Massive Implantable Defibrillator Settlement under False Claims Act Approaches

The Department of Justice is reportedly nearing settlements with hundreds of hospitals over their fraudulent billing of Medicare for defibrillators. Medicare covered the $40,000+ defibrillators for the primary prevention of arrhythmia unless they were implanted within 90 days of bypass surgery or 40 days of a heart attack. Doctors implanted the medical devices in patients and then fraudulently billed Medicare in spite of the guidelines.

This is expected to be the largest settlement in terms of the number of hospitals and the amount for a group of hospitals. In 2013, 55 hospitals settled a national investigation for $34 million into the use of cement in fractured vertebrae, a procedure known as kyphoplasty. The government is reportedly using data mining techniques this time around to assist them in their investigation.

The cardiac investigation dates back to at least 2012, when Modern Healthcare reported that the Justice Department was simultaneously emailing hundreds of hospitals with questionnaires concerning their use of the devices. At that time, Modern Healthcare obtained a document from the DOJ called the “Medical Review Guidelines/Resolution model”. It divided the possible scenarios for hospital billing of patients into categories which included those covered by the National Coverage Determination and/or excluded from the investigation, that the government had used its discretion to determine it would not bring enforcement (referred to as buckets), and those which would be included in an enforcement action.

The enforcement action(s) included certain coding errors, patients who were previously qualified but did not have an implantation until they were not within the coverage window, and those where it was not medically indicated. The calculation identified that the hospitals would be charged for the difference between the code they used and the correct code, as well as a per hospital multiplier of damages based on a variety of factors including knowledge, compliance efforts and patient harm.

At least six healthcare systems have already publicly reported the amount of their settlements to shareholders. Tenet announced a settlement of $12.1 million and HCA indicated their number was $15.8 million.

It will be interesting to see how the credit for this victory is shared. It seems likely that there are a number of whistleblowers out there, insiders who reported their hospital to the federal government through a qui tam lawsuit and may be in line for a reward as part of the settlement. The False Claims Act requires the DOJ to pay eligible relators between 15 and 25 percent of the award (in cases like this one where the government has not declined to intervene in the case). However, there are various rules such as the first to file rule and public disclosure which could limit those payments.

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