On May 28, 2020, the United States Court of Appeals for the Fifth Circuit affirmed a lower district court decision to dismiss the health care fraud lawsuit brought against Baylor Scott & White Health by Integra Med Analytics.
Background
Integra brought the case against Baylor Scott & White, accusing the health system of fraudulently using secondary diagnosis codes to increase its revenues. Specifically, Baylor allegedly pressured physicians to use higher value complication or comorbidity or major complication or comorbidity codes when diagnosing patients. Those alleged actions led to $61.8 billion in false claims submitted to Medicare.
Integra alleged that, based on its statistical analysis of Baylor’s claims from 2011 through 2017, Baylor was ahead of most health care providers in adhering to new guidelines from the United States Centers for Medicare and Medicaid Services (CMS) that reduced standardized reimbursements for hospitals and increased the number of secondary diagnoses.
District Court Decision
In August 2019, Judge David Ezra of the United States District Court for the Western District of Texas dismissed the case against Baylor, saying that the clinical documentation improvement efforts – including resources for physicians on coding complications and comorbidities – were in line with normal schemes to improve hospital revenue through accurate coding of patient diagnoses. In his decision, Judge Ezra cited a CMS regulation that states that the agency does “not believe there is anything inappropriate, unethical or otherwise wrong with hospitals taking full advantage of coding opportunities to maximize Medicare payment that is supported by documentation in the medical record.”
At that time, Judge Ezra also found that Integra was unable to prove that Baylor was intentionally submitting false claims. He dismissed Integra’s lawsuit with prejudice, because they had already had two opportunities to reformulate their allegations to state a claim for relief that meets federal pleading standards.
Integra appealed the decision to the Fifth Circuit Court of Appeals, which also ruled in favor of Baylor.
Fifth Circuit Decision
The Fifth Circuit opinion stated, “These facts strongly indicate that a legal and ‘obvious alternative explanation’ for the statistical data presented by Integra Med is that Baylor was simply ahead of the healthcare industry at implementing the Medicare reimbursement guidelines supplied by CMS.” This included that CMS included in the guidance direction that hospitals would alter their clinical documentation and coding practices and increase their case mix, consistent with the new payment incentives made by Medicare billing and coding changes. Hospitals were even encouraged by CMS to develop clinical documentation improvement programs, similar to Baylor’s to “maximize reimbursement.”
The appeals court also found that Integra did not provide enough evidence to prove that Baylor provided unnecessary treatment to patients to maximize their Medicare reimbursement. “Even when plaintiffs in an FCA case use statistics, which can be reliable indicia of fraud, they must still plead particular details of a fraudulent scheme for each claim. Here, Integra Med’s complaint contains a conclusory allegation that Baylor was providing unnecessary treatment to its patients. … Integra Med does not present sufficient particular details of this alleged fraud claim.”
Conclusion
This case – and its dismissal with prejudice – may stymie a future rise of data analytic firms focused on uncovering fraud, waste, and abuse filing lawsuits against health care organizations.