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September 28, 2015 01:00 AM

Hundreds of hospitals said to settle in federal probe of cardiac procedures

Lisa Schencker
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    Hundreds of hospitals are believed to have settled with the government as part of a yearslong, nationwide investigation into the suspected overuse of implantable cardioverter defibrillators, or ICDs, according to lawyers with knowledge of the cases.

    The vast majority have not been made public—a handful have been disclosed in financial reports. The U.S. Justice Department may announce in the coming weeks what may be the largest False Claims Act investigation and recovery ever in terms of the number of hospitals involved.

    “I believe there are over 500 hospitals that are the subject of the initiative, and I believe that the vast majority of them have reached settlements with the Department of Justice,” said Frank Sheeder, a partner in the law firm DLA Piper who has also represented clients involved in the investigation.

    The consulting firm Navigant has worked with more than half of the targeted providers, according to Kevin Cornish, a managing director in Navigant's disputes and investigations practice. He confirmed that several hundred hospitals have agreed to settle.

    The total sum the government has recovered is likely to be large, although none of the lawyers interviewed for this story was able to provide an estimate. A Justice Department spokeswoman declined to comment Monday, saying the department's policy is to neither confirm nor deny investigations.

    In August, HCA said in an SEC filing that it had agreed to pay the government $15.8 million. That same month, Tenet Healthcare Corp. said it had agreed to a $12.1 million settlement.

    Other systems that have also disclosed settlements include Iasis Healthcare; Catholic Health Initiatives; St. Joseph Health based in Irvine, Calif.; and MedCath Corp., a now defunct chain of heart hospitals. None of the companies admitted liability as part of their settlements.

    The investigation started more than four years ago and has raised the hackles of physicians who argue that Medicare's coverage rules for the devices conflict with other medical guidelines.

    The implantable cardiac devices, which cost $25,000 to $40,000 apiece, are wired to the heart and deliver an electric shock if they detect an abnormal rhythm. Their use increased after Medicare changed its rules in January 2005 allowing them for primary prevention of arrhythmia. The rules say the devices cannot be implanted within 40 days of a heart attack or 90 days of bypass surgery or angioplasty, but many doctors have chosen to implant them in such circumstances anyway.

    The investigation has raised awareness among hospitals across the country about Medicare's national coverage decision for implantable defibrillators. It has been credited with lowering the number of the devices implanted in recent years.

    “Now hospitals and doctors are in a difficult position because the standard of care is different from what Medicare will allow coverage for,” said Lynn Adam, a lawyer with the firm King & Spaulding who has represented clients involved in the investigation. She said hospitals have responded with new policies to help doctors and patients determine who will pay for the devices if Medicare won't, she said.

    The investigation has given the industry a better understanding of the government's interpretation of the CMS' national coverage determination and how to comply with it, according to Cornish. But the policy “is still lacking significantly with respect to the current standard of care when it comes to implantable cardiac defibrillators,” he said.

    The investigation also, however, has broader potential implications for future healthcare investigations.

    It's the first time the government has alleged violations of the False Claims Act on the basis of medical necessity on such a large scale, Cornish said. It's also the first time the government has undertaken such a large investigation based on a legal theory that holds hospitals accountable for the medical decisionmaking of their staff, he said.

    “Any time a hospital is billing for something that a physician has done within the walls of that institution, it is the hospital's responsibility to make sure it agrees with the compliance of that service or procedure or device with whatever applicable Medicare rules and regulations are,” Cornish said. “If they are not and they bill it, then they are taking on a False Claims Act liability for acts of a physician who is not their employee.”

    The investigation also shows the power of data in bringing cases against hospitals.

    “It indicates that data prospecting can be a fruitful way for people to develop cases because it is clear to me that this was an effort to round up hospitals based on data and not any specific knowledge or allegations” said Sheeder of DLA Piper. “So prudent hospitals would be well advised to analyze data trends to spot aberrations or outliers.”

    Colin Zick, a partner at Foley Hoag in Boston who has also represented providers involved in the investigation, said, “Over the course of 20 years, you've seen a real evolution in the government's approach, and their ability to access and manage the data.”

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