Ted Lotchin, Baker Donelson

In this month’s article, the third in a four-part series examining enforcement trends in the long-term care industry, our authors review the current potential for False Claims Act liability arising from allegations of poor quality care.


Congress enacted the False Claims Act after disclosure of widespread government contractor fraud during the Civil War revealed that the Union Army was being billed for nonexistent or worthless goods. According to one contemporary observer: “For sugar, it often got sand; for coffee, rye; for leather, something no better than brown paper; . . . and for serviceable muskets and pistols, the experimental failures of sanguine inventors or the ruse of shops and foreign armories.” With the FCA’s expansion over the past 150 years, however, its utility has grown well beyond just the defense industry.  

As the FCA is now the primary tool to prosecute fraud in the healthcare industry, the statute’s potential to create ruinous financial liability begs the question of whether it is still an appropriate tool for policing quality of care complaints.  

At the most basic level, there will always be significant disagreement among providers over the proper course of care for a particular patient and when to deviate from standard clinical protocols. Without clear consensus on how to quantify the quality of care in each instance, the fact that reasonable minds can differ should not automatically lead to FCA liability. In addition, defense attorneys routinely raise questions about whether whistleblowers and government enforcement attorneys are in the best position to make professional determinations about the quality of care provided to a particular beneficiary. These questions are even more difficult in an industry where clinical guidelines are constantly evolving and changing with the underlying science.

FCA liability for worthless services

FCA complaints that focus on the provision of low (or no) quality care are generally referred to as “worthless services” complaints.  Under this theory, private whistleblowers are essentially arguing that the services provided to a Medicare or Medicaid beneficiary were of such poor quality that they were tantamount to providing no services at all. In other words, whistleblowers are arguing that the services were of no value to either the beneficiary or government healthcare program and, as such, the government did not receive the benefit of its bargain.

The worthless services theory of FCA liability was first laid out in a mid-1990s action against a Pennsylvania nursing home. Since its emergence, whistleblowers have brought FCA complaints under this theory based on allegations of unnecessary procedures or lab tests, poor quality rehabilitation services, inaccurate calibration of pulmonary testing equipment, and hospital readmission rates.  Although there are legitimate questions about whether providers that are paid on a per diem basis can or should be the target of worthless services claims, nursing homes and long term care providers have been frequent targets of these actions.

Not surprisingly, different federal courts have staked out different positions on the standard for liability under a worthless services complaint. Some courts have followed a more permissive approach to the questions noted above, by allowing worthless services litigation to proceed if patients received care or services that simply did not meet statutory standards. Other courts, in contrast, have adopted a more skeptical view by essentially requiring that the services provided must have been of such poor quality as to be the functional equivalent of providing no services whatsoever.  

The Seventh Circuit has been one of the most recent federal courts to comment on FCA allegations involving poor quality care at a long-term care facility. Fortunately for providers in Illinois, the court reigned the worthless services theory in somewhat in Absher v. Momence Meadows Nursing Center, by finding “[s]ervices that are ‘worth less’ are not ‘worthless.’” Although this language sets a high bar for whistleblowers to clear, worthless services complaints continue to pop up across the federal circuits.  In addition, government enforcement agencies are often requiring corporate defendants to implement extensive quality monitoring and improvement programs as part of any settlement agreements or deferred prosecution agreements.  

Best practices for risk mitigation

With the country’s aging population, the need for skilled nursing and other types of long-term care will only increase over the coming decades. While this might be good for patient census, this trend will continue to put long-term care providers in the spotlight for FCA enforcement actions. From a best practices perspective, this means that providers must continue to incorporate quality of care metrics into their enterprise-wide risk management processes and take steps to break down communication barriers between legal, the C-suite, and nursing staff.  

Most importantly, providers must continue to pay close attention to trends and patterns in infections, falls, and other quality of care metrics. While one bad outcome or incident might not make a fraud case for a government attorney, ten or twenty bad outcomes certainly will.

In our next blog, we’ll discuss the new requirements for long-term care providers to implement corporate compliance and ethics programs, and the organizational benefits that can flow from this important exercise.

Jason R. Edgecombe is of counsel in the Atlanta, GA, office of Baker Donelson. He can be reached at [email protected].

Ted Lotchin is of counsel in Baker Donelson’s Washington, D.C., office, and is a member of the Firm’s Health Law Group. He can be reached at [email protected].