HHS and DOJ Issue Stern Warning Letter To Hospitals Regarding Fraud In Electronic Health Records

by King & Spalding

On September 24, 2012, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder issued a letter to heads of the nation’s leading hospital trade associations suggesting that there were “troubling indications” that providers were using electronic health records (EHR) to obtain payments to which they were not entitled and warning that such activity would not be tolerated.  The letter appears to have come in reaction to an article published in the New York Times on September 22, 2012 that attributed a portion of the recent growth in health care costs to the increased use of EHR. 

Although calls for increased use of EHR began earlier, the switch to electronic health records was first mandated by the American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”).  That law provided financial incentives beginning in 2011 to providers who invested in electronic health record technology and imposed penalties beginning in 2015 for providers who have not become meaningful EHR users.  At the time, the mandate was justified on the basis that the use of EHR would improve efficiency and patient safety and reduce health care costs.  

The American Hospital Association (AHA) immediately responded to Secretary Sebelius and Attorney General Holder.  In its letter, the AHA agreed that fraud should not be tolerated, but pointed out that inaccurate documentation and coding in EHR does not necessarily equate with fraud.  It also noted that, notwithstanding many requests, CMS has failed to establish any guidelines for coding in EHR.  The AHA’s response further pointed out that the federal government has exacerbated the coding complexities by “drastically” increasing the number of third-party program integrity auditors, such as Recovery Audit Contractors, Medicare Administrative Contractors, Medicaid Integrity Contractors, and Zone Program Integrity Contractors.  The AHA asserted that “while the payment accuracy programs may be well intentioned, they need to be streamlined with duplicative audits eliminated and inappropriate denials halted.  Furthermore, investments should be made in provider education and payment system fixes to prevent payment mistakes before they occur.” 

Time will tell whether Secretary Sebelius and Attorney General Holder’s letter last week was simply an election year communication designed to blunt criticism.  The issuance of such a stern warning, however, asserting that instances of fraud attributable to the use of EHR are actually on the rise certainly has raised the visibility of the issue.  Hospitals and other providers should expect, therefore, that the use of EHR in billing and coding may receive greater scrutiny.  In addition, they should be prepared for an increase in the number of whistleblowers raising allegations in this area.  Hospitals and providers may benefit, therefore, from taking proactive measures now to examine their own EHR processes.

Reporter, John C. Richter, Washington, D.C., + 1 202 626 5617, jrichter@kslaw.com.

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