Effective Peer Review May Be the Best Defense to Liability for Fraud and Abuse

In today’s regulatory and enforcement environment, hospitals must implement a vigorous compliance program to ensure that the services they provide are medically necessary. A number of different laws expose hospitals to liability when they have a peer review process and compliance program that is not effective in addressing potential concerns brought to its attention. Furthermore, recent government enforcement actions confirm that regulators will indeed go after hospitals when they have billed for services that were performed by medical staff members that were unnecessary or substandard. An important, but often neglected, aspect available to help reduce the risk of liability is the integration of a hospital’s peer review process and its compliance process. In many cases, effective peer review can be a hospital’s best defense to liability for fraud and abuse by medical staff members.

Peer review encompasses a broad spectrum of medical staff oversight. It includes the initial credentialing and privileging of staff members, reappointment and re-credentialing of current staff members, to ongoing oversight and formal disciplinary and corrective action. In totality, these actions are the devices hospitals have at their disposal to identify and address quality and safety issues.

Hospitals and their medical staffs are required by a number of different sources to implement compliance processes to ensure that the services they provide are medically necessary and meet the standard of care. More specifically, they must participate in specific performance improvement activities in order to satisfy both Medicare and Joint Commission Hospital Accreditation Standards.

The federal False Claims Act (FCA), 31 USC § 3279 et. seq. and state false claims statutes create liability for the submission of false claims to the federal or state government and allows the government to go after hospitals that have improperly and knowingly billed for services. Hospital exposure can arise from the failure to adequately oversee patient quality and to ensure that the services that are provided are necessary. Moreover, the FCA allows a whistleblower, known as a qui tam “relator,” to bring a lawsuit against a hospital and collect a portion of the government’s recovery if the lawsuit is successful. The FCA whistleblower provision is the source and incentive behind many health care fraud cases. Whistleblowers may use information from alleged failures in the peer review processes.

Ignoring compliance issues in peer review may also create issues for hospitals under the Patient Protection and Affordable Care Act (ACA). Section 6402(a) of the ACA amended the Social Security act to add a new Section 1128J(d) known as the “60-Day Repayment Rule.” The 60-Day Repayment Rule requires hospitals to report and repay identified overpayments from Medicare or Medicaid within 60 days from identification. Hospitals may find themselves in a difficult posture to defend against an FCA case if the peer review process should have alerted the hospital to the false claims, but did not or was ignored by the medical staff and never communicated to compliance personnel.

Often, a Hospital’s greatest exposure to enforcement actions occurs because concerns raised in the peer review process are not effectively communicated to the compliance department. For many hospitals, the peer review process operates entirely independent of the compliance department. As such, hospitals would be wise to incorporate policies and mandate education that facilitates communication between the participants in the peer review process and compliance personnel. This integration of the peer review and compliance processes will reduce the risk of liability for unnecessary care and hopefully address concerns before they are discovered by enforcement agencies. For additional information or assistance, contact a Wachler & Associates attorney at 248-544-0888.