[Congressional Record Volume 144, Number 50 (Wednesday, April 29, 1998)]
[Senate]
[Pages S3789-S3791]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COCHRAN (for himself and Mr. Hollings):
  S. 2007. A bill to amend the false claims provisions of chapter 37 of 
title 31, United States Code; to the Committee on the Judiciary.


                  the health care claims guidance act

  Mr. COCHRAN. Mr. President, today I am introducing the Health Care 
Claims Guidance Act. I am pleased to have the distinguished Senator 
from South Carolina (Mr. Hollings), join with me as an original co-
sponsor of the bill. This measure addresses a very serious concern: the 
government's misuse of the False Claims Act and the need to distinguish 
Medicare fraud from unavoidable billing errors.
  Health care fraud has no place in health care practice. Health care 
fraud costs taxpayers many millions of dollars that should be spent on 
patient care. In addition, government agencies must be able to use all 
of the tools at their disposal to prosecute aggressively those who 
willfully engage in fraudulent practices.
  It is equally important, however, that government resources be used 
to go after genuine wrongdoers, rather than health care providers who 
may have overbilled the government for Medicare services through 
innocent clerical errors or interpretive mistakes.
  Recently, the Department of Justice has embarked on a program to 
utilize the False Claims Act to prosecute provider billing errors. 
Until 1994, government agencies, hospitals, and physicians acted 
together, cooperating in most instances, to make sure all parties were 
treated fairly in Medicare billing disputes. Sometimes providers were 
underpaid, sometimes they were overpaid. Either way, they and the 
government would review and settle claims at the end of each quarter or 
each year. But, the government has abandoned this practice with doctors 
and hospitals and has begun a campaign to coerce and extract money 
improperly from the providers.
  In the State of Mississippi, and across the Nation, health car 
providers have received ``demand'' letters from U.S. Attorneys' 
offices, many not even from their own State, asserting that the doctors 
and hospitals may be guilty of fraudulent billing. These letters 
threaten the imposition of treble damages plus fines of $5,000 to 
$10,000 per claim unless a quick settlement is reached, often within 
fourteen days of the letter. In some cases, the demand letters have 
been sent based on alleged overbilling of minuscule amounts.
  Providers should certainly do all they can to minimize errors, and 
when discrepancies are discovered, the correct amounts should be paid 
to the Government with interest.
  But, with the filing of large numbers of claims each year, and the 
volume of Government rules, regulations, and directives--some of which 
are conflicting--that providers must follow, it is impossible to be 
error-free. Hospitals and health systems submit nearly 200,000 Medicare 
claims a day. To ensure the accuracy of those claims, they must comply 
with the 1,800 pages of law, 1,300 pages of regulations interpreting 
the law and thousands of additional pages of instructions. In addition, 
they are required to work with 41 intermediaries--mostly insurance 
companies--that have their own procedures that hospitals must follow as 
part of the billing process. The same level of law, procedures, and 
instructions also apply to physicians.
  The current practice of the Department of Justice, using the False 
Claims Act, assumes that hospitals, health systems, and doctors are 
guilty of intentionally filing erroneous claims when errors are made. 
This, in my view, is simply not right.
  The Health Care Claims Guidance Act we are introducing would amend 
the False Claims Act to distinguish between fraud and mere mistakes. It 
would apply only to claims under federally funded health care programs, 
and would have no effect on other False Claims Act prosecutions.
  The legislation does not change the criminal portions of the False 
Claims Act. Neither does it change the qui tam, or ``whistle blower'' 
provisions of the law. And it in no way would impede the Department of 
Justice or any other Government agency from zeroing in on true fraud 
and prosecuting those who commit fraud. No other Federal laws would be 
affected, including changes made by Congress in 1996 in the Health

[[Page S3790]]

Insurance Portability and Accountability Act. The changes would apply 
only to health care claims for Federally funded programs such as 
Medicare and CHAMPUS. This legislation would not prevent the Government 
from receiving any money that is rightfully due. In all cases, 
overpayments would be reimbursed with interest.

  What this legislation does is to distinguish Medicare billing fraud 
from honest billing mistakes. The bill does these four things:
  It imposes a ``de minimis'' standard. Under the standard, as defined 
by the American Institute of Certified Public Accountants, Medicare 
overpayments to providers of less than a specified percentage would 
result in penalties of no more than the amount of the claim plus 
interest.
  It establishes a ``safe harbor'' for health care providers that 
submit a claim based on advice given by fiscal intermediaries and 
carriers. Such hospitals would be subject to fines limited to actual 
damages and interest, not treble damages plus $5,000 to $10,000 per 
claim.
  It raises the burden of proof required under the act from a 
``preponderance of the evidence'' standard to a ``clear and convincing 
evidence'' standard.
  And lastly, it establishes a ``safe harbor'' for health care 
providers that have adopted effective, good-faith compliance plans in 
which they are, if found to be in violation of the False Claims Act, 
subject only to actual damages plus interest, rather than treble 
damages plus $5,000 to $10,000 per claim.
  Mr. President, although Congress 2 years ago gave Federal agencies 
additional tools to go after health care fraud--such as expanded 
authority under the Health Insurance Portability and Accountability 
Act--the Department of Justice has nonetheless decided that the use of 
the False Claims Act guarantees ``easy money.''
  The Health Care Claims Guidance Act stops this abuse of the law and 
provides a clear and simple way of distinguishing between those claims 
that are fraudulent and those claims that result from human error. I 
urge Senators to support this bill.
  I ask unanimous consent that a copy of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2007

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Health Care Claims Guidance 
     Act''.

     SEC. 2. RULES FOR ACTIONS UNDER FALSE CLAIMS PROVISIONS BASED 
                   ON CLAIMS SUBMITTED UNDER CERTAIN HEALTH CARE 
                   PROGRAMS.

       (a) In General.--Subchapter III of chapter 37 of title 31, 
     United States Code, is amended by adding at the end the 
     following:

     ``Sec. 3734. Rules for certain actions based on health care 
       claims

       ``(a) In General.--In the case of any action that is 
     brought under this subchapter based on a claim submitted with 
     respect to a federally funded health care program, the 
     preceding provisions of this subchapter shall apply only to 
     the extent that such provisions are consistent with the 
     provisions of this section.
       ``(b) Actions if Amount of Damages Are Material Amount.--
     Notwithstanding the preceding sections of this subchapter, no 
     action may be brought under this subchapter based on a claim 
     that is submitted under a federally funded health care 
     program unless the amount of damages alleged to have been 
     sustained by the United States Government with respect to 
     such claim is a material amount.
       ``(c) Actions for Claims Submitted in Reliance on Official 
     Guidance.--Notwithstanding the preceding sections of this 
     subchapter, no action may be brought under this subchapter 
     based on a claim submitted--
       ``(1) in reliance on (and correctly using) erroneous 
     information supplied by a Federal agency (or an agent 
     thereof) about matters of fact at issue; or
       ``(2) in reliance on (and correctly applying) written 
     statements of Federal policy which affects such claim 
     provided by a Federal agency (or an agent thereof).
       ``(d) Action for Claims Submitted by Persons in Substantial 
     Compliance With Model Compliance Plan.--Notwithstanding the 
     preceding sections of this subchapter, no action may be 
     brought under this subchapter based on a claim submitted by a 
     person that is in substantial compliance with a model 
     compliance plan issued by the Secretary of Health and Human 
     Services (in consultation with the Secretary of Defense).
       ``(e) Standard of Proof.--In any action brought under this 
     subchapter with respect to a claim submitted to a federally 
     funded health care program, section 3731(c) shall be applied 
     by substituting `clear and convincing evidence' for `a 
     preponderance of the evidence'.
       ``(f) Rule of Construction.--Nothing in this section shall 
     be construed as limiting the authority of the Government of 
     the United States to recoup or otherwise recover damages with 
     respect to a claim submitted to a federally funded health 
     care program under provisions of law other than this 
     subchapter.
       ``(g) Definitions; Related Rules.--For purposes of this 
     section--
       ``(1) the term `claim' means a claim (as defined in section 
     3729(c)) made with respect to a federally funded health care 
     program;
       ``(2) the term `damages' means the amount of any 
     overpayment made by the United States Government with respect 
     to a claim;
       ``(3) the term `federally funded health care program' means 
     a program that provides health benefits, whether directly, 
     through the purchase of insurance, or otherwise, that is 
     established under--
       ``(A) title XVIII, XIX, or XXI of the Social Security Act, 
     or
       ``(B) title 10, United States Code;
       ``(4) the amount of damages alleged to have been sustained 
     by the United States Government with respect to a claim 
     submitted by (or on behalf of) a person shall be treated as a 
     `material amount' only if such amount exceeds a proportion 
     (specified in regulations promulgated by the Secretary of 
     Health and Human Services in consultation with the Secretary 
     of Defense) of the total of the amounts for which claims were 
     submitted by (or on behalf of) such person--
       ``(A) to the same federally funded health care program, and
       ``(B) for the same calendar year,
     as the claim upon which an action under this subchapter is 
     based;
       ``(5) the regulations specifying the proportion referred to 
     in paragraph (4) shall be based on the definition of the term 
     `material' used by the American Institute of Certified Public 
     Accountants as of the date of the enactment of this section; 
     and
       ``(6) in determining whether an amount of damages is a 
     `material amount' under paragraph (4), with respect to a 
     person--
       ``(A) the amount of damages for more than 1 claim may be 
     aggregated only if the acts or omissions resulting in such 
     damages were part of a pattern of related acts or omissions 
     by such person, and
       ``(B) if damages for more than 1 claim are aggregated in 
     accordance with subparagraph (A), the proportion referred to 
     in such paragraph shall be determined by comparing the amount 
     of such aggregate damages to the total of the amounts for 
     which claims were submitted by (or on behalf of) such person 
     to the same federally funded health care program for each of 
     the calendar years for which any claim upon which such 
     aggregate damages were based was submitted.''.
       (b) Technical and Conforming Amendment.--The table of 
     sections for chapter 37 of title 31, United States Code, is 
     amended by adding after the item relating to section 3733 the 
     following:

``3734. Rules for certain actions based on health care claims.''.

       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to actions brought under subchapter III of 
     chapter 37 of title 31, United States Code, with respect to 
     claims submitted before, on, and after the date of the 
     enactment of this Act.

  Mr. HOLLINGS. Mr. President, I am delighted to join my colleague 
Senator Cochran in introducing legislation that helps define the rules 
of the game for health care providers and allows investigators to focus 
on ferreting out and prosecuting real fraud in Federal health programs.
  The Health Care Claims Guidance Act of 1998 that we introduce today 
is made necessary by conflicting, extremely complex regulations 
covering Medicare, Medicaid, CHAMPS and other Federally funded 
programs. Ironically, most of these exist as a result of Congressional 
efforts to reduce fraud and abuse--to establish a system for billing 
and claims processing that assures these programs are paying reasonable 
costs for medically necessary services actually provided to eligible 
individuals. Not achieving our goal of ending fraud, we just stack on 
more rules that require honest providers to take more and more time 
from patient care to do paperwork while the crooks ignore us or accept 
as a challenge getting around the rules. There is no end in sight. This 
is a classic example of the road to hell being paved with good 
intentions. We have created a nightmare, and we have a responsibility 
to begin straightening out some of the confusion so honest health care 
providers can take care of patients and we can concentrate on 
prosecuting those who willfully violate the law.
  It is absolutely imperative that we accept nothing less than zero 
tolerance for real fraud and that the Government use all the tools at 
its disposal to prosecute willful violations of the law. It is equally 
imperative that we play fair with our partners who provide the health 
care we pay for with Federal

[[Page S3791]]

funds. When a participating hospital receives directions from its 
fiscal intermediary, the hospital should know it can follow those 
directions without fear of being accused of fraud. Using the False 
Claims Act, the Justice Department is notifying hospitals that they are 
under investigation for alleged billing fraud, offering minimal time to 
respond or face prosecution. Hospitals are capitulating to these 
demands even when they know no fraud has been committed simply because 
they cannot afford to pay the accountants and lawyers to take on the 
Department of Justice. Others believe diverting these funds from 
patient care would be an irresponsible waste of tax dollars and not in 
the best interests of Medicare beneficiaries. I certainly agree.
  Respected physicians in my State, some personal friends of forty 
years, have received letters recently from the ``Medicare Fraud Unit'' 
demanding that they pay up immediately or face prosecution. They are 
confused and annoyed about the complexity of Medicare rules and coding, 
but they are outraged that they are being accused of fraud with no 
basis whatsoever. I submit, Mr. President, that they deserve to be 
enraged. And it doesn't get any better once they enter negotiations and 
are virtually unable to practice medicine because of the auditors 
consume most of the work day and office space. Then they wait for 
months to see if the ax will fall.
  The Health Care Claims Guidance Act of 1998 would take a small but 
important step in the right direction. It would amend the False Claims 
Act to create special rules for claims in all Federally funded health 
care programs. No criminal provisions are amended. The bill's 
provisions apply only to health care claims limited to civil actions.
  First, no action can be brought if the provider has relied on and 
correctly applied information supplied by a Federal agency or an agent 
thereof. Second, no action may be brought unless the amount of damages 
is material. Third, it establishes a safe harbor for hospitals with an 
effective compliance plan under the General Hospital Compliance 
Guidelines. And, fourth, it raises the burden of proof from a 
``preponderance of the evidence'' to a ``clear and convincing 
evidence'' standard.
  Mr. President, let me make it clear once again, this bill in no way 
limits the authority of the Government to recoup or otherwise recover 
damages with respect to claims under any other provisions of law and 
does not apply to criminal provisions. It allows us to begin restoring 
the partnership between the Federal Government and those who provide 
health care under Federal programs and encourages the Government to use 
its resources to prosecute those who violate that partnership. I urge 
my colleagues to assist us in its early passage.
                                 ______