Cost report suit could set crippling precedent
Government’s inference of fraud in Quorum case has potentially catastrophic effects’ on hospitals
A ruling against Brentwood, TN-based Quorum Health Group on charges that it defrauded Medicare by not submitting reserve cost report information could set a hazardous precedent and expose thousands of providers to similar charges.
"If the Court rules in the plaintiff's favor on this issue, a lot more providers are at risk," says the Healthcare Financial Management Association's (HFMA) Robbie-Lynn Watnik, technical director of legal services.
That fear has prompted HFMA and the American Hospital Association (AHA), both based in Chicago, to file "friend of the court" briefs rigorously opposing the government's tactic in the Tampa, FL federal court now hearing the case. While both groups are careful to point out that their actions are designed to prevent a menacing precedent rather than defend Quorum, there is no hiding their alarm.
"This case represents a major sea change in terms of what the government says is required," asserts Maureen Mudron, JD, AHA's Washington, DC counsel.
She says the government is attempting to draw an inference of fraud on the basis of cost reports that do not include certain backup information related to reserves, even though that information was not required.
It is long-standing industry practice for hospitals to submit cost reports but, as part of their normal accounting procedure, maintain reserves for what may be differences of opinion about appropriate reimbursement, she explains.
The groups filed the amicus brief in the qui tam suit — filed by former Quorum employee James Alderson — that the U.S. Department of Justice joined. The suit was unsealed Oct. 15, 1998 and the court is now considering Quorum's motion to dismiss the case.
"Accepting the position that this practice results in an inference of fraud has potentially catastrophic effects on hospitals which have done nothing more than follow the industry practice," AHA argued in its brief.
The association also argued that nothing in the Medicare Act or any of its associated regulations requires a hospital to submit its reserve calculations and work papers along with its cost reports.
Policy change should be prospective
What AHA opposes is the government's effort to change the rules after the fact, says Mudron. "If what they want is to change the process in terms of the kind of information that must be provided, they should do it prospectively, and the way to do that is through a rulemaking process," she argues.
Watnik takes a similar view. "This is basically asking the court to set healthcare policy, which it could do, but we certainly don't advocate that it be done that way," she says.
Watnik says the prevailing interpretation of the rules has always been that if the government wants all of the work papers and calculations behind the cost report, all it has to do is ask.
But there is no requirement in the rule that says a provider has to include it voluntarily —and there's really no place on the cost report to put the information, even if the provider wanted to, she adds.
Quorum spokeswoman Shea Davis says the regional health care giant is anxious for a decision, but the court has offered no indication of when it might rule. A Justice Department spokesperson declined to comment on the merits of the government's case.
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