I first heard the words last year at Dr. Lawrence R. Muroff’s Economics of Diagnostic Imaging 1998 National Symposium in Washington, DC. It was the contention of Ronald Clark, a partner with Arent Fox Kinter Plotkin & Kahn, that qui tam relators were driving the enforcement of actions being brought against hospitals under the False Claims Act. Though diminutive, the words qui tam are packing quite a wallop from coast to coast as hospitals gear up to defend themselves against charges brought by former and current employees, or, in the case of the recent settlements by the University of California at San Diego (UCSD), and the University of Washington, Seattle, a vendor salesman.

In this particular case, UCSD paid $4.7 million and the University of Washington paid $3.6 million to settle charges that their research hospitals improperly billed Medicare for experimental medical devices. As the federal enforcement coffers swell, news stories of this ilk have become so routine that they rarely rate coverage outside city limits. This story, however, may be coming to a newspaper near you as 127 additional research centers face similar charges in the same action, according to an attorney representing the relator. The cardiac devices in question, manufactured by 10 different vendors, had not received Food and Drug Administration approval and so did not qualify for reimbursement, though most eventually were approved. In settling the case, UCSD admitted to no wrongdoing, and in fact stated that the 300 patients involved had received the best possible care, according to an article in the Los Angeles Times.

The relator, a medical device salesman in Seattle, testified before a Senate panel in 1996 that physicians and hospitals used experimental medical devices in exchange for financial payoffs, including stock options, royalty contracts, and cash. In exchange for his testimony, and according to the Qui TamProvision in the False Claims Act, the salesman stands to gain 15-30% of the settlement. His take is likely to escalate dramatically, in light of the additional 127 facilities fielding related accusations.

The issue of payments to physicians and hospitals was not addressed in the settlement, but a spokesman for UCSD acknowledged that one of the physicians whose billings were among those questioned did receive cash payments from the manufacturer. There is no law preventing physicians from receiving compensation for their role in investigational research conducted on behalf of vendors, and it is, in fact, a common — and in this case, embarrassing — practice. Medicare, however, stipulates that it will not pay for such research by reimbursing for unapproved devices. In the wake of this experience, UCSD has instituted a conflict of interest review to prevent compromise in the future, Charles Mittman, UCSD dean for clinical affairs and chief compliance officer, told the Times.

This case offers an urgent wake-up call for those institutions that have not developed an institution-wide compliance program like the one reviewed by David Tupper in his story on the Dartmouth-Hitchcock Medical Center (DHMC), Lebanon, NH. DHMC is one of an elite fraternity of teaching institutions that came through the Physicians at Teaching Hospitals audit without being assessed penalities, though defending its reputation cost a jaw-dropping $1 million. The program at DHMC is exemplary for the manner in which it begins at the highest administrative level and is iterated throughout every department, consciously creating an ethical environment in which to practice medicine and get reimbursed for services rendered. The DHMC program also is proactive in its willingness to challenge proposed Medicare regulations.

As government support for medical research declines, it is more likely — necessary, even — that an institution will partner with vendors in financing research. At the same time, the money available to finance fraud enforcement against medical facilities escalates with each settlement, creating a conducive environment for fraud and its detection. An institution’s best defense is to create its own culture of ethics and a compliance program that goes beyond the buzzword.

Cheryl Proval ( [email protected])