Flagging Judgment: Medical Necessity as a Focus of Fraud and Abuse Enforcement Actions

Physician judgment and medical necessity increasingly are a focus of fraud and abuse enforcement actions, with statistical analysis of procedure volumes used to flag potential cases. Last week, the Atlantic published this recent article discussing a significant 2018 decision of the Tenth Circuit Court of Appeals in United States ex rel. Polukoff v. St. Mark’s Hospital, et al., No. 17-4014 (10th Cir. Jul. 9, 2018), in which the court held that a physician’s medical judgment concerning medical necessity of a particular treatment for two specific cardiac conditions could be “false or fraudulent” under the federal False Claims Act (FCA). Our colleague, Brian Dunphy, covered the 2018 decision on this blog here. The Tenth Circuit ultimately held that a “doctor’s certification to the government that a procedure is ‘reasonable and necessary’ is ‘false’ under the FCA if the procedure was not reasonable and necessary under the government’s definition of the phrase.”

The Atlantic article follows settlements by the hospital defendants for $8 million and $1.6 million, respectively, and most recently, in April, by the defendant cardiologist’s practice for an undisclosed amount. The hospital where the physician worked initially became aware that the physician performed a statistically significant volume of “PFO closures,” a procedure to close a hole between chambers of the heart. The Atlantic article quotes an internal letter from another cardiologist at the hospital to the chief of cardiology, flagging that the physician was “several standard deviations off the interventional normal distribution regarding PFO procedural volume.” When the hospital ultimately took steps to limit the number of PFO closures the physician performed, the physician resigned and moved to another hospital where he had operating privileges. Both hospitals were sued, along with the physician’s practice, in a FCA suit that alleged that the physician had fraudulently billed Medicare and Medicaid for medically unnecessary PFO closures. The whistleblower was another cardiologist who was concerned about what he was seeing in the physician’s practice, including instances in which the physician performed PFO closures where no hole in the patient’s heart existed before surgery.

The case and article provide a compelling cautionary tale regarding the risk of FCA claims arising from the alleged lack of medical necessity. Although determining medical necessity ordinarily requires case-by-case evaluations, statistically anomalous volumes of procedures can provide at least an initial indication that doctors are performing procedures on some patients who may not require treatment.  Hospitals and health systems can perform statistical analyses to identify abnormally high procedure volumes or practices that could call into question whether such procedures are in fact medically necessary and could prompt a potential FCA inquiry. However, publicly available data regarding procedure volumes is also accessible to government actors and potential whistleblowers. The Atlantic article provides a timely reminder that hospitals should look closely at their data on procedure volumes to attempt to detect and resolve potential issues early.

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