HHS wins Medicare fraud appeal

October 9, 1991

A major obstacle to the enforcement of the federal Medicare anti-kickbacklaw was eliminated last month when the government won on appealthe first test of its right to bar providers from Medicare. A Department of Health and Human Services appeals board

A major obstacle to the enforcement of the federal Medicare anti-kickbacklaw was eliminated last month when the government won on appealthe first test of its right to bar providers from Medicare.

A Department of Health and Human Services appeals board struckdown an administrative law judge's ruling that had substantiallynarrowed interpretation of the law. The anti-kickback legislationprohibits medical businesses from inducing referrals from physicianinvestors.

The action clears the way for Inspector General Richard Kusserowto pursue indictments anticipated since the July publication ofanti-kickback safe harbors governing physician self-referral.

"This decision removes the cloud over our ability to continueto enforce the statute as we have in the past," he said.

Although Office of Inspector General spokesperson Judy Holtzclaimed victory for Kusserow on the appeal, the three-judge paneldid not go as far as the inspector general had hoped in overturningthe lower court ruling.

The case centered on the Hanlester Network, a general partnerof three Southern California medical laboratories owned jointlywith about 200 physicians. The appeals board ruled that the governmentneed not prove an explicit quid pro quo existed to prove anti-kickbackviolations. But the panel rejected the OIG argument that simplyencouraging referrals violates the law.

The appeal was pivotal in measuring the amount of clout theOIG can muster through the safe harbor regulations, accordingto Thomas Greeson, general counsel of the American College ofRadiology.

"It strengthens the inspector general's hand by reinforcinghis exclusionary authority," he said.

OIG staff attorney Thomas Crane stressed that the implicationsof a win on the appeal were less important than the fallout froma loss.

"Winning Hanlester was a non-event. I don't expect anychanges because we won. The implications would have been staggeringif we had lost. It would have shut down many cases," he said.

Smith-Kline-Beecham Clinical Laboratories, a partner in theHanlester Network, previously paid a $1.5 million out-of-courtsettlement to HHS. It was the largest fine ever assessed fromthe Medicare fraud and abuse law.

The appeals board remanded the OIG's civil action against thephysician partners to the lower court for retrial.