YET MORE CORRUPTION and How it Remains Protected and Invisible…. in places that have yet to be questioned... dallasnews/investigations/headlines/20130527-supreme-court-ruling-has-chilled-fraud-probes-of-state-institutions.ece?action=reregister Supreme Court ruling has chilled fraud probes of state institutions By MILES MOFFEIT Staff Writer mmoffeit@dallasnews Published: 27 May 2013 10:49 PM Updated: 28 May 2013 11:43 AM UT Southwestern Medical Center’s doctor-training program stood at the center of a federal fraud investigation that Parkland Memorial Hospital is now paying $1.4 million to settle. Yet the medical school wasn’t held responsible and didn’t pay a cent. State institutions possess a powerful legal shield against federal civil fraud cases, particularly those triggered by whistle-blower lawsuits. In 2000, the U.S. Supreme Court gave state entities the ability to claim immunity against suits filed under the U.S. False Claims Act. That landmark ruling in Vermont vs. Stevens has since chilled efforts by whistle-blowers and the federal government to expose fraud inside state institutions or hold them accountable for wrongdoing, legal experts say. “I don’t think it’s a stretch to say that hundreds of instances of fraud likely have never come to light because of the Stevens decision,” said Shelly Slade, a former senior counsel for health care fraud in the U.S. Justice Department who now represents whistle-blowers. “Most of these cases just aren’t pursued around the country,” said Stephen Kohn, executive director of the National Whistleblowers Center based in Washington, D.C. “Today if someone works for a state agency and reports fraud, there’s going to be skepticism and caution in pursuing the case against the agency.” That cautious path was taken on the way to the government settlement with Parkland that was made public Wednesday. The agreement arose from allegations of fraudulent practices inside UTSW’s residency program for physical medicine and rehabilitation based at the hospital. Dr. Lien Kyri, a former resident doctor, filed a 2010 lawsuit against Parkland and five UTSW faculty physicians, saying they submitted thousands of improper claims to Medicare and Medicaid, the government insurance programs for the poor and elderly. But in light of the Stevens legal bar, Kyri steered clear of suing the medical school. Instead, he sued Parkland and the individual physicians — parties who don’t have the same immunity protections. The Justice Department followed his lead. Kyri alleged that the physicians, who also worked for Parkland as clinical supervisors, told residents to perform rehab consultations that were never ordered by the patients’ primary care doctors, as required under federal billing rules. He also alleged the residents weren’t supervised by faculty doctors. Both practices put some patients at risk of further injury, he said. Ultimately, Parkland was the sole party to pay damages. Neither the medical center nor its physicians had a role in the settlement talks, UTSW officials told The News. The U.S. attorney’s office in Dallas, as well as Kyri and his California attorney Don Warren, declined to comment, saying the case is still being finalized. Parkland, which has denied wrongdoing in the settlement, also would not comment. UTSW also has denied wrongdoing. As for the Stevens ruling, “UT Southwestern fully respects the authority and wisdom of decisions made by the U.S. Supreme Court in relation to all laws, including those interpreting the False Claims Act,” the school said in a prepared statement. Richard Roper, U.S. attorney for the Northern District of Texas from 2004 to 2008, said the Stevens ruling gives state medical institutions such as UTSW a zone of protection from fraud scrutiny that few entities possess. “You’ve got an interesting situation where all over the country, these state medical centers for all intents and purposes don’t have to worry about False Claims Act cases,” Roper said. Damage to health Consumer groups say health care fraud, whether committed inside the government or in a private corporation, can lead to higher insurance costs for patients. And it can carry more than financial costs — as Kyri’s lawsuit alleges. “There can be damage to human health — it can be coincident to the fraud,” said Malcolm Sparrow, a professor of public management at Harvard University and a health care fraud expert. A 2010 national investigation by The Dallas Morning News found that for decades, lax supervision of doctors in training by medical school faculty — a common source of fraudulent or improper insurance claims to the government — has frequently led to patient harm, including deaths. “I want whistle-blowers to be as effective in the state domain as in the private sector,” Sparrow said. The Justice Department has hailed the False Claims Act as the federal government’s most powerful fraud-fighting tool, recovering more than $30 billion for taxpayers since 1986. The process works like this: A whistle-blower files what’s known as a qui tam — an abbreviation for a Latin phrase meaning “he who sues for the king as well as himself” — alleging fraud against the federal government. Such suits provide a valuable pipeline of information to the federal government, and the Justice Department is required to investigate all of them. If a U.S. attorney decides to intervene as a plaintiff — it happens in less than a quarter of all cases — and the investigation leads to a settlement or court judgment, the whistle-blower can receive about 25 percent of proceeds. That is a powerful incentive for people who fear retaliation or professional ruin, attorneys say. Since the law was passed during the Civil War era, whistle-blowers have helped federal investigators expose fraud committed by individuals, corporations, local governments and state-owned entities such as medical schools. The 2000 Stevens decision carved states out of that mix, however. The Supreme Court took up the state of Vermont’s appeal of a whistle-blower suit filed by Jonathan Stevens, a former attorney for the state’s water regulatory agency. He claimed the agency was bilking the EPA of $25 million in grants by inflating the hours its employees worked. The agency claimed it did nothing wrong and argued it was protected by sovereign immunity. Writing for the majority, Justice Antonin Scalia, a frequent champion of states’ rights, sided with Vermont, saying states are immune from whistle-blower suits unless a law clearly says otherwise. Scalia also said the False Claims Act’s history showed that Congress’ goal was to stop fraud committed by military contractors and other private actors, not states. Dissenting Justices John Paul Stevens and David Souter argued unsuccessfully that a 1986 False Claims Act amendment that authorized the attorney general to issue “civil investigative demands” to states showed that states fall within the definition. They also noted that members of Congress had assailed states’ roles in fraud at the time, uncovered by an extensive investigation that led directly to the False Claims Act’s adoption. Vexing questions The decision left some major legal questions dangling. Could U.S. attorneys bring their own False Claims Act actions against state entities? And could local governments also claim immunity? The high court later resolved the question about local governments, saying they were effectively corporations and presumed covered under the False Claims Act. But the issue of U.S. attorneys’ ability to bring suits remains unclear. The Justice Department believes it can unilaterally bring suits, a spokesman said. And many attorneys believe that, even if the courts refused to allow compensation for whistle-blowers, U.S. attorneys could share settlement proceeds with them. Still, the case sent chills through the Justice Department. Matt Orwig, U.S. attorney for the Eastern District of Texas between 2002 and 2007, said he doesn’t recall any cases against state entities rising to his attention among the thousands his office screened. Orwig said government attorneys often steer away from whistle-blower cases carrying the potential for setting bad legal precedent. Such cases also can drive down potential values of settlements because institutions can use legal uncertainty as leverage in negotiations. “A case that’s valued in the tens of millions becomes a case that is valued in the hundreds of thousands and tens of thousands,” Orwig said. It’s more attractive for the Justice Department to go after private corporations — a “cleaner shot” at collecting money, he said. Torpedoed cases The Stevens ruling had a quick impact on whistle-blower suits against state entities. Cases under investigation by private attorneys were dropped. Cases winding through the courts were tossed. And the pipeline to the government for exposing potential fraud inside state governments was virtually choked off, attorneys say. “The decision led to a lack of disclosure by would-be whistle-blowers to federal authorities,” said Slade, the former Justice attorney. “In turn that means many schemes involving false claims by state entities, including state hospitals and universities, are never investigated.” It’s not clear how many cases involving state entities the Justice Department has pursued in the post-Stevens era. The federal government doesn’t track those statistics. And hundreds of whistle-blower suits remain under confidential seal. Prior to the 2000 decision, however, whistle-blower suits against at least nine state academic medical centers during the 1990s led to $74 million in settlements with the Justice Department. But since then, qui tam attorneys who track settlements closely say that only a handful of whistle-blower suits have been filed against state medical centers, leading to just over $2 million in settlements. Meanwhile, the Justice Department has collected at least $100 million from private hospitals through whistle-blower suits filed after 2000, according to Justice Department records and press releases. Suing LSU Only a few options exist to maneuver around the Stevens legal bar, such as targeting the state institutions’ affiliates, individuals, corporations or local governments that aren’t subject to the ruling. Louisiana qui tam attorney Patrick Jackson had success doing just that. He sued the state entity, Louisiana State University Health Sciences Center, as well as some of the individual physicians. He represented a surgeon and nurse who alleged fraudulent billing practices in the orthopedics division at the school. Their suit said they faced retaliation for airing the concerns. After scouring the Internet, Jackson found a tip sheet from a qui tam blog site saying that “individual actors” could be sued. The loophole turned out to be an “angel” for his clients’ cause, he said. Armed with that information and evidence collected by his nurse client, Susan Hodnett, Jackson built his case. On a Saturday shift, Hodnett placed documents reflecting improper medical practices above ceiling tiles in a hospital office, she told The News. Federal agents later entered the hospital to recover the evidence, and the Justice Department intervened in the lawsuit. By 2009, the feds had forced a $700,000 settlement, and the whistle-blowers later won additional money to compensate them for their retaliation claims. LSU didn’t take the case to court to test Stevens, showing that U.S. attorneys can reach such settlements despite the ruling. Sometimes the mere existence of strong evidence and the threat of bad publicity can help overcome immunity issues in settlement talks, Jackson said. As part of its settlement, LSU denied wrongdoing. Its officials declined to comment. “It’s a large institution,” Jackson said. “I’m sure they wanted to protect its image.” Rare settlement Another rare success concerned a 2011 Justice Department settlement with UTSW and Parkland. That case was sparked by a 2007 lawsuit from Larry Gentilello, a former chairman of the burn, trauma and critical care division of the medical school’s surgery department. Like Kyri, he claimed that the government was falsely billed for procedures performed by residents with little or no supervision from faculty doctors, practices that jeopardized patients. Despite the Stevens hurdle, Gentilello sued UTSW, as well as its affiliate Parkland. That settlement, ultimately paid by the medical school, also amounted to $1.4 million. Charla Aldous, Gentilello’s Dallas attorney, told The News that the medical school repeatedly invoked Stevens as a potential shield. “Stevens was a threat from Day One,” she said. “But my sense is that the evidence was so overwhelming” that it warranted aggressive action by the U.S. attorney’s office in Dallas. That office also agreed to give a share of the settlement proceeds to Gentilello. Aldous said she invested her own money in the case because she believed strongly that UTSW should be held accountable. “It’s a crying shame that entities often can get by because of their sovereign immunity” protection, she said. UT Southwestern said in its statement that it “categorically denies all allegations” brought in the Gentilello case. UTSW also said that in the recent settlement case prompted by Kyri’s suit, the Justice Department required Parkland’s insurance billings to be monitored by the government for five years. But in the Gentilello settlement there was no such order, reflecting the Justice Department’s “confidence in UT Southwestern’s robust billing compliance program,” the university said. Undermining effect on exposing fraud U.S. False Claims Act experts say the 2000 Supreme Court ruling in Vermont vs. Stevens has chilled federal investigations of state institutions such as medical centers, resulting in fewer settlements to recover tax dollars. Here’s a comparison of known whistle-blower lawsuits filed against state medical centers before and after the ruling, and the settlements. Pre-Stevens whistle-blower suit filings and settlements Year suit filed Party Settlement amount 1995 University of Minnesota $32 million 1995 Texas Tech University $2.3 million 1996 University of Texas Health Center in San Antonio $17.2 million 1996 UCLA Medical Center $8.5 million 1996 UC-Irvine $4.1 million 1996 UC-San Diego $3.7 million 1996 UC-San Francisco $3.7 million 1996 UC-Davis $2.5 million Post-Stevens whistle-blower suit filings and settlements Year suit filed Party Settlement amount 2002 Louisiana State University $700,000 2007 UT Southwestern Medical Center $1.4 million Source note: List may be incomplete. The U.S. Justice Department does not track statistics on settlements reached with state institutions. Cases listed are based on interviews with former Justice Department attorneys, veteran U.S. False Claims Act specialists and reviews of government records.
Posted on: Thu, 13 Jun 2013 09:46:09 +0000
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