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American hospitals have been resistant to whistleblowers. Here’s how they can save money and lives by embracing them.

Posted  June 21, 2022

Last month, the American Hospital Association wrote a pointed letter to the Justice Department, asking them to investigate, and potentially sue, Medicare Advantage plans for improperly denying coverage of patients’ hospital services. Medicare Advantage is a popular government program that pays private insurers premiums to cover seniors, and the insurers are required by law to provide at least the same benefits as traditional Medicare.

The AHA’s letter to the DOJ cites an audit from the Office of the Inspector General, which found that approximately 13 percent of Medicare Advantage coverage denials were improper. The audit–which spanned a single week in 2019–flagged 430 examples of improper coverage denials. In one, an insurer denied a 72-year-old woman with a breast cancer reduction surgery. Another insurer refused to pay $150 per month to fund a bed with rails for a 92-year-old patient who had a history of epilepsy, early-onset Alzheimer’s, and rheumatoid arthritis. Yet another plan refused coverage for a 67-year-old patient’s hospital stay when the patient presented with an acute stroke, and needed overnight medical supervision to monitor for pneumonia. When the insurer denies coverage, the hospital is often faced with the choice of either footing the bill or forcing the patient to pay out of pocket, while the insurer pockets government money that is allocated to cover the procedures.

It is no surprise to see hospitals frustrated by insurers who don’t cover necessary services for their patients. But what is unusual about the AHA’s request is the legal avenue that it asks the government to take up. The AHA explicitly asks the government to sue insurers using the False Claims Act, a law that also allows whistleblowers to bring lawsuits on the government’s behalf against entities that are defrauding the government, including health insurers and hospitals. Until this point, the AHA and its members have been vociferous opponents of the FCA, claiming that it interferes with their ability to treat patients and that the fraud can be chalked up to paperwork mistakes. The Justice Department has brought many FCA suits against AHA members for engaging in kickbacks, performing medically unnecessary procedures, and a litany of other fraud schemes.

As whistleblower lawyers, of course we agree with the AHA’s newfound enthusiasm for the False Claims Act, which has tremendous power to root out fraud and wasteful spending in the healthcare system, making patients, the government, and taxpayers whole. The government recovers billions under the law each year, often with whistleblowers’ help. But we would challenge the AHA to take a slightly different spin on it.

Within the hospitals themselves, there are insiders who review much more insurance data than any OIG auditor. Compliance professionals, auditors, billing specialists, and other insiders review thousands of insurance denials a month. Hospital employees are uniquely situated to spot fraudulent patterns and collect evidence to prove their suspicions. If given the proper motivation and encouragement – including training and financial incentives – hospital employees could route information up the chain and to the government in real-time. In addition to hospital employees, hospitals themselves can bring False Claims Act suits. The law allows corporations to serve as whistleblowers, and entities have successfully brought suits against competitors to combat fraud and level the playing field.

Put another way, if the AHA’s members are serious about wanting enforcement action in this area, they, or their employees, can be whistleblowers in FCA suits themselves. Instead of writing short letters to the DOJ, waiting for another OIG report, or hoping for a whistleblower to come out of the woodwork at an insurance company, the hospitals can sue over fraudulent insurer behavior, bringing intelligence to the government that would ultimately benefit patients and saves taxpayer dollars. Should the government win a settlement against an insurer, the hospitals, like any whistleblower, can even recoup a percentage of the returned funds as a reward.

Any given hospital has access to much more data than 430 denials, and hospitals are capable of corresponding with Medicare Advantage plans about the reasons for the denials and searching for patterns in what is denied. By becoming whistleblowers, hospitals can contribute to a more efficient, less wasteful Medicare Advantage program for the entire ecosystem. The 26 million people who are enrolled in the program rely on it.

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Tagged in: FCA Federal, Healthcare Fraud, Hospital Fraud, Importance of Whistleblowers,