How DOJ got 500-plus hospitals to settle over cardiac implants

The two federal prosecutors were skeptical.

They weren't sure what to believe when they first saw whistle-blowers' allegations that 1,300 hospitals across the country had submitted false claims to Medicare for inappropriately implanting heart devices.

“How could 1,300 hospitals—the biggest and the best, the most highly thought of, the leaders, and community hospital systems large and small, east and west, teaching, universities, stand-alones—how was everybody getting it wrong?” Jeffrey Dickstein remembers wondering eight years ago when he was assistant U.S. attorney in the Southern District of Florida.

But because the allegations were so serious, Dickstein and his partner in the inquiry, Amy Easton—then senior trial counsel in the U.S. Justice Department's Civil Fraud Section—felt compelled to investigate.

The pair didn't know then that the case over implantable cardioverter defibrillators would consume the next eight years of their lives with them consistently working 80-hour weeks and crisscrossing the country leading a team that pored through more than 10,000 patient charts. Ultimately, more than 500 hospitals settled with the government for more than $280 million.

The investigation was groundbreaking in many respects, and providers will likely feel its effects for years to come—in ways that are both potentially positive and negative for the hospital community.

On the one hand, hospital defense attorneys praise the way federal prosecutors gave deference to medical experts and took individual patient circumstances into account. They hope the approach will be replicated in future investigations. Also, in light of the inquiry, the CMS is now reviewing whether conditions that justify Medicare coverage of implantable cardioverter defibrillators should be reconsidered, according to a CMS official. Many providers say changes to those requirements are long overdue.

Other potential implications of the investigation, however, are more worrisome for providers. It's already led to a decrease in the number of the devices implanted—which some see as a positive development and others view as an indication that not all patients who need the devices are getting them.

Also, providers worry about the way the case was brought by whistle-blowers who relied on data rather than firsthand experience. They worry that approach could lead to more lawsuits.

“It's a very troubling issue to think about a whistle-blower who has no personal knowledge of the physicians and the hospital and the patients making fraud allegations based solely on data-mining,” said Lynn Adam, counsel at King & Spaulding, who represented several of the systems involved.

Still, many hospital defense attorneys have high praise for the way Dickstein and Easton handled the investigation, saying the duo were open-minded about hospitals' explanations for their billings.

“In a typical investigation, an allegation is made and, often, from a defense perspective, it feels like a conclusion about the conduct has been reached before the investigation is complete,” Adam said. “It didn't feel that way.”

Kevin Cornish, a managing director at Navigant who worked as a consultant for more than 300 of the hospitals involved, said he had “never been a part of a Department of Justice investigation that went the way this did.” He said Dickstein and Easton understood that the hospital billings weren't always a black-and-white issue.

“It was a very iterative process, which normally with the Department of Justice, has not been the case,” Cornish said.

It's a process that began with a single 154-page complaint filed under seal by the whistle-blowers in January 2008.

In that complaint, whistle-blowers Leatrice Ford and Thomas Schuhmann alleged that about 1,300 hospitals billed Medicare for implantable cardioverter defibrillators despite using them outside of Medicare's requirements for coverage. Ford was a cardiovascular nurse turned Medicare compliance consultant who had access to extensive data about hospitals' uses of the devices, and Schuhmann was a healthcare reimbursement consultant who analyzed the data.

The electronic devices, which cost about $25,000 each, are implanted near the heart. They detect and treat extremely fast, dangerous heart rhythms called fibrillations by delivering a shock to the heart. But providers are not supposed to bill Medicare for devices implanted sooner than 40 days after a heart attack or 90 days after bypass or angioplasty in order to give the heart time to stabilize and improve. Those rules describing when providers may bill Medicare for the devices—known as a national coverage determination—were set in 2005 based on clinical trials and guidance from professional cardiology societies, patient advocates and manufacturers.

When Easton and Dickstein first started on the case, they approached it cautiously. Easton began by issuing civil investigative demands to a small percentage of the hospitals to get a better sense about the veracity of the allegations.

It quickly became clear that the allegations were solid—but the path to evaluating them would be winding.

“Their response was, 'Yes, you're right,' ” Dickstein said of the hospitals' responses. The hospitals acknowledged that they implanted the devices sooner than the allowable time frames, but insisted that there were compelling medical reasons for doing so.

At that point, Easton and Dickstein retained a panel of their own experts, including prominent cardiologists, electrophysiologists and heart failure specialists, among others. The experts helped create a medical protocol for reviewing cases, and a review team composed of cardiac nurses used that protocol to look over each patient's chart. Sometimes the experts agreed with the hospitals' explanations for implanting the devices outside the requirements, and other times they did not, Dickstein said.

“We didn't substitute our judgment for the medical professionals' (judgment),” Easton said.

The experts worked with Dickstein and Easton, who consulted with heart societies and hospitals' defense attorneys and experts, to craft a resolution model for determining enforcement. Based on that resolution model, some hospitals' claims were easily excluded from the investigation for falling within exceptions to the requirements, while others were clearly outside the coverage criteria or not medically indicated.

But many other hospitals' claims fell somewhere in the middle, where their validity was fuzzier. In many cases, the prosecutors chose not to challenge hospitals' claims even when they didn't meet Medicare's exact requirements. For example, some hospitals' claims were allowed to stand despite being for implants that occurred sooner than 40 days after a heart attack, as long as they waited at least 30.

“We didn't want to enforce in the gray zone,” Dickstein said. Hospitals made their cases to Dickstein and Easton about where on the continuum they felt they belonged.

Ultimately, of the 1,300 hospitals named in the original complaint, the Justice Department pursued settlements with about 500. “We tailored it to go after those we thought most worthy,” Dickstein said.

The Justice Department reached its first settlement for $6.1 million with MedCath Corp., a now-defunct chain of heart hospitals, in 2013. Other settlements trickled in after that. The Justice Department announced the largest chunk of settlements last October and another 51 settlements this February.

Frank Sheeder, a partner at DLA Piper who represented four systems involved in the investigation, called Dickstein and Easton's approach “relatively balanced.” He credited them for considering claims one by one—an enormous task for two lone Justice Department attorneys.

The praise runs both ways. “We really had the pleasure of dealing with 200 of the best healthcare defense lawyers in the country,” Dickstein said.

Dickstein and Easton have since left the Justice Department and are now with Phillips & Cohen, where they represent whistle-blowers. But many hope their approach of employing medical experts to consider medical decisions will be applied to future Justice Department investigations.

With this investigation, the Justice Department showed that it's capable of looking at a situation chart by chart even when many patients in many places are involved. “They can do it, and they have done it, and I think in the appropriate instances they will do the same thing again,” Dickstein said.

That's not to say, however, that hospitals and their attorneys weren't troubled by other aspects of the ordeal. Community Health Systems issued a statement at the time its $13 million settlement was announced in October saying, “The issue involved a highly technical interpretation of a Medicare national coverage determination that was the subject of strong disagreement in the medical community.”

Dr. Michael Gold, president of the Heart Rhythm Society, called the investigation and resulting settlements disappointing, especially given that the national coverage determination for the devices hasn't changed in 11 years. “Physicians are trying to do their best and trying to follow evidence-based guidelines … and we ended up with lots of centers receiving fines because their documents were not in compliance with what was in the CMS payer decisions,” Gold said.

In 2013, the Heart Rhythm Society along with the American College of Cardiology and the American Heart Association published updated recommendations for patient eligibility for the devices. Some of the writers and peer reviewers for those documents have affiliations with device manufacturers, according to their own disclosures.

Adam, a lawyer who represented several targeted systems, said she'd like to see the CMS add more flexibility for physicians to the current national coverage determination, which is now under review, according to the CMS.

But the fact the national coverage determination may not be in accord with the latest professional society guidelines hasn't stopped doctors from limiting their use of the devices in the wake of the investigation. Based on Medicare claims data, physicians billed Medicare for inserting the devices in 49,014 beneficiaries in 2014 compared with 70,969 beneficiaries in 2008, according to Bryan Vroon, an attorney for the whistle-blowers.

Whether that's a good or bad thing depends on perspective. Vroon said that reduction means doctors are more closely basing their decisions on science, which is a win for patient care. Easton said she's never seen data or even anecdotal evidence that patients have suffered from the reduction in implants.

But Gold, who in January of this year disclosed he has received funding from Medtronic and Boston Scientific Corp. to conduct clinical trials on heart rhythm devices, said that means some patients who need the defibrillators may not be getting them because their situations don't meet outdated Medicare requirements.

He said he doesn't believe the 500-plus hospitals that settled were lawbreakers. “I didn't review 500 hospitals, but it's hard to imagine that 500 hospitals were egregiously violating the rules,” Gold said.

Dickstein said he also wouldn't consider the hospitals involved in the investigation to be fraudsters by any means, though the lawsuit against them was filed under a fraud statute, the False Claims Act. “We don't think they're fraudsters. But on the other hand, we also think that hospitals that are sophisticated enough to operate on hearts are sophisticated enough to follow the rules of their biggest paying customer,” Dickstein said.

The investigation also left providers concerned with the data-mining that led to it. The whistle-blowers in the case relied on data to bring their allegations, not eyewitness experience. Ford, one of the whistle-blowers, looked at procedure and diagnostic codes submitted by hospitals to identify cases where patients received the device during the same admission in which they suffered a heart attack or underwent angioplasty or bypass surgery, Vroon said. She also looked to see if other diagnosis codes justified the implants, he said.

DLA Piper's Sheeder wonders whether the case will embolden other whistle-blowers to use similar data analyses to file lawsuits against providers.

In False Claims Act cases, whistle-blowers are entitled to a portion of whatever money the government recovers. In this case, the whistle-blowers received about $41.8 million, according to the Justice Department.

But Vroon said the case was important for Medicare and patients. The process the Justice Department used made exceptions for situations that fell into gray areas and tried to take updated medical consensus and studies into account. The Justice Department gave hospitals ample opportunity to explain their medical justifications for using the devices outside of Medicare's requirements, he said.

To say the hospitals were prodded to settle over technical billing issues is simply not accurate, he said.

The Justice Department's investigation process was “thoughtful,” Vroon said. “Whether someone wants to criticize it, it remains an historic case.”