What happens when false claims intersect with state peer review protections?

State peer review statutes offer protections to providers, ensuring the process in which medical professionals review the quality of medical services of their peers is shielded from discovery in legal proceedings. Proponents have long argued that the law allows for peer review committees to openly examine adverse events and permits physicians to engage in an honest review of medical practices without the threat of a medical malpractice lawsuit.

A recent case involving a Milwaukee healthcare system provides a glimpse at the role that peer review statutes play during fraud investigations. The U.S. Attorney has filed a petition with a federal judge to order Aurora Health Care to turn over more than 600 documents related to an investigation into potential False Claims Act violations, according to the Milwaukee Sentinel Journal. The 15-hospital system has already turned over more than 1,200 records dating back to Jan. 31, 2014, but contends that the 600 remaining documents are protected from discovery under the state's peer review statute.

Occasionally, providers will cite peer review protections during cases related to a fraud or false claims investigation; however, federal courts are not apt to apply a state statute to a federal case, Michael R. Callahan, a partner at Katten Muchin Rosenman LLP in Chicago, told FierceHealthPayer: AntiFraud in an exclusive interview.

"What they typically do in federal court is a balancing test," said Callahan (pictured right). "They look at the interests being protected under the state law versus the plaintiffs right to bring a claim, and most federal courts say, 'We're not going to use a state confidentiality statute to effectively preclude or undermine a federal claim.'"

Worthless services

In instances where a federal investigation is underway, or a provider self-reports a potential fraud or overbilling scenario, the federal government will often ask for as many documents as possible to build its case. If it's still in the investigative stage, many providers are able to negotiate with the investigators to provide pertinent billing records without sacrificing peer review documents.

In many cases, federal investigators are sensitive to peer review protections and often only need the billing and coding documents, along with the medical records--both of which are open to discovery--to build the case, Callahan said.

What may be more problematic is an investigation into worthless services, he added. A notable 2010 case in which the United States filed a complaint under the False Claims Act against Dr. Najam Azmat and the Satilla Regional Medical Center in Waycross, Georgia illustrates this point.

The claim originated from a whistleblower, but the Justice Department joined the suit, alleging that both the hospital and the surgeon submitted false or fraudulent claims for operations that were not reasonable or necessary. The hospital later settled for $840,000, but Callahan noted that similar cases may push federal prosecutors to reveal those internal peer review documents in order to prove the hospital was also liable for filing claims for worthless services.

"Under that circumstance, if you can't find a reasonable accommodation, and now you have a federal court action, I think the hospital would be hard pressed in trying to keep that information protected under their state confidentiality statute," Callahan said.

PSOs may offer federal protection

The Patient Safety and Quality Improvement Act (PSQIA) of 2005 offers federal peer review protections to hospitals that participate in designated Patient Safety Organizations (PSO). Information and reports submitted to the PSO is protected from discovery with few exceptions, one of which is if the case involves a criminal claim. The law was enacted as a way to improve patient safety by encouraging voluntary and confidential reporting of adverse events.

The federal protections offered through PSQIA may make it more difficult for fraud investigators to compel the discovery of documents submitted through a PSO.

"If the hospital had placed within its patient safety evaluation system peer review documents or other documents related to patient safety events that the feds want access to, now you have an issue," Callahan said.

Although courts have not yet faced this issue of federal peer review protections related to a fraud investigation, as more providers begin using PSOs (particularly health systems that span multiple states) and as there is a greater emphasis on value-based payments, there could be a shift in the way some cases unfold, which will give greater insight into how the courts interpret PSQIA.

Although the vast majority of fraud claims revolve around billing and coding, more cases involving worthless services may emerge, Callahan said. Additionally, federal prosecutors may use peer review protections as a bargaining chip to entice providers into settlements rather than a lengthy legal battle over confidentiality.

"We're seeing the list of HACs and never events grow, and more quality metrics and performance standards have been developed and will continue to grow, and that's why we're going to see more and more of these cases," he said. "But clearly the bulk is still on billing and coding-type claims." - Evan (@HealthPayer)