The American Hospital Association (AHA) recently requested the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) to undertake a policy review of the ongoing enforcement initiatives proceeding under the auspices of the False Claims Act (FCA). The AHA expressed a concern that "aggressive FCA investigations are being initiated upon the discovery of evidence of a mistake or overutilization, making FCA enforcement through negotiated 'settlement' a self-fulfilling prophecy." The AHA highlights the aggressive pursuit of kyphoplasty investigations in the Western District of New York as an example.

The kyphoplasty investigations stem from an FCA investigation in which the DOJ alleged that Kyphon -- a manufacturer whose medical device is used in the kyphoplasty procedure -- misled physicians and hospitals about the medical necessity of an inpatient stay following the procedure as well as the use of particular billing codes related to the procedure and inpatient stay. The Kyphon case settled for $75 million. The AHA notes that the DOJ has been dispatching "contact" letters to hospitals that suggest a presumption of FCA liability based upon utilization data, effectively "using the threat of FCA liability as an audit tool." Such letters appear to presume that the physician's judgment was compromised in every case of a kyphoplasty admission and that the hospitals consented to that judgment.

The AHA notes that the DOJ's approach requires hospitals to treat each discovery of an overpayment as an FCA case, and incur the significant cost that such cases generate, as opposed to making routine payment adjustments to correct the overpayment.