HOW MUCH IS TOO MUCH?

The Eighth Amendment to our U.S. Constitution provides, among other things, that “…excessive fines” shall not be imposed or inflicted.  The False Claims Statute, dating back to the Civil War, has been used extensively by plaintiffs and by the U.S. to impose liabilities for those filing “false” claims under Medicare or Medicaid.  In essence, the argument is that each “false” Medicare or Medicaid bill is a separate false claim under this statute.  The statute provides for a minimum penalty of $5,500 and treble damages for each false claim.  In the case of United States v. Gosselin the government revealed that it had received 9,136 (“false”) invoices, and that the government’s actual damages were $865,000 (about $95 per claim).  The battle then moved to the amount of penalty or judgment imposed by the court.  The qui tam whistleblowers apparently wanted $50 Million or more for their lawsuits while the hospital involved wanted the court to find that each claim was a single claim, and that the total damages should therefore be 3 x $5,500 for each of the two claims.  The District Court adopted the hospitals position finding that all of the filings by the hospital constituted a single false claim, and assessed a penalty of $5,500.  The second similar claim was also found to relate to a single false claim, and denied any penalties.

On appeal, the Fourth Circuit Court of Appeals would have none of this.  While it certainly supported the government’s ability to settle these claims for less than the statutory minimum, the Court felt that it was required to assess the minimum penalty for each of the 9,136 “false” claims.

The hospital’s attempt to claim that the penalty was excessive and, therefore, barred by the Eighth Amendment Constitutional provision, was lost.

Hospitals and other high volume billers need to either seek legislative relief to get Congress to change this law to face the reality that, literally, thousands of claims might be filed a day or week by hospitals, and that using this Civil War era statute can result in manifestly unfair penalties.  While high volume users certainly should not be able to profit from artificial limits upon their liability for truly false claims, the current statute and interpretation may, as here, create a situation where the government’s actual damages are less than 1 Million Dollars, but that the government wins a verdict of 50 or 70 times that verdict.  Makes one wonder what would be excessive to the Fourth Circuit?

RAC APPEALS BACK LOG

According to CMS, hospitals now appeal about half of RAC payment denials.  Given the volume of such billings and, therefore, the volume of the payment denial appeals, the result is long delays.  The number of complex denials is reported to top 450,000, with automated denials reaching over 91,000.  This represented $2.6 Billion in claims.  Reportedly the average complex denial claim was over $560,000.  When those records are reviewed, over 50% did not contain an improper payment.

This high rate of denials, coupled with a high rate of success on appeal of these denials, is creating a number of problems, even beyond the obvious slow down in the appeals process.  The RAC appeal system has a built in denial rate that is wrong over 50% of the time.  The RAC system is fundamentally flawed, and fundamentally unfair to hospitals.

$6.8 MILLION FOR HIPAA BREACH

A Puerto Rican Insurance Company will pay $6.8 Million for a HIPAA violation involving mailing pamphlets to Medicaid advantage customers containing protected health information of over 13,000 dual eligible Medicaid beneficiaries.  Reportedly, the company also faces administrative sanctions including the suspension of new enrollments, a notification obligation and perhaps impositions.  This appears to be the largest ever HHS civil monetary penalty.

ST. VINCENT HIPAA BREACH

St. Vincent Health in Indianapolis has begun notifying over 1,000 people that a laptop with PHI was stolen in December.  Apparently, the data was not encrypted.  The penalties and sanctions for St. Vincent have not been reported.

HIPAA AUDITS

HHS plans to resume HIPAA compliance audits this year.  These audits will include business associates and covered entities.  The audit process will restart with a survey to 1,200 organizations, approximately 2/3 business entities and 1/3 business associates.  Expect the audits to focus on HIPAA security risk assessments and documentation of readiness for breach reporting.  No word yet on whether the audits will focus on assessing penalties or on correction.

This newsletter is edited by Paul Wallace of Jones • Wallace, LLC, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years.  Mr. Wallace assists physicians in health practices in contract items, federal legal compliance, creation of practice entities, estate and wealth planning and similar issues.  Please feel free to call if you have any questions on this newsletter or legal matters at (812) 402-1600 or pwallace@joneswallace.com.