated with the hospital since.
Central Montgomery denied wrongdoing, saying its use of restraints "was clinically appropriate to provide proper care to the hospital's patients and to protect them from further harm."
The hospital said it settled to avoid "a long, expensive and complicated legal battle," adding that it believes the allegations "represent an unprecedented effort by the government to expand the False Claims Act far beyond its appropriate scope and its intended use."
The government alleged that an August 2002 state survey found that in 91 out of 91 cases, the hospital did not adequately document that it complied with Medicare policy on restraints. The alleged misconduct occurred during a transitional period after the hospital was acquired by UHS.
The U.S. attorney applauded the hospital for changing its restraint policies and practices, which have "drastically reduced its use," and now offers "multiple, less restrictive alternatives."
Washington healthcare defense lawyer John Boese of the firm Fried, Frank, Harris, Shriver & Jacobson who wrote a book on the False Claims Act, dismissed the $200,000 settlement as signifying little.
"Now a $200 million settlement might get some attention. This settlement only represents a rational decision by rational people and doesn't mean anything except that the hospital must have believed that by signing it, it could get off more quickly and cheaply. A federal district court or appellate court decision would portend something. But this will have little effect."
Assistant U.S. Attorney David Hoffman, who prosecuted the case, disagreed, saying it's not necessary to extract huge settlements to change behavior. "I can only speak to my experience with nursing homes. And that went beyond looking at the settlement as a cost of doing business. I believe that most hospitals will look at this and review their restraint policies, regardless of how large this settlement was. The real message is that the abuse of restraints is an important issue that concerns not only the providers but the government as well."
Hoffman said the Medicare conditions of participation are important and must be followed by hospitals and providers. He said no one expects a restraint-free environment, but hospitals have to try the least restrictive alternatives before ordering or imposing physical or chemical restraints.