Medicare Fraud and Abuse
DOJ Continues to Promote Compliance with False Claims Act Guidance Gao ID: GAO-02-546 April 5, 2002The Department of Justice (DOJ) recovered more than $1.2 billion in health care fraud cases in fiscal year 2001. The False Claims Act bolstered DOJ's recoveries and enabled the government to seek damages and penalties against providers who knowingly submitted fraudulent bills to Medicare, Medicaid, or other government programs. In the late 1990s, industry representatives voiced concerns that DOJ had over zealously pursued hospitals, conducted unwarranted investigations, and demanded large penalties for unintentional errors. In response, DOJ issued guidance that emphasized the importance of using the act in a fair and even-handed manner and introduced new procedures for national initiatives. DOJ requires all U.S. Attorneys' Offices that pursue civil health care fraud to annually certify their compliance with the guidance. DOJ appears to be conducting its three national initiatives consistent with the guidance. U.S. Attorneys' Offices that GAO visited had coordinated their activities with the national initiative working groups and, as the guidance requires, took each hospital's unique circumstances into consideration in resolving these matters. Representatives from the American Hospital Association and the state hospital associations GAO spoke to were generally satisfied that U.S. Attorneys' Offices were adhering to DOJ's False Claims Act guidance.
GAO-02-546, Medicare Fraud and Abuse: DOJ Continues to Promote Compliance with False Claims Act Guidance
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United States General Accounting Office:
GAO:
Report to Congressional Committees:
April 2002:
Medicare Fraud And Abuse:
DOJ Continues to Promote Compliance with False Claims Act Guidance:
GAO-02-546:
Contents:
Letter:
Results in Brief:
Background:
DOJ's Oversight Aims to Foster Compliance with False Claims Act
Guidance:
National Initiatives Are Being Conducted in Accordance with the
Guidance:
Hospital Associations Express Few Concerns Regarding DOJ's Compliance
with the Guidance:
Concluding Observations:
Agency Comments:
Appendix I: GAO Reports Concerning the Use of the False Claims Act in
Civil Health Care Fraud:
Abbreviations:
AHA: American Hospital Association:
DOJ: Department of Justice:
HCFA: Health Care Financing Administration:
HHS-OIG: Department of Health and Human Services Office of Inspector
General:
PPS: prospective payment system:
[End of section]
United States General Accounting Office:
Washington, DC 20548:
April 5, 2002:
Congressional Committees:
In fiscal year 2001, the Department of Justice (DOJ) reported
recoveries of more than $1.2 billion related to civil health care
fraud. Identifying improper payments and ferreting out fraud in
Medicare”the federal health insurance program serving approximately 40
million elderly and disabled Americans”is one of DOJ's top enforcement
priorities. DOJ's recoveries have been bolstered by the use of the
False Claims Act,[Footnote 1] a powerful enforcement tool, which
enables the government to seek significant damages and penalties
against providers who knowingly submit false or fraudulent bills to
Medicare, Medicaid, or other federal health programs.
DOJ's use of its False Claims Act authority has included several
nationwide investigations of hospitals”projects known as national
initiatives.[Footnote 2] These investigations resulted in significant
concerns from hospital industry representatives in the late 1990s.
They criticized DOJ for overzealously pursuing hospitals for improper
Medicare billings by conducting unwarranted investigations and
demanding large penalties for unintentional errors. Amid growing
concerns from both the industry and the Congress, DOJ issued guidance
on the appropriate use of the act in civil health care matters,
including national initiatives, in June 1998. The guidance was
intended to emphasize the importance of using the act in a fair and
even-handed manner and to implement new procedures regarding national
initiatives.
The Congress subsequently required us to monitor DOJ's implementation
of the guidance, which has resulted in a series of reports (see
appendix I).[Footnote 3] While our initial reviews identified concerns
with a DOJ initiative that had commenced before the guidance was
issued, our more recent work shows that DOJ has made progress in
ensuring that the guidance is followed.
This report represents our final required evaluation of DOJ's efforts
to ensure compliance with the guidance. It focuses on DOJ's efforts to
monitor compliance at its U.S. Attorneys' Offices and the application
of the guidance in three national initiatives. These three initiatives
all focus on hospitals that may have received greater reimbursement
from the Medicare program than they were entitled to receive. The
Prospective Payment System (PPS) Transfer initiative examines whether
hospitals have improperly reported patient transfers between hospitals
as discharges. The Pneumonia Upcoding initiative assesses whether
Medicare has been billed improperly on behalf of beneficiaries
hospitalized with pneumonia. Finally, the Laboratory Unbundling
initiative reviews potentially improper billings for laboratory tests.
Our specific objectives were to: (1) review the actions taken by DOJ
to ensure U.S. Attorneys' Offices compliance with the guidance, (2)
determine whether the PPS Transfer, Pneumonia Upcoding, and Laboratory
Unbundling projects are being conducted in a manner consistent with
the guidance, and (3) determine whether the hospital industry has
concerns with DOJ's current use of the False Claims Act.
Although DOJ's guidance applies to all civil health care matters, we
focused this review, as we have our prior reports, on DOJ's
implementation of the guidance in national initiatives. To evaluate
DOJ's oversight of U.S. Attorneys' Offices, we discussed ongoing
monitoring and compliance efforts with DOJ officials, including those
responsible for periodic evaluations of the operations of each U.S.
Attorney's Office. In addition, we confirmed that all offices involved
in civil health care matters had certified their compliance with the
guidance for the period ending December 31, 2001, as required by DOJ.
We also reviewed relevant documentation supporting these
certifications and interviewed members of DOJ's working groups that
coordinate each initiative to discuss their oversight of U.S.
Attorneys' Offices participating in the initiatives.
To determine if the PPS Transfer, Pneumonia Upcoding, and Laboratory
Unbundling projects are being conducted in a manner consistent with
the guidance, we visited 4 of the 94 U.S. Attorneys' Offices. The
offices we visited were participating in at least one national
initiative. At these offices we reviewed investigative files
pertaining to PPS Transfer, Pneumonia Upcoding, and Laboratory
Unbundling matters. We reviewed correspondence and other materials to
determine whether these offices were conducting their investigations
in accordance with the guidance. We chose the offices to visit to be
able to review examples of both open and closed matters from the three
initiatives. In total, we reviewed 35 investigative files-19 closed
matters and 16 open matters. To identify industry concerns with DOJ's
implementation of the guidance, we spoke to representatives of the
American Hospital Association (AHA) and representatives from eight
state hospital associations.
We were provided access to documents through an agreement with DOJ to
ensure that confidentiality of ongoing matters and DOJ's internal
review process would not be compromised. This agreement did not
materially affect our review because we were able to document
compliance with specific elements of the guidance in both open and
closed matters. We conducted our work from October 2001 through March
2002. Except for these restrictions on our access, our work was
performed in accordance with generally accepted government auditing
standards.
Results in Brief:
DOJ continues to take actions to foster compliance with its False
Claims Act guidance. First, DOJ has successfully integrated an
assessment of compliance with the guidance in its periodic evaluations
of all U.S. Attorneys' Offices. In addition, all U.S. Attorneys'
Offices involved in pursuing civil health care fraud matters must
annually certify their compliance with the guidance. Although not
required to do so, DOJ officials told us that some offices have
implemented procedures to support their annual certifications by
documenting their compliance with the guidance in individual
investigative files or by establishing a review process under the
direction of their civil chiefs. All of the offices we visited this
year that are resolving matters with the use of the False Claims Act
had, in fact, instituted such procedures. The national initiative
working groups also have encouraged compliance with the guidance.
Their efforts have helped ensure that claims data are accurate and
that offices do not open more investigations than resources can
support. Offices are therefore better able to devote individualized
attention to each hospital's circumstances, as the guidance requires.
In our view, these activities have helped to promote compliance with
the guidance.
DOJ appears to be conducting its three national initiatives in a
manner that is consistent with the guidance. Our work continues to
show that the U.S. Attorneys' Offices we visited had coordinated their
activities with the national initiative working groups and, as the
guidance requires, took each hospital's unique circumstances into
consideration in resolving these matters. We noted one of the offices
we visited that was participating in the Laboratory Unbundling
initiative had simultaneously opened many matters in 1995, prior to
the issuance of the guidance. According to an official in this office,
a lack of resources to handle this workload ultimately resulted in
delays in resolving these matters. The office found it could not
resolve all of these matters soon enough to utilize the damages
provision available under the False Claims Act. According to an
official in this office, approximately 12 matters remained open at the
time of our March 2002 visit. In addition, this office was unable to
resolve 4 of the recently closed matters we reviewed as false claims.
Instead, it collected the amount of any overpayment plus interest.
Representatives from the AHA and the state hospital associations we
spoke to were generally satisfied that U.S. Attorneys' Offices were
adhering to DOJ's False Claims Act guidance in the national
initiatives. Although a few hospital association representatives
expressed continuing concerns with the use of the act in health care
matters, none of the representatives we contacted identified specific
instances of noncompliance with the guidance”either by a particular
U.S. Attorney's Office or in one of DOJ's national initiatives. Many
of these representatives provided us with examples of DOJ's compliance
with the guidance. Officials from DOJ's Executive Office for U.S.
Attorneys and its Civil Division generally concurred with our findings
and concluding observations.
Background:
The False Claims Act provides that anyone who "knowingly" submits
false claims to the government is liable for damages up to three times
the amount of the erroneous payment plus mandatory penalties between
$5,500 and $11,000 for each false claim submitted. In the health care
setting, where providers submit thousands of claims annually, the
potential damages and penalties provided under the act for violators
can quickly add up.
DOJ's use of the False Claims Act currently includes three national
initiatives involving hospitals.[Footnote 4] The two initiatives that
currently have the most active investigations are the PPS Transfer and
Pneumonia Upcoding projects. The PPS Transfer[Footnote 5] initiative
was developed from a series of audits and joint recovery projects by
DOJ, the Department of Health and Human Services Office of Inspector
General (HHS-OIG), the Health Care Financing Administration (HCFA),
[Footnote 6] the agency within the Department of Health and Human
Services that administers the Medicare program”and the contractors to
HCFA that process and pay Medicare claims. This effort sought to
identify improperly coded transfers and recover associated
overpayments from hospitals.[Footnote 7] The Pneumonia Upcoding
initiative targets inpatient hospital claims inappropriately coded as
stays for a relatively rare bacterial form of the disease that is more
costly to treat”approximately $2,500 more per claim”than the more
common viral pneumonia. DOJ's older national initiative”Laboratory
Unbundling”is nearly completed. The Laboratory Unbundling initiative,
which began in 1994 prior to the issuance of the False Claims Act
guidance, identifies excess payments for laboratory tests that were
performed concurrently on automated equipment but improperly billed or
"unbundled" as separate tests.
DOJ issued "Guidance on the Use of the False Claims Act in Civil
Health Care Matters" on June 3, 1998. The guidance, which applies to
all civil health care matters, emphasizes fair and responsible use of
the act and instructs DOJ attorneys and U.S. Attorneys to determine,
before they allege violations of the act, that the facts and the law
sufficiently establish that the claimant knowingly submitted false
claims. The guidance also contains provisions that specifically
address the use of the act in DOJ's national initiatives. Prior to
alleging a violation of the act in connection with a national
initiative, attorneys should use contact letters to notify a provider
of a potential liability and give the provider an opportunity to
respond before a demand for payment is made. The guidance contains
other safeguards to ensure the fair treatment of hospitals. For
example, U.S. Attorneys' Offices must consider alternative remedies to
the False Claims Act, including administrative remedies such as
recoupment of overpayments, program exclusions, and other civil
monetary penalties. In addition, they must also consider a provider's
ability to pay; the effect on the community served by the provider”
particularly for rural and community hospitals; and the extent of
provider cooperation in the matter.
According to the guidance, working groups must be established to
coordinate each national initiative. These groups, comprised of DOJ
attorneys and assistant U.S. Attorneys with expertise in health care
fraud control, must develop "initiative-specific guidance" to provide
direction and support to the U.S. Attorneys' Offices that are
participating in the initiatives. This initiative-specific guidance
may include a legal analysis of pertinent issues, an investigative
plan, and a summary of Medicare claims data indicating potentially
significant billing errors for specific providers to assist individual
U.S. Attorneys' Offices participating in the initiatives. As we
reported in August 1999, the PPS Transfer, Pneumonia Upcoding, and
Laboratory Unbundling working groups developed extensive guidance and
memoranda for their respective initiatives outlining relevant legal
and regulatory requirements.[Footnote 8] The working groups are also
tasked with tracking the participating offices' progress, responding
to their questions, and monitoring compliance with the guidance, as
each initiative proceeds.
This is the fifth and last in a series of reports we have issued
regarding DOJ's implementation of its False Claims Act guidance and
its efforts to oversee compliance. In February 1999, we issued an
early status report on DOJ's initial efforts to implement the
guidance.[Footnote 9] In our August 1999 report we concluded that
DOJ's process for reviewing implementation of the guidance appeared
superficial and that U.S. Attorneys' Offices were not consistent in
their application of the guidance. However, in March 2000, we reported
that DOJ had taken steps to improve compliance with its False Claims
Act guidance.[Footnote 10] Our March 2001 report concluded that DOJ
seemed to have made substantive progress in ensuring compliance with
the guidance by strengthening its oversight of U.S. Attorneys'
Offices.[Footnote 11] In that report, we also pointed out that both
the PPS Transfer and Pneumonia Upcoding initiatives appeared to be
conducted in a manner that was consistent with the guidance.
DOJ's Oversight Aims to Foster Compliance with False Claims Act
Guidance:
DOJ continues to promote compliance with the False Claims Act guidance
at its U.S. Attorneys' Offices. We believe that the oversight
mechanisms it has put in place help ensure that the guidance will be
followed and, that if instances of noncompliance occur, there are
procedures in place to detect them.
DOJ's periodic evaluation of compliance with the guidance at U.S.
Attorneys' Offices continues to be substantive. Two years ago DOJ
revamped this process to provide a more meaningful assessment of
compliance, in response to our prior recommendations. As we reported
last year, these evaluations include detailed interviews regarding the
activities and procedures each office has in place to ensure that the
attorneys are informed of the guidance and that the office is in
compliance. Of the 28 evaluations that took place in 2001, none
resulted in a determination that an office was out of compliance with
the guidance. DOJ officials indicated that offices found to be out of
compliance in future evaluations will be required to develop a plan of
corrective action. DOJ's Executive Office for U.S. Attorneys would
then be tasked with monitoring the offices' implementation of these
plans.
Similarly, DOJ's requirement that all U.S. Attorneys' Offices involved
in civil health care fraud matters annually certify their compliance
with the guidance, a process also instituted 2 years ago in response
to our recommendations, appears to have continued to promote
compliance. According to DOJ officials, all U.S. Attorneys' Offices
participating in civil health care matters had attested to their
compliance for the period ending December 31, 2001. Although DOJ has
not required offices to document their compliance with the guidance as
part of the certification process, the offices we visited this year,
like those we visited the year before, had either specifically
documented their compliance in individual investigative files,
instituted a review process under the direction of their office's
civil chief, or developed a process to document compliance in a
particular stage of an investigation. For example, closed
investigative files we reviewed in one office contained certifications
that the investigations had been conducted in accordance with the
guidance. Another office conducted an annual review of all open
national initiative matters to assess compliance. A third office
documented its justification for opening investigations before
hospitals were notified of potentially false claims. Based on our
review of the materials supporting these certifications, and our
analysis of the files we reviewed, we found no basis to dispute any
office's certifications.
The working groups have continued to be involved in the development
and implementation of the national initiatives. They have also
continued to monitor the progress of the offices participating in
them. Particularly for DOJ's two newer initiatives, the working groups
have helped ensure the accuracy of the data on which the
investigations are premised. By obtaining and analyzing national and
hospital-specific claims data and subsequently sharing them with U.S.
Attorneys' Offices to use as a basis for initiating their
investigations, the working groups' review has helped ensure the
validity of the analysis, thus addressing a problem which we noted in
a prior report.[Footnote 12] In addition, substantially fewer matters
are being pursued under the two newer initiatives, which we believe is
attributable to the working groups' oversight and their limiting the
data provided to participating offices. This approach helps ensure
that the offices do not simultaneously open more matters than
resources can support. It also enables offices to devote
individualized attention to each hospital's unique circumstances, such
as its efforts to comply with billing rules and its financial
condition, as the guidance requires. In addition, we found that U.S.
Attorneys' Offices participating in the initiatives consulted with
working group members throughout the development of their
investigations and shared proposed settlement agreements with them.
This exchange of information allows the working groups to monitor
compliance with the guidance on an ongoing basis.
National Initiatives Are Being Conducted in Accordance with the
Guidance:
Our review of files at the U.S. Attorneys' Offices we visited suggests
that the interactions between these offices and the hospitals they
investigated were consistent with the guidance, in all three national
initiatives. However, we also found that one of the offices that was
participating in the Laboratory Unbundling initiative had
simultaneously opened more matters than could be processed
expeditiously. It subsequently found that it could not resolve all of
these matters soon enough to utilize the damages provision available
under the False Claims Act.
In reviewing correspondence and other documentation pertaining to the
PPS Transfer, Pneumonia Upcoding, and Laboratory Unbundling
investigations and settlements, we observed that the offices conducted
detailed examinations of each hospital's billing patterns and
circumstances, as the guidance requires. They also considered
hospitals' individual circumstances and varied their actions
accordingly, as required by the guidance. For example, one office
reviewed the data supplied by the PPS Transfer working group and found
that billing patterns for five hospitals indicated that some improper
billings had been submitted. However, the office chose not to pursue
False Claims Act actions because in its view, the amounts of the
overpayments were not of a magnitude to warrant the use of the act.
This office also recognized that resolving these matters as false
claims could adversely affect the hospitals' financial conditions and
impair their ability to provide services to their rural communities.
Both considerations are consistent with proper use of the guidance.
Another office participating in the Pneumonia Upcoding project reduced
its proposed settlement offer because the hospital was able to
demonstrate that it was in dire financial condition and was currently
billing Medicare properly. The office also considered that the
hospital's improper billings occurred while it was under different
management. In a different office participating in the Laboratory
Unbundling initiative, the office closed a matter without recovering
any monies because of the hospital's poor financial condition and the
community's dependence on it as a sole source of medical care. The
hospital, however, instituted new procedures to prevent improper
billings in the future.
However, we found that one office we visited that was participating in
the Laboratory Unbundling initiative is currently facing a challenge
comparable to one we previously identified at another office in our
August 1999 report”simultaneously opening more matters than the
office's resources could ultimately support. As that report noted, the
office was unable to close most of its matters as false claims and
instead collected overpayments only.[Footnote 13]
In March 2002, we visited an office that had opened approximately 60
matters in June 1995, prior to the issuance of the guidance. Although
many of these matters had been settled, an official told us that
approximately 12 were still open at the time of our visit. When
matters remain open for many years the government may jeopardize its
ability to recover damages under the False Claims Act. In order to
settle or litigate allegations as False Claims Act violations, the
government must resolve these matters within the timeframe specified
by the act's statute of limitations.[Footnote 14] At the office we
visited, the statute of limitations had expired for some of the
office's closed matters, including 4 of the recently closed matters we
reviewed. The office collected the amount of the overpayments plus
interest, but could not assess any damages or penalties available
under the False Claims Act.
Officials there largely attributed the delay in resolving these
matters to the complexity of the investigations as well as the
office's workload and an accompanying lack of resources. The resulting
delays may also have kept the hospitals in a state of prolonged
uncertainty regarding their liability.
However, since the guidance was issued, scrutiny by the working groups
and more careful selections of matters by offices has made it less
likely that offices will open more matters than they can resolve in a
timely fashion.
Hospital Associations Express Few Concerns Regarding DOJ's Compliance
with the Guidance:
Representatives from the AHA and the eight state hospital associations
we spoke to were generally satisfied that U.S. Attorneys' Offices were
adhering to DOJ's False Claims Act guidance in the national
initiatives. They had no specific examples of noncompliance with the
guidance either by a particular U.S. Attorney's Office or in a
specific national initiative. Many of these representatives provided
us with examples of DOJ's compliance with the guidance. For example,
some stated that since the guidance was issued, U.S. Attorneys'
Offices have shown greater willingness to communicate with hospitals.
Similarly, they mentioned that these offices were now more likely to
consider information that hospitals submit in their defense and
otherwise treat them reasonably in resolving these matters. Some
associations noted that in the more recent national initiatives”PPS
Transfer and Pneumonia Upcoding”DOJ seems to have carefully identified
potentially improper payments before contacting hospitals. Several
hospital association representatives attributed improved working
relationships between DOJ and the health care community to the
development of an ongoing dialogue between some U.S. Attorneys'
Offices and hospital associations regarding billing issues.
However, a few hospital association representatives we spoke to did
raise some concerns regarding the appropriateness of DOJ's use of the
False Claims Act. For example, a representative of one state hospital
association questioned whether U.S. Attorneys' Offices were giving
enough consideration to the clarity of Medicare's billing rules and
the adequacy of communicating these rules to providers in its current
initiatives. However, the four offices we visited appeared to be
willing to consider whether hospitals misunderstood the billing rules.
In the case of PPS Transfer, both of the offices we visited that were
participating in this initiative exclusively targeted hospitals that
had been the subject of prior PPS Transfer audits conducted by the HHS-
OIG. These audits identified improper billings and the results were
shared with the hospitals. In DOJ's opinion, these audits should have
clarified hospitals' understanding of the PPS billing rules.
Although the AHA and state hospital association representatives we
spoke to acknowledged that DOJ's guidance has resulted in less
threatening communications, they reported that hospitals nonetheless
feel intimidated when they are notified by DOJ that they are under
investigation. One association suggested that, instead of DOJ
conducting initial investigations and notifying hospitals, the
contractors that process and pay Medicare claims should be permitted
to initiate investigations. In our review, which included an
examination of correspondence between the U.S. Attorneys' Offices and
the hospitals, we did not detect an unreasonable or threatening tone.
And, while Medicare contractors as well as the HHS-OIG conduct audits
and perform other tasks to detect and investigate improper billings,
it remains the prerogative of DOJ to pursue providers who may have
violated the False Claims Act. Moreover, only DOJ can initiate a False
Claims Act action against a provider.
AHA representatives also expressed concern about an ongoing False
Claims Act case that is not related to the national initiatives. Their
concerns involve an investigation of over 100 hospitals that allegedly
billed Medicare improperly for investigational medical devices.
[Footnote 15] This investigation is based on a qui tam lawsuit.
[Footnote 16] As with all qui tam cases, DOJ was required to
investigate the allegations and determine whether to join the lawsuit.
Part of its investigation, therefore, included an assessment of
whether the alleged billing improprieties merited pursuit under the
False Claims Act. AHA representatives said the billing rules regarding
these devices had been unclear and that the use of the act was
uncalled for. However, DOJ officials explained that, while these rules
changed over time, their clarity was sufficient to have permitted
hospitals to bill Medicare properly. Because of this pending lawsuit's
qui tam status and the fact that many cases remain under seal, we were
unable to address the matter further.
Finally, some hospital associations raised an issue that was also
brought to our attention in preparing last year's report. Association
representatives continue to be concerned that corporate integrity
agreements they regard as burdensome may be included in settlement
agreements of national initiative matters at the insistence of the HHS-
OIG.[Footnote 17] Consistent with our findings last year, the
imposition of these agreements was not routine for the matters we
reviewed this year. These agreements were required in 7 of the 19
closed matters we examined. Moreover, in an open letter to the medical
community in November 2001, the EMS inspector general announced new
criteria that would be used in determining when a corporate integrity
agreement would be required. These new criteria are based on a variety
of factors including the age and financial significance of the alleged
impropriety and whether the provider has a viable voluntary compliance
plan in place.
Concluding Observations:
DOJ's oversight of U.S. Attorneys' Offices has helped to foster
compliance with its False Claims Act guidance. DOJ has instituted
sufficient monitoring of U.S. Attorneys' Offices participating in the
national initiatives and other civil health care fraud matters to help
ensure that offices use the act in a fair and even-handed manner. The
review of each office's compliance is now an integral component of the
periodic evaluations conducted of all U.S. Attorneys' Offices. The
annual certification of compliance with the guidance by each U.S.
Attorney's Office pursuing civil health care fraud matters has also
helped encourage compliance, as have the activities of the working
groups that coordinate and oversee offices participating in national
initiatives. Our review of open and closed PPS Transfer, Pneumonia
Upcoding, and Laboratory Unbundling project files in the four offices
we visited also supports that the guidance is being followed. And,
although hospital association representatives still expressed some
concerns with the use of the act, they did not identify specific
instances of noncompliance by either a particular U.S. Attorney's
Office or in a specific national initiative.
We believe that it is in the interest of both the government and the
hospitals to pursue investigations thoroughly and resolve them
expeditiously. DOJ is involved in a balancing act. On one hand, if
offices have sufficient evidence to allege that false claims have been
filed, but do not pursue them, the government loses the opportunity to
use the sanctions of the act for the intended purpose of discouraging
false claims for federal monies. On the other hand, if offices
overextend themselves by opening more matters than they can reasonably
be expected to resolve within the required timeframes, the hospitals
are kept in a state of uncertainty about their investigations for
unnecessarily prolonged periods while the government is also unable to
use the act as a deterrent. One of the offices we visited had opened
many Laboratory Unbundling matters in 1995, prior to the issuance of
DOJ's guidance, and is still in the process of resolving some of these
matters. However, offices participating in the two newer national
initiatives”PPS Transfer and Pneumonia Upcoding”are now opening fewer
investigations, reducing the likelihood that this situation will
resurface.
Agency Comments:
We provided a draft of this report to DOJ for comments. Officials from
DOJ's Executive Office for U.S. Attorneys and its Civil Division
provided oral comments, in which they generally concurred with our
findings and concluding observations. They also provided technical
comments, which we incorporated, as appropriate.
We are sending copies of this report to the attorney general of the
United States, the secretary of HHS, and other interested parties. We
will make copies available to others upon request.
If you or your staff have any questions about this report, please call
me on (312) 220-7767, or Geraldine Redican-Bigott at (312) 220-7678.
Other major contributors were Lynn Filla-Clark, Don Kittler, and
Barbara Mulliken.
Signed by:
Leslie G. Aronovitz:
Director, Health Care”Program:
Administration and Integrity Issues:
List of Committees:
The Honorable Patrick J. Leahy:
Chairman:
The Honorable Orrin G. Hatch:
Ranking Minority Member:
Committee on the Judiciary:
United States Senate:
The Honorable Ernest F. Hollings:
Chairman:
The Honorable Judd Gregg:
Ranking Minority Member:
Subcommittee on Commerce, Justice, State, the Judiciary:
Committee on Appropriations:
United States Senate:
The Honorable Jim Sensenbrenner, Jr.
Chairman:
The Honorable John Conyers, Jr.
Ranking Minority Member:
Committee on the Judiciary:
House of Representatives:
The Honorable Frank R. Wolf:
Chairman:
The Honorable Jose E. Serrano:
Ranking Minority Member:
Subcommittee on Commerce, Justice, State, and the Judiciary:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendix I: GAO Reports Concerning the Use of the False Claims Act in
Civil Health Care Fraud"
Reports Mandated by the Omnibus Consolidated and Emergency
Supplemental Appropriations Act of 1999 (P.L. 105-277):
Medicare Fraud and Abuse: Early Status of DOJ's Compliance with False
Claims Act Guidance. [hyperlink,
http://www.gao.gov/products/GAO/HEHS-99-42R]. Washington, D.C.:
February 1, 1999.
Medicare Fraud and Abuse: DOJ's Implementation of False Claims Act
Guidance in National Initiatives Varies. [hyperlink,
http://www.gao.gov/products/GAO/HEHS-99-170]. Washington, D.C.: August
6, 1999.
Reports Mandated by the Consolidated Appropriations Act of 2000 (P.L.
106-113):
Medicare Fraud and Abuse: DOJ Has Made Progress in Implementing False
Claims Act Guidance. [hyperlink,
http://www.gao.gov/products/GAO/HEHS-00-73]. Washington, D.C.: March
31, 2000.
Medicare Fraud and Abuse: DOJ Has Improved Oversight of False Claims
Act Guidance. [hyperlink, http://www.gao.gov/products/GAO-01-506].
Washington, D.C.: March 30, 2001.
Other Related Products:
Medicare: Application of the False Claims Act to Hospital Billing
Practices. [hyperlink, http://www.gao.gov/products/GAO/HEHS-98-195].
Washington, D.C.: July 10, 1998.
Medicare: Concerns with Physicians at Teaching Hospitals (PATH)
Audits. [hyperlink, http://www.gao.gov/products/GAO/HEHS-98-174].
Washington, D.C.: July 23, 1998.
Letter to the Committee on Ways and Means. B-278893. Washington, D.C.:
July 22, 1998.
[End of section]
Footnotes:
[1] 31 U.S.C. sec. 3729(a) to 3733: Anyone who "knowingly" presents
false claims for payment to the United States may be found to be in
violation of the False Claims Act. The act defines "knowingly" to
include a person who (1) has actual knowledge of the false claim, (2)
acts in deliberate ignorance of the truth or falsity of the claim, or
(3) acts in reckless disregard of the truth or falsity of the claim.
[2] DOJ defines a national initiative as a nationwide investigation
stemming from an analysis of national claims data, indicating that
numerous, similarly situated providers have engaged in similar conduct
to improperly bill government health care programs.
[3] These requirements were contained in the Omnibus Consolidated and
Emergency Supplemental Appropriations Act of 1999 (P.L. 105-277) and
the Consolidated Appropriations Act of 2000 (P.L. 106-113).
[4] Another project, the 72-Hour Window, was previously designated as
a national initiative, but according to DOJ, is now complete. This
project, begun in 1995, centered on improper claims for payments for
outpatient services received within 72 hours of a hospital admission.
Payments for the inpatient admission cover these services in addition
to services during a patient's stay.
[5] Under Medicare's Prospective Payment System, hospitals are
reimbursed a single amount to cover an entire inpatient stay. When a
patient is transferred from one inpatient hospital to another, the
transferring hospital is only entitled to receive a prorated payment
based upon the patient's diagnosis and the number of days at the
transferring hospital.
[6] On June 14, 2001, the secretary of Health and Human Services
announced that the name of the Health Care Financing Administration
had been changed to the Centers for Medicare and Medicaid Services. In
this report, we will refer to HCFA where our findings apply to
operations that took place under that organizational structure and
name.
[7] See, for example, reports issued by the Department of Health and
Human Services Office of Inspector General, Medicare Hospital Patient
Transfers Incorrectly Paid as Discharges”January 1992-December 1994 (A-
06-95-0083), November 1996; and Medicare Hospital Patient Transfers
Improperly Reported and Paid as Hospital Discharges (A-0693-00095),
February 1995.
[8] U.S. General Accounting Office, Medicare Fraud and Abuse: DOJ's
Implementation of False Claims Act Guidance in National Initiatives
Varies, [hyperlink, http://www.gao.gov/products/GAO/HEHS-99-170]
(Washington, D.C.: Aug. 6, 1999).
[9] U.S. General Accounting Office, Medicare Fraud and Abuse: Early
Status of DOJ's Compliance with False Claims Act Guidance, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-99-42R] (Washington, D.C.: Feb.
1, 1999).
[10] U.S. General Accounting Office, Medicare Fraud and Abuse: DOJ Has
Made Progress in Implementing False Claims Act Guidance, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-00-73] (Washington, D.C.: March
31, 2000).
[11] U.S. General Accounting Office, Medicare Fraud and Abuse: DOJ Has
Improved Oversight of False Claims Act Guidance, [hyperlink,
http://www.gao.gov/products/GAO-01-506] (Washington, D.C.: March 30,
2001).
[12] This report noted that data used for the basis of unbundling
investigations by certain offices were seriously flawed and had not
been adequately analyzed and verified before these offices made
allegations. U.S. General Accounting Office, Medicare Fraud and Abuse:
DOJ's Implementation of False Claims Act Guidance in National
Initiatives Varies, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-99-170] (Washington, D.C.: Aug.
6, 1999).
[13] Officials had made False Claims Act allegations against 75
hospitals in 1997 Officials at that office told us that obtaining
evidence needed to establish violations of the act would be time
consuming and difficult and that opening so many matters at the same
time strained their resources. Ultimately, the office opted to not
pursue hospitals for violation of the act and instead offered them the
alternative of returning the overpayments identified during the
investigation.
[14] The statute of limitations applicable to the False Claims Act
requires that a civil action may not be brought more than 6 years from
the date the false claim was made or 3 years from the date that the
government could have reasonably discovered the facts about the claim
but not to exceed 10 years from the date the claim was made.
[15] Investigational medical devices are those that have not been
approved for marketing by the Food and Drug Administration.
[16] A qui tam lawsuit involves an action brought by an individual on
behalf of the United States alleging that false or fraudulent claims
have been submitted to the government.
[17] A corporate integrity agreement is an obligation imposed by the
HHS-OIG on a provider as part of a settlement of a potential fraud
matter. The provider agrees to take affirmative steps to improve
compliance and report periodically to the HHS-OIG. The HHS-OIG, in
turn, agrees not to seek further administrative penalties for the
behavior in question. Corporate integrity agreements typically last
for 3 years for national initiative matters.
[End of section]
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