Compliance and quality are often viewed as two distinct functions. Typically, compliance deals with the rules and proper procedures for billing Medicare and other third-party payers. Conversely, quality functions do not usually concern themselves with reimbursement. A traditional quality assurance function focuses on the nature of the care provided to the patient. Increasingly, however, these two functions are becoming interrelated as good quality is often a prerequisite to effective compliance.

The emphasis on quality is exhibited in health care reform measures, specifically the Patient Protection and Affordable Care Act, which encourages development of accountable care organizations (ACOs) and evidence-based medicine. The legal line between compliance and quality, however, has not always been clear. Efforts to use quality as a potential False Claims Act (FCA) violation have thus far not been extremely effective in strengthening the connection between compliance and quality of care.

Efforts to Use Quality Under the FCA

Many of the cases linking quality to a potential false claim have involved highly regulated areas such as nursing homes. For example, in United States v. NHC Healthcare, 163 F. Supp. 2nd 1051 (W. D. M0. 2001), the government contended that a Missouri nursing home submitted false claims in connection with two residents. One of the residents suffered dehydration and the other suffered from pressure sores and weight loss. The second patient died while in NHC’s care, according to the opinion. According to the government, staffing shortages were the cause of the issues.

The government contended that the quality of care provided to the residents was so poor that submission of a claim for billing constituted a false claim. The court denied the defendant’s motion for summary judgment. In allowing the claim to proceed, the government stated that at a certain point, the care "can cease to maintain this standard by failing to perform the minimum necessary care activities required to promote the patient’s quality of life. When the provider reaches that point, and so presents a claim for reimbursement to Medicare, the provider has simply committed fraud against the United States."

Similarly, in United States ex rel. Sanchez V. AHS Tulsa Regional Medical Center, 754 F. Supp 2d 1270 (N. D. Ok.), qui tam plaintiffs alleged that their employer submitted false claims for the provision of inpatient psychiatric services. There, the court granted summary judgment in favor of the defendants and adopted the "worthless services" standard of the U.S. Court of Appeals for the Second Circuit as articulated in United States ex rel. Mikes v. Strauss, 274 F.3d 687 (2d Cir. 2001). Under that test, the plaintiff must prove (1) the provision of an entirely worthless service; or (2) at a minimum the provision of grossly negligent services with regard to a particular standard of care or regulatory requirement.

Connection Between Fraud and Quality

Increasingly, plaintiffs have attempted to turn routine malpractice cases into False Claims Act allegations. These types of allegations often fall outside of standard malpractice policies given the potential for treble damages in addition to fines of up to $11,000 per false claim. As discussed above, however, such claims are difficult to prove from a False Claims Act perspective.

Following the court in Mikes, courts have maintained that the FCA should not be used as a federal malpractice statute. In United States v. Ector County, 386 F. Supp. 2d 759, 766 (W.D.Tex. 2004), the relator alleged that the tests and medical procedures performed before his open-heart surgery should not have occurred, were only performed to maximize reimbursement by Medicare and the performance put his life at risk. Turning to the quality of care claim, the court referenced the NHC and Strauss cases and stated that the FCA should not be used to "call into question a health care provider’s judgment regarding a specific course of treatment." The record did not support that the hospital defendants’ services were so deficient as to be worthless. The evidence also did not support that the surgery and treatment was unnecessary or that the treatment was done by the defendants to make a fee and defraud the government.

In United States v. Dialysis, 2011 U.S. Dist. LEXIS 4862 (N.D.N.Y. Jan. 19, 2011), the plaintiff alleged that the defendant submitted fraudulent claims for payment based upon false certifications that the defendant was in compliance with Medicare regulations for dialysis centers. In addressing the implied false certification claim, the court concluded that the dialysis center must meet and adhere to conditions as standards for the quality of care, but that these were conditions for participation, not for receiving reimbursement. In regard to the factually false/worthless services claim, the court reiterated that the services rendered must be worthless in that the claims are fraudulent or false because they could not be reimbursed. The court found that while the care may have been substandard, this was not the "equivalent of no performance at all."

The adherence to the standards in Mikes may be changing. The Department of Justice, in partnership with the Office of Inspector General, is actively pursuing false claims against hospitals and medical practices that have improperly billed Medicare, not provided proper physician supervision, and billed services to Medicare that were not medically necessary. The DOJ does not consider these actions to create the federalization of malpractice. The trend can especially be seen in recent settlements with the Justice Department. In each case, a settlement was reached without admitting liability.

In February, a Florida dermatologist agreed to pay millions to resolve allegations that he violated the FCA by billing the Medicare program for medically unnecessary services. The dermatologist admitted to performing thousands of complicated, medically unnecessary surgeries to obtain reimbursement. Another settlement in February was reached between the government and St. Joseph Medical Center in Maryland for allegations of Medicare and Medicaid false claims submission. This case involved unnecessary stent implants by a cardiologist. In 2012, EMH Regional Medical Center, a nonprofit community hospital in Ohio, and North Ohio Heart Center Inc. (NOHC), an independent physician group in Northern Ohio, as well as two physicians, settled a qui tam action with the government. The government alleged that EMH and NOHC over-prescribed angioplasty procedures and improperly "unbundled" angioplasty and angiogram services. The providers were also accused of performing angioplasty and stent services on individuals whose blood vessels were not sufficiently occluded to require such procedures.

Many recent False Claims Act cases in which quality of care issues were raised have failed based on a lack of specificity and/or failure to prove actual fraudulent claim submission. In United States ex rel. Montgomery v. St. Edward Mercy Medical Center, while the court dismissed the FCA claim for lack of specificity (despite the government’s findings that the bypass graft surgeries should not have been performed, the relator lacked the direct and independent knowledge to support fraudulent claim submission of 60 Medicare beneficiaries), in light of the PPACA and the ability to initiate false claim actions on information already publicly disclosed, this decision may have been different. It is only a matter of time before a relator asserts sufficient pleadings to turn a malpractice-type action into a viable claim under the FCA. In combination with the activity of the DOJ and the OIG, this scenario seems likely.

As indicated above, these claims are difficult to prove from a False Claims Act perspective. Nevertheless, as ACOs begin to come into operation, some of the principles may translate into additional risks for providers. This is especially true given the establishment of quality performance standards to assess the quality of care furnished by ACOs as well as ACO certification requirements. Nonetheless, quality and compliance should be viewed as complementary. Good quality is typically consistent with proper compliance, and providers that are conscious of compliance requirements often provide higher quality of care.

Mark L. Mattioli is the chair of the health law practice group at Marshall Dennehey Warner Coleman & Goggin. He can be reached at mlmattioli@mdwcg.com.

Stephanie M. Barr is an associate in the health care department at the firm. She can be reached atsmbarr@mdwcg.com.