August 2001 Bulletin

HHS, IG can enforce quality of care issues

Failure to meet statutory criteria can trigger penalties, civil fines under False Claims Act

By Robert E. Wanerman

Each time that a physician submits a health insurance claim form, he or she makes several representations to a government agency or to a health insurer about the services provided. The most common is a certification that the services described "were medically indicated and necessary for the health of the patient . . .." This ordinary statement can provide the basis for audits, investigations, and even civil or administrative liability based on the quality of care provided to a patient. The tools that are being used are not new; what is new is the application of those tools to enforce quality standards.

Under federal law, all providers have an obligation to furnish services to Medicare and Medicaid beneficiaries that are medically necessary, are provided economically, and that meet professionally recognized quality standards. This obligation is distinct from requirements governing the proper coding of diagnoses and procedures, and can trigger an independent set of enforcement mechanisms. Nevertheless, many of the compliance tools and strategies that are useful in other settings can be helpful in this context.

The agencies that currently enforce fraud and abuse laws have the authority to investigate quality of care issues and to pursue actions based on their findings. For example, a failure to satisfy the statutory quality criteria may trigger review and remedial action by a peer review organization which has the ability to recommend formal sanctions to the Department of Health and Human Services’ Office of Inspector General that range from civil fines to exclusion from participation in all federally funded health care programs.

The Office of Inspector General has another potent tool to enforce quality of care standards: Emergency Medical Treatment and Active Labor Act (EMTALA). Although EMTALA was intended to provide screening and stabilizing treatment for all patients with emergencies (see Legal Issues column, AAOS Bulletin, April 2001), it has been used as a sanction for what the government believes to be substandard responses to emergency situations by on-call physicians. However, the government’s ability to do so was limited by a federal appeals court, which found that the decision by an on-call physician to stabilize or transfer a patient must be evaluated on an objective standard of reasonable conduct under the circumstances, and only requires that the patient be stabilized within the scope of the staff and equipment available. This decision restricts the ability of the government to make quality of care decisions unless all relevant factors are throughly considered in context.

The current remedy of choice for the federal government is the False Claims Act, which includes penalties of up to three times the amount billed to the program plus civil fines of between $5,500 and $11,000 per claim. In such cases, the government has expressed the position that when the quality or efficiency of care drops to the point that the services furnished are no longer medically necessary or are being provided in a manner that wastes resources, then the government is paying for services that do not meet the minimum standard in the certification.

In this context, the government has alleged that if it believes that the care provided is substandard, the certification on the claim is false and is actionable under the False Claims Act. The False Claims Act poses a special threat not only for the extraordinary liability, but also because of the "whistleblower" or qui tam provisions, under which an individual can initiate an action and share in any recovery.

To date, several courts have allowed the Department of Justice to proceed under the False Claims Act based on a quality of care theory. As a practical matter, this translates into a powerful incentive for many providers to settle False Claims Act allegations promptly to avoid the litigation risks.

The current enforcement environment shows no signs of weakening, and may expand further as issues such as the cost of medical errors attract more attention. As a result, practitioners should incorporate quality reviews as a component of their compliance activities. Even though this may be an added expense, it pales by comparison to the expenses and disruption that can occur in any government audit or investigation, even ones that are meritless.

Robert E. Wanerman, JD, MPH, is a senior associate in Arent Fox Kintner Plotkin & Kahn, PLLC, a Washington D.C. law firm.

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