Ohio Hospital Lab Lawsuit Tossed Out By The Judge

OHA, AHA sought court order to prevent further investigation of lab billing practices

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CEO SUMMARY: Hospitals in Ohio now find themselves at square one again in their efforts to stop federal prosecutors from continuing the statewide investigation of laboratory billing practices. The judge’s legal ruling denied jurisdiction to hear the case and did not address any of the arguments for or against the plaintiffs’ case.

STATING THAT HER COURT had no jurisdiction, U.S. District Judge Kathleen O’Malley tossed out the lawsuit jointly filed by The Ohio Hospital Association (OHA) and the American Hospital Association (AHA). Her ruling was announced last week.

O’Malley’s decision blunted the attempt by the OHA and AHA to seek a court order preventing federal prosecutors from continuing their investigation of hospital Medicare billing practices involving specific laboratory tests.

“Effectively, the judge left us two options,” stated plaintiff’s attorney Diane Signoracci of Bricker and Eckler. “One option is to appeal this decision. The second option, which the judge recommended in her ruling, was to seek relief through legislative action. We are currently considering our next move.”

This legal ruling has consequences outside of Ohio. As THE DARK REPORT predicted in July, 1996, federal prosecutors began expanding these investigations to other states besides Ohio. (See TDR, July 22, 1996.)

In recent months hospitals in at least six states received letters from federal investigators requesting that the hospital initiate a self-audit of how Medicare was billed for certain laboratory tests. Hospitals in Georgia, Maine, Mississippi, Rhode Island, Vermont, Virginia and the District of Columbia have acknowledged getting such letters.

The American Hospital Association was hoping that any favorable legal result in the Ohio lawsuit would enhance the defense of hospitals targeted in these other states.

The Ohio lab billing probe began in 1995. Federal prosecutors targeted 75 of 90 hospitals in the Northern Ohio District for further investigation. A similar percentage of hospitals in the Southern Ohio District underwent the same scrutiny. To date, at least 24 Ohio hospitals have agreed to settle charges and pay fines.

“It is not appropriate for the government to take an adversarial relationship with these hospitals. We believe government prosecutors are abusing the False Claims Act in this matter of how laboratory tests were billed to Medicare.”
-Diane Signoracci

The OHA and AHA filed the lawsuit last October in an effort to stop the investigation from proceeding further. It was also a goal of the lawsuit to challenge the use of the False Claims Act. OHA spokesperson Mary Yost explained at that time “We hold that, for certain types of tests which may have been incorrectly billed, if mistakes were made, they were honest mistakes. Thus, it is inappropriate and extreme for the government to use the threat of the False Claims Act to say, not only must you pay back whatever overage you may have received, but you owe up to three times that amount, plus up to $10,000 per error.”

“This is a key point in our position opposing the way the federal investigation is proceeding,” added Signoracci. “It is an inappropriate use of the False Claims Act. Prosecutors hold the threat of $10,000 per incident against hospitals which might choose to fight this in a court action. It is a huge economic deterrent for any hospital weighing the risks of openly contesting federal claims in court.”

Even as the judge ruled against the hospitals, she noted several encouraging points. She declared that there were “understandable concerns” to the manner in which the U.S. Department of Health and Human Services (HHS) and the U.S. Department of Justice proceeded with their investigation.

Judge O’Malley further commented, “despite the very real possibility that the (HHS) Secretary’s position regarding the hospitals’ billing practices is wrong, the practical barriers of challenging the Secretary leave the hospitals with little choice and no bargaining room. Still, that the Secretary’s actions seem heavy-handed does not confer jurisdiction upon this court.”

“Although this decision was sympathetic to our case, it was not helpful,” said Signoracci. “Our legal team must now decide whether to appeal this to the Sixth Circuit Court. We are also evaluating how to make our case with Congress.”

Judge O’Malley’s decision illustrates the difficulty in opposing the government at any level as they pursue their claims of Medicare Fraud and Abuse. After almost one year of legal work and time, the Ohio Hospital Association and the American Hospital Association failed to stop government prosecutors from continuing with their investigation.

Practical Insights

Diane Signoracci had some practical insights on how easy it would be to correct the situation. “It is time for Donna Shalala (Secretary of Health and Human Services) to step to the plate and tell Janet Reno (Attorney General) to cease taking an adversarial position against the hospitals. Everyone wants to resolve any inappropriate billing. It is just they would prefer to do it without the heavy hammer of the False Claims Act.


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