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Shifting Medicare Model Could Set Fraud Traps for Providers

Oct. 25, 2018, 12:01 PM

Health-care providers could face new False Claims Act hurdles as the Medicare agency continues to move toward reimbursement based on quality care rather than quantity.

It’s an emerging question whether courts will treat failures to comply with requirements for value-based care programs as fraud. The FCA typically is used to go after health-care providers who billed government funded health programs for treatments that were not provided or were upcoded in the current fee-for-service system that pays for quantity of care.

Now, health-care providers will need to make sure they’re complying with all the requirements of participation in value-based programs, as health-care moves steadily toward value-based reimbursement. Not doing so could leave them open to fraud litigation.

“If a provider is getting an enhanced payment for meeting certain quality criteria and you haven’t met them and it can be said you know you haven’t met them, there could be some liability,” James Holloway, a shareholder at Baker Donelson in Washington, D.C., who represents health-care providers in fraud litigation, told Bloomberg Law.

New Approaches, New Issues

Lots of compliance infrastructure had been built around making sure volume metrics for fee-for-service care were measured appropriately, Michael Lampert, a partner at Ropes & Gray LLP in Boston who represents health-care providers in regulatory and fraud matters, told Bloomberg Law.

Now, with quality of care moving to the forefront, compliance programs will have to guarantee the integrity of data that they submit to demonstrate quality. And, health-care providers need to make sure they understand all the criteria for value-based payment.

Federal regulations laying out requirements for accountable care organizations (ACOs) are an example of a newer approach, Lampert said. ACOs are groups of doctors, hospitals, and other health-care providers who join together to coordinate the care to they give to Medicare patients. ACOs must meet requirements such as engaging with beneficiaries, providing a process for beneficiaries to access their medical records, and developing an infrastructure for ACO providers and suppliers to report on the quality and cost to allow for monitoring.

The arrangements can provide several kinds of fuel for False Claims Act cases. “You do see the interaction of three different areas,” Melissa Jampol, a former assistant U.S. attorney who now represents health-care clients undergoing fraud investigations, told Bloomberg Law.

Jampol said value-based arrangements can trigger potential violations of the Anti-Kickback Statute, which prohibits providers from paying for referrals, such as bonuses for a meeting; or the Stark Law, which prevents doctors from making referrals for certain services to places where they have financial relationships. Both kinds of violations can be called false claims and have been pursued as such.

Data analytics play a big part in building fraud cases under DOJ’s current health care fraud initiatives and, as a result, because value-based arrangement often generate significant amounts of data, any incorrect data could potentially be the basis of FCA liability, as the relator alleged in this matter.

“I think this is an area where we’re going to see more enforcement action,” Jampol, now with Epstein Becker & Green in New York and Newark, N.J., told Bloomberg Law.

Early Test

The U.S. District Court for the District of Kansas Oct. 2 granted summary judgment for Lawrence Memorial Hospital in a case featuring FCA allegations with respect to quality measures. A former emergency department nurse in the Lawrence, Kan., hospital alleged the hospital falsely reported patients’ arrival times to increase Medicare reimbursement so electrocardiograms were the earliest time in the records, which would impact the hospital’s Outpatient Quality Reporting (OQR), Inpatient Quality Reporting (IQR), and Hospital Value Based Purchasing (HVBP).

OQR and IQR are pay-for-reporting programs in which hospitals report certain quality measures with respect to their outpatient and inpatient encounters to CMS. In return, hospitals avoid a reduced payment for the provision of services to Medicare patients. The HVBP program allows CMS to withhold a certain percentage of annual Medicare payments from all hospitals nationwide and place it in a separate fund to increase or decrease the reimbursement rate upon claims for payment depending on IQR performance measures.

The court didn’t find the alleged inaccurate submission times material because it didn’t view the arrival times as “sufficiently critical” in a way that would affect the government’s payment decision. But that doesn’t mean a court in the future would rule the same way.

“It’s highly fact-specific,” Jampol told Bloomberg Law. Jampol said a judge could find quality measures material in another case with a different set of facts.

But this case isn’t dead yet either. Robert Collins, one of the attorneys for the whistleblower who practices in Olathe, Kan., told Bloomberg Law that his legal team is looking for grounds to appeal and to ask for an amended ruling.

“We find the order very inconsistent with the reading, intent, and performance of the programs,” Collins told Bloomberg Law. He said the entire premise of value-based care is meaningless if you can make up numbers the way his client alleged Lawrence did.

“If a single data element was falsely reported, there still would be many factual and legal issues to be resolved,” Nancy LeGros, former chief legal officer at CHRISTUS Health, a health system comprising 60 hospitals and 175 clinics based in Irving, Texas, told Bloomberg Law. LeGros is a partner at the law firm Bracewell LLP in Dallas.

“Was the data element false in every case? There are many metrics involved in the program, so what portion of the value-based payment can be attributed to the false data elements? Should it taint the value-based payment for all claims or just those that are affected by the data point?” LeGros asked.

Manipulated Metrics and Compliance

“Despite the court’s holding [in Lawrence Memorial Hospital], the case shows that a hospital’s reporting methodology for metrics that could be manipulated would benefit from periodic spot checks for compliance issues,” LeGros told Bloomberg Law.

Holloway echoed those sentiments. “The potential exposure would be higher in a case where a provider is able to manipulate whatever data goes into making the value determination,” he said.

The CMS deferred any questions regarding possible FCA liability for value-based payments to the Justice Department. The Justice Department didn’t respond to Bloomberg Law’s request for comment. The attorneys for Lawrence Memorial Hospital declined Bloomberg Law’s request for comment out of respect for the recent death of the whistleblower in the case.

To contact the reporter on this story: Matt Phifer in Washington at

To contact the editor responsible for this story: Pamela Atkins at