The Health Law Sidebar
July 30, 2020

U.S. Department of Justice and Congress Focus on False Claims Act Cases Against Nursing Homes

The federal False Claims Act (“FCA”) states that any person who knowingly submits a false claim to the government will be liable for treble damages and penalties ranging from $5,000 to $10,000.  See 31 U.S.C. § 3729.  Importantly, the foregoing damages and penalties are for each false claim.  The FCA also allows for citizens, or “whistleblowers,” to file a “qui tam” action on behalf of the government should they become aware of any FCA violations.  If the government is awarded damages, then the whistleblower is entitled to a percentage of that recovery.  See 31 U.S.C. § 3730.  In the world of health care, this holds true for any providers and/or entities that submit false claims for reimbursement under Medicare and Medicaid.  It should be noted that the meaning of the term “false” is not limited to intentional misconduct when submitting claims for payment.  For example, the failure to timely return overpayments can lead to those claims being deemed “false” and services provided in violation of the Anti- Kickback Statute are also deemed “false” claims for this purpose.

Recently, the U.S. Department of Justice (“DOJ”) has been particularly focused on identifying FCA actions against nursing homes for allegedly failing to deliver adequate care to their residents.  This began on March 3, 2020, with an official announcement unveiling the DOJ’s National Nursing Home Initiative by Attorney General William Barr.  See “Department of Justice Launches a National Nursing Home Initiative” Press Release.  This initiative aimed to “coordinate and enhance civil and criminal efforts to pursue nursing homes that provide grossly substandard care to their residents.”  Id.  DOJ is investigating the followings factors to identify the “most problematic” nursing homes:

  • Consistent failure to provide adequate nursing staff;
  • Failure to adhere to basic protocols of hygiene and infection control;
  • Failure to provide their residents with enough food;
  • Withholding pain medication; or
  • Use of physical or chemical restraints to restrain or otherwise sedate their residents.  See id.

Furthermore, some observers suggest that the DOJ may be after homes that allegedly provide what is known as “worthless services.”  See William Harrington et al., Next for America’s Nursing Homes: A Legal Pandemic, New York Law Journal (June 29, 2020).  “Worthless services” occur where the services provided are so inadequate that they render any claims for Medicare/Medicaid as false because they provide no value to government.  Id.   Simply put, “[i]n a worthless services claim, the performance of the service is so deficient that for all practical purposes it is the equivalent of no performance at all.”  See Mikes v. Straus, 274 F.3d 687, 703 (2d Cir. 2001).  Moreover, it must be shown that the defendant did more than merely provide services that are worth an amount less than the services paid for.  United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 710 (7th Cir. 2014).  In other words, a “diminished value” of services will not satisfy this worthless services standard.  Id.  “Services that are ‘worth less’ are not worthless.”  Id.

In one case based in Tennessee, an action was filed against several of Vanguard Healthcare’s companies for allegedly providing services that were so grossly substandard as to be considered “worthless.”  See “Vanguard Healthcare Agrees to Resolve Federal and State False Claims Act Liability” Press Release.  There were several allegations made against five of Vanguard’s nursing homes including, among other claims, failure to administer prescribed medications, failure to provide appropriate infection control measures, and the submission of hundreds of preadmission forms containing forged provider signatures.  See id.  Ultimately, Vanguard agreed to pay more than $18 million to resolve these claims.  See id.

Now, with the high number of COVID-19 cases in nursing homes, both the DOJ and Congress have intensified the focus on FCA claims.  One investigation, opened by the DOJ’s Civil Rights Division and U.S. Attorney’s Office for the District of Massachusetts, examined the practices of the Soldiers’ Home in Holyoke (“Soldiers’ Home”) to determine whether the home failed to provide residents with adequate medical care prior to and during the COVID-19 pandemic.  See “Federal Investigation into Conditions at a Nursing Home for Veterans in Massachusetts Announced” Press Release.  Soldiers’ Home came under scrutiny due to a high number of COVID-19 related deaths.  As a result, the DOJ is investigating whether Soldiers’ Home had practices and policies in place to properly protect their residents from the COVID-19 pandemic.  See Chris Villani, DOJ To Probe COVID-19 Deaths At Mass. Veterans Home, Law 360 (Apr. 10, 2020), https://www.law360.com/articles/1262539/doj-to-probe-covid-19-deaths-at-mass-veterans-home

Moreover, there are many “unknowns” regarding the “worthless services” analysis mentioned above due to COVID-19.  See William Harrington et al., Next for America’s Nursing Homes: A Legal Pandemic, New York Law Journal (June 29, 2020).  The new ways in which we view “reasonable precautions” and regulatory enforcement amidst the COVID-19 pandemic will likely influence the worthless services argument against nursing homes.  Id.  This means there is a greater need for these facilities to ensure that they stay on top of compliance plans/practices as well as keep up with guidance issued by governmental agencies. 

Congress has also commenced investigations into the COVID-19 crisis in nursing homes through the “Select Subcommittee on the Coronavirus Crisis.”  The Chairman of this Subcommittee, Rep. James Clyburn, sent letters to the Centers for Medicare and Medicaid Services (“CMS”) and the five largest for-profit nursing home companies (Genesis HealthCareLife Care Centers of AmericaEnsign GroupSavaSeniorCare, and Consulate Health Care) in the U.S.  See “Clyburn Launches Sweeping Investigation Into Widespread Coronavirus Deaths in Nursing Homes” Press Release.  In his letter to CMS, Chairman Clyburn requests information regarding its oversight of nursing homes and its actions to protect residents.  See id.  In his letter to the nursing home companies, he requests any documents and information regarding COVID-19 related deaths, the conditions that may have contributed to the deaths, and any preventative measures taken to protect both the residents and workers.  See id. 

With the recent uptick in investigations, it is important that nursing homes closely monitor their policies and practices as well as regulations and any guidance from CMS and other agencies such as the New York State Department of Health.  For more information on agency guidance, please see the following resources:

Jessica N. Haller, Law Clerk, contributed to this article. If you have any questions regarding this article or the False Claims Act, please contact David R. Ross, Esq., Senior Shareholder, via e-mail at dross@oalaw.com. Mr. Ross has handled numerous federal False Claims Act cases and has represented nursing homes in New York State Attorney General’s Medicaid Fraud Control Unit cases, including those involving COVID-19.