In the shift from fee-for-service care, the federal government has refocused its efforts on developing quality of care measures to incentivize providers -- hospitals, clinics, physicians’ offices, labs and ambulatory surgery centers alike -- to deliver care more effectively and efficiently.1 In recent years, the False Claims Act (FCA) has emerged, for better or for worse, as a quality enforcement tool. With quality of care as an ever-moving target by the federal government (with the constant development of new quality measures), the FCA has faced its share of criticism as too blunt of an instrument to regulate quality of healthcare, a matter that many argue is better left to the states under their police power.2 However, it can be argued that since the federal government is the biggest buyer of healthcare, it thus has a stake in how its monies are used. This article will explore the history of quality regulation by the federal government and the FCA and what trends should be expected in the future.
The Past: History of Healthcare Quality Regulation by the Federal Government
Brief History of Quality Regulation
Since the enactment of Medicare in 1965, the federal government has regulated healthcare quality. Establishing a set of conditions entitled “Conditions of Participation,” Congress required the implementation of certain elements it deemed necessary for hospital operation, such as staff credentials, 24-hour nursing services and utilization review.3 In 1983, Congress authorized the establishment of Peer Review Organizations tasked with validating assignments to the diagnosis-related groups, reducing (1) unnecessary admissions and readmissions, (2) complications and (3) mortality rates.4 In 1989, Congress created the Agency for Healthcare Research and Policy, in response to newly reported data that revealed wide geographic variations in practice patterns without supporting clinical evidence and with reports of misuse and overuse of procedural treatments.5
The framework for measuring quality is based on one developed by Dr. Avedis Donabedian in 1966, which primarily examines structure, process and outcomes, as well as functional status, pain, complications, morbidity, mortality, patient-based experiences and utilization of resources.6 For example, structure can refer to the total number of nursing hours daily; process can refer to the number of patients diagnosed with a major depressive disorder with a suicide risk assessment completed during the visit in which a new diagnosis or recurrent episode was identified; outcome can refer to low birth weight.7
In 1999, the non-profit National Quality Forum (NQF) was created after the President’s Advisory Commission on Consumer Protection and Quality in the Healthcare Industry advised as such.8 The NQF works to define national goals and priorities for healthcare quality improvement, builds national consensus around these goals and endorses standardized performance metrics for quantifying and reporting on national healthcare quality efforts.9 NQF endorsement has become the “gold standard” for healthcare performance measures.10
Despite the existence of these quality measures, in 1999 and 2001 the Institute of Medicine (IOM) produced two reports that alarmed Congress about the systemic problems that plagued America’s healthcare system. The first report, “To Err is Human: Building a Safer Health System,” called out the many errors that occur, including adverse drug events; improper transfusions; surgical injuries and wrong-site surgery; suicides; restraint-related injuries or death; falls; burns; pressure ulcers; and mistaken patient identities, often resulting in patient deaths.11
The second report, “Crossing the Quality Chasm” suggested that the entire system needed to be redesigned. The IOM developed six focus points that continue to inform current federal initiatives:
· Safety: avoiding injuries to patients from the care that is intended to help them
· Effectiveness: providing services based on scientific knowledge to all who could benefit, and refraining from providing services to those not likely to benefit
· Patient-centered: providing care that is respectful of and responsive to individual patient preferences, needs, and values, and ensuring that patient values guide all clinical decisions
· Timeliness: reducing waits and sometimes harmful delays for both those who receive and those who give care
· Efficiency: avoiding waste, including waste of equipment supplies, ideas, and energy
· Equity: providing care that does not vary in quality because of personal characteristics such as gender, ethnicity, geographic location and socioeconomic status.12
In response, Congress enacted legislation authorizing the Centers for Medicare & Medicaid Services (CMS) to develop and implement pay-for-performance reimbursement methodologies for services rendered to Medicare beneficiaries. For example, under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, the Inpatient Quality Reporting Program incentivizes hospitals to report certain metrics in return for a higher annual update to the standardized amount for hospital inpatient operating costs, also known as the market basket update.13 The Deficit Reduction Act (DRA) of 2005 increased this to two percent of market basket update.14
The Department of Health and Human Services’ Office of Inspector General (OIG) has taken this a step further by emphasizing the role of governing boards regarding quality care. In 2007 and 2008, the OIG hosted roundtable discussions with industry leaders and counsel for both acute and long-term providers regarding this subject.15 In 2015, the OIG, with the Association of Healthcare Internal Auditors, American Health Lawyers Association and Health Care Compliance Association, published “Practical Guidance for Health Care Governing Boards on Compliance Oversight.”16
Gradually, data driven quality improvement initiatives increased in number.
The False Claims Act
The FCA did not address healthcare quality until 1996, in a line of cases involving nursing homes. As background, Congress enacted the FCA in 1863 to address procurement fraud occurring in the Civil War, imposing liability on those who defraud the federal government.17 Since then, it has been implemented in other governmental programs. The consequences of losing an FCA case can be grave. The law imposes treble damages per claim in addition to civil penalties of up to $21,563 per claim.18 In 2018, the Department of Justice recovered $2.5 billion in FCA cases from settlements and judgments involving the healthcare industry.19 In addition, the FCA allows whistleblowers (a/k/a relators) to receive a portion of the amount recovered.20 Providers as well as their officers, directors, employees and related parties face program suspension, debarment and exclusion from the Medicare program.21
The FCA has addressed various healthcare quality metrics under two general theories: (1) false certification (express and implied) and (2) worthless services. Under the false certification theories, the plaintiff alleges that the claimant, in certifying a claim to the government, has falsely attested -- explicitly or impliedly -- that it provided or performed services in adherence to certain statutory or regulatory requirements.22 Under the worthless services theory, care is so substandard as to lead to factually false claims, or claims for worthless services.23
To illustrate, in United States ex. Rel, Aranda v. Community Psychiatric Ctr. Of Okla., the condition at the nursing home subject to the lawsuit was so dangerous that the court found that the government sufficiently alleged violation of the FCA under the implied false certification theory. In this case, some patients were identified by treating physicians as being sexual perpetrators or as having physically aggressive tendencies that require precaution or special consideration, but appropriate precautions were allegedly not taken and physical injury to and sexual abuse of patients occurred because of inadequate conditions, e.g. understaffed shifts, lack of monitoring equipment, and inappropriate housing assignments.24 This allegedly violated applicable statutes, rules and regulations requiring that patients be provided with appropriate quality of care and a safe and secure environment.25 In another case, the court considered a different quality measure: the quantity of care provided based on allegations that the nursing home billed the government for procedures it did not perform.26
Other lawsuits addressed whether the FCA can be used to address the government’s quality of care regulations. In one case, the relator asserted a violation of the FCA based on under-qualified staff, inadequate facilities and equipment and substandard care, claiming that submission of cost reports contradicted the certification contained in the cost reports.27 However, the court found that this did not amount to implied false certification, explaining that the annual cost report certification does not condition the government’s payment on perfect compliance with all underlying statutes and regulations, but rather seeks assurances that the provider continues to comply with the conditions of participation originally agreed upon.28 Another court found that compliance with the Anti-Kickback Statute to be a material condition to payment, thus a violation of the FCA.29 One court found that a scheme to maximize reimbursement in violation of the “reasonable and necessary” requirements of 42 U.S.C. 1395 § (a)(i) sufficed to allow not only the implied certification theory to proceed, but also the express false certification and the worthless services theories.30
United States ex. rel. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) was the first case that rigorously critiqued the FCA as a quality enforcement measure. The court expressed policy concerns about the scope of the FCA, the federalization of medical malpractice and the appropriateness of courts rather than state, local and private medical societies to address quality of care issues.31 These concerns are still prevalent today.
In the past 10 years, the federal government has increasingly examined quality-driven data based on care provided to beneficiaries of federal healthcare programs.32 The Patient Protection and Affordable Care Act (PPACA) implemented even more quality metrics with its creation of a value-based purchasing program.33 The value-based purchasing program adjusts the inpatient prospect payment system (IPPS) payments based on quality measures, tying a percentage of hospital payment to performance on high cost conditions, such as acute myocardial infarction, surgical and healthcare infections and pneumonia.34 PPACA requires CMS to evaluate each hospital’s performance using the higher of either an achievement score or an improvement score.35 CMS also penalizes hospitals for poor performance, as measured by metrics such as disproportionate amounts of hospital acquired conditions and readmissions.36
PPACA also established the Medicare Shared Savings Program, in which accountable care organizations (ACOs), a type of integrated delivery system, bear financial responsibility for treatment decisions. ACOs are measured against benchmarks, which are based in part on ACO providers’ historical costs in providing Medicare fee-for-service Parts A and B expenditures for ACO members.
With the increase in quality metrics, hospitals and other providers are increasingly subjected to risk in false claims enforcement. The next section addresses how the judiciary is currently addressing these quality metrics.
The Present: “Materiality” Reigns
The U.S. Supreme Court ruling in Universal Health Servs., Inc. v. United States ex rel. Escobar in 2016 shifted the focus to “materiality” in False Claims cases that address quality of care.37 “Materiality looks to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation.”38 In Escobar, the court stressed the high standard that must be enforced with “materiality”:
The False Claims Act is not an ‘all-purpose antifraud statute’…or a vehicle for punishing garden-variety breaches of contract or regulatory violations. A misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant’s noncompliance. Materiality, in addition, cannot be found where noncompliance is minor or insubstantial.39
Courts have started to adopt this rigorous standard for quality metrics. In October 2018, the U.S. District Court for the District of Kansas granted Lawrence Memorial Hospital’s motion for summary judgment because a relator could not demonstrate the materiality element of the FCA claim.40 In this case, the relator alleged that Lawrence Memorial Hospital (LMH) falsely reported when emergency room chest pain patients arrived by delaying registration until after the hospital obtained electrocardiograms on the patients. LMH reported “arrival times” used to calculate CMS measure AMI-8A, primary percutaneous coronary intervention received within 90 minutes of hospital arrival.41 The goal of AMI-8A is to administer a heart catheterization within 90 minutes of arrival.42 The relator claimed that this misinformation impacted the Outpatient Quality Reporting, Inpatient Quality Reporting and Hospital Value Based Purchasing programs.43
As the court found, no evidence was presented to show that LMH’s allegedly false arrival time materially impacted that goal.44 Further, in fiscal years 2014, 2015, 2016 and 2017, LMH was not penalized for reporting inaccurate data to CMS; in fact, LMH received positive Valued Based Purchasing adjustments based upon the data it provided.45 As the court reasoned, there must be some showing that the inaccuracy alleged as to arrival time is sufficiently critical that the government modified or would likely have modified its reimbursement behavior on the basis of that information.46 No such showing occurred.
The Future: Evolving Metrics
Besides the measures developed in PPACA, CMS has also developed other measures, such as the Meaningful Measures Initiative, which represents the priorities of CMS and serves as a guiding framework for its quality metrics. The measures are: (1) medication management, (2) admissions and readmissions to hospitals, (3) transfer of health information and interoperability, (4) preventative care, (5) management of chronic conditions, (6) prevention, treatment, and management of mental health, (7) prevention and treatment of opioid and substance use disorders, (8) risk adjusted mortality, (9) equity of care, (10) community engagement, (11) appropriate use of healthcare, (12) patient-focused episodes of care, (13) risk adjusted total cost of care, (14) healthcare associated infections, (15) preventable healthcare harm, (16) personalized care that is aligned with patient’s goals, (17) end of life care according to preferences, (18) patient’s experience of care, and (19) patient reported functional outcomes.47
While providers should be concerned about the increasing use of data for FCA allegations, any alleged violations must still meet the rigorous materiality standard developed by Escobar. If the U.S. District Court for the District of Kansas is any indication, it is a high bar to meet. However, compliance programs should still carefully monitor their quality metrics because an FCA allegation, with all its penalties, is simply not worth the cost of litigation.