More than three years ago, the Department of Justice launched an extensive investigation into improper Medicare billing for procedures involving implanted cardioverter defibrillators, devices that use electrical pulses to regulate heart arrhythmias. As part of its investigation, the government sent notice letters and, in some cases, records requests, to hundreds of hospitals that it believes performed ICD implantations that did not conform to the medical necessity criteria in the National Coverage Determination guidelines set forth by CMS. The government notified the hospitals that their billings for ICD procedures were subject to scrutiny under the False Claims Act, which penalizes knowingly making a false record or statement for the purpose of inducing the government to pay a claim.
The FCA is a powerful tool for targeting fraud in the Medicare context. To establish liability under the FCA, the government must prove that a hospital "knowingly" submitted a false or fraudulent claim. Knowledge under the FCA need not be actual; deliberate ignorance of or reckless disregard for the truth or falsity of the information will suffice. No specific intent to defraud is required. Thus, potentially all Medicare claims for ICDs that do not fit squarely within the NCD criteria — compliance with which must be certified to obtain reimbursement — could trigger liability under the law, even those procedures with a sound clinical rationale.
The penalties for a violation of the FCA can be severe. When liability attaches, so do civil penalties of $5,500 to $11,000 per claim, as well as three times the amount of any damages suffered by the government. The DOJ has specified that the government’s damages consist of the difference between what was paid on each claim and what should have been paid without the ICD codes and related charges.
The potential for these harsh penalties, coupled with the backdrop of adhering to strict criteria without accounting for the judgment of medical providers, generated a sharp response from the medical community. Many argued that using the NCD criteria as the sole determinant of medical necessity without accounting for on-site clinical decision making leads to inaccurate conclusions, and that the NCD, which was issued in 2005, does not reflect current clinical guidance or recent advances in medical knowledge.
Recently, the DOJ appears to have shown some appreciation for the notion that determining medical necessity is not always as simple as mechanically applying the NCD criteria. In August 2012, following extensive collaboration with industry groups, defense counsel, CMS and other relevant agencies, the DOJ issued a “Resolution Model” for resolving cases relating to ICD implantation without litigation. Under this framework, claims are divided into categories according to severity. Certain claims, including those that are deemed violations of the NCD due to technical or timing reasons, will not be subject to enforcement. Other claims, which will be enforced, will be classified according to type and severity, using specific descriptions set forth in the model. These claims will then be subject to a multiplier that is based on various factors such as patient harm, compliance efforts and effectiveness, ICD registry submissions and evidence of knowledge, and that can increase with each category of severity.
The Resolution Model represents a significant step forward in terms of a hospital’s ability to settle claims that have already been billed, and indicates that the government is prepared to forgo certain potential claims and to settle others for less than treble damages. It does not, however, clarify how hospitals should handle Medicare coverage claims for ICD implantation procedures going forward. In fact, the model clearly states that it is not CMS guidance and should not be relied upon in determining whether an ICD procedure is covered by Medicare. To date, there has been no reconsideration of the criteria set forth in the 2005 NCD, despite advances in medical care since that time.
As such, hospitals and other similarly situated providers should assess their vulnerabilities regarding the use of ICDs to avoid future investigations concerning medical necessity. This effort may include refining existing compliance policies and scrutinizing ICD implantation procedures, all the way from pre-procedure assessment to post-operative follow-up. Providers also may want to consider monitoring decision making by implanting physicians, and developing paradigms to assist in the determination of when and whether ICDs procedures should be performed. If an ICD-related claim is questioned on the basis of medical necessity, having implemented these steps and other safeguards will substantially improve a provider’s ability to blunt challenges and resolve inquiries.
Providers can further strengthen their positions against future claims investigations by developing system-wide ICD monitoring, documentation and education based on NCD and Local Coverage Determinations. Such education ought to include keeping abreast of changes to the guidelines, examining how they affect current clinical practices, and communicating developments to implanting physicians.
Should the government come knocking, providers who have in place current and relevant policies for dealing with the government will be best situated to handle the government’s requests. A well-constructed plan will include, at minimum, protocols for talking to the government; procedures for gathering, reviewing, and producing electronic and hard copy documentation; policies for providing individual employees with counsel, as needed; and a designated employee who will be the point person to handle document retention and litigation hold notices once an investigation begins. These safeguards are particularly crucial in cases such as these, where the ability to resolve a questioned claim turns largely on the ability to demonstrate medical necessity through case reviews and patient-specific documents.
While medical necessity issues forming the basis of an FCA theory is nothing new, the government’s expansive investigation into ICD procedures is notable because it turns in large part on whether the application of the NCD — which critics argue is outdated, ambiguous and does not adequately take into account professional judgment — is the sole proper basis for determining whether a medical procedure is necessary to a patient’s health. The investigation is also noteworthy because of the government’s collaborative approach to identifying, categorizing, and resolving existing claims. That said, there can be no doubt that the government will continue to use the FCA to police Medicare reimbursements based on medical necessity, particularly in situations such as the ICD cases, which involve numerous providers and significant dollars. For providers, an ounce of prevention in the form of preparation, documentation, and risk analysis is worth well more than a pound of cure.
David A. Feldman and Grayson Yeargin are partners and Emily Crandall Harlan is an associate at Nixon Peabody LLP. Mr. Feldman, Mr. Yeargin, and Ms. Crandall Harlan are members of Nixon Peabody’s government investigations & white collar defense practice and are based in the firm’s Washington, D.C. and New York offices.
More Articles on ICD Risks:
Cardiology & Medical Necessity: How Your Hospital Can Avoid Heart-Related Investigations
One in Five Defibrillators Put in Patients Who Don't Meet Guidelines
OIG's Increased Scrutiny on Heart Stents and ICDs: What It Means For Your Hospital