There is little doubt that the government’s enforcement efforts in combatting fraud, waste, and abuse concerning the federal healthcare programs have yielded significant results. During the last five years, civil enforcement recoveries have exceeded $12.5 billion. Of that amount, the government has recovered hundreds of millions of dollars from the long-term care industry, including hospice, home health, and skilled nursing facilities, in resolving allegations arising under the civil False Claims Act.  

With the ever-increasing amount of dollars expended on providing long-term care services to beneficiaries of government healthcare programs, it should be no surprise that long-term care providers find themselves seemingly at the center of the government’s healthcare fraud enforcement efforts. The recent announcement by the Department of Justice of the creation of 10 Regional Elder Justice Task Forces throughout the United States plainly reflects that such efforts are a high priority among government regulators.

Scrutiny focused on the long-term care industry

No sector of the long-term care industry has escaped scrutiny. During the last 12 months, hospice providers entered into numerous multi-million dollar FCA settlements with DOJ, most of which involved allegations that providers billed Medicare for hospice services for patients who were not eligible for such services or otherwise failed to meet certain specified conditions of payment.

Skilled nursing providers likewise resolved numerous FCA cases, including the largest-ever settlement involving alleged violations of the Anti-Kickback Statute, and a significant number of cases where the government alleged that providers manipulated patients’ Resource Utilization Group levels in order to maximize reimbursement rather than meet the patients’ clinical needs. Enforcement activity also remained robust in the home health sector.

Not all enforcement efforts, however, have resulted in settlements with the government. Long-term care providers have demonstrated an increased willingness to litigate FCA claims, particularly when those claims are based on allegations that the services provided were not medically necessary. Providers often view this sort of FCA claim as necessarily involving second guessing of the nature and amount of care provided to a patient – a subjective process to say the least. Not surprisingly, such cases often involve contentious reviews of medical records by experts, with the parties arguing over whether sufficient proof exists to demonstrate the falsity of any particular claim. Providers defending such claims received a significant boost from a recent federal district court opinion, in which the court made clear that a mere disagreement between experts regarding the clinical need for particular services was insufficient to establish an FCA claim. (U.S. ex rel. Paradies v. AseraCare Inc., No. 2:12-cv-00245 (N.D. Ala.).)  In other words, the district court reaffirmed the long-standing notion that in order to prevail on an FCA claim, it must be established that the claims at issue were objectively false.   

By the numbers

In addition to the clinical disagreements regarding whether the patient required the level of service provided, disputes often arise regarding inferences to be drawn from the business practices such as budgeting or benchmarking. It is common for plaintiffs in FCA cases – whether whistleblowers or the government – to point to a provider’s stated “goals” or “benchmarks” as supposed pressure on the provider’s employees to provide medically unnecessary services. Not surprisingly, when providers track performance against those goals, benchmarks or budgets, or evaluate employees relative to those standards, such conduct likewise is highlighted as evidence of wrongdoing.

There are, of course, very legitimate business reasons for a healthcare provider to create budgets, to establish goals and benchmarks, and to evaluate performance relative to these metrics. And, prudent business practices demand tracking of such information in order to evaluate effective delivery of care to patients, staffing needs, patient demographics, relational dynamics among clinicians, and the overall business climate. As more cases proceed against long-term care providers challenging the medical necessity of the care provided to patients, it will be increasingly important to distinguish between legitimate business practices and those practices that actually evidence wrongful conduct. For their part, providers should have a thorough understanding of their use of targets, benchmarks and other metrics, and the legitimate operational reasons for the use of such metrics.

Providers facing FCA claims challenging the medical necessity of long-term care services also have encountered increasing efforts by FCA plaintiffs to extrapolate liability from a sample of claims to a larger universe of claims. While providers facing FCA claims have urged that falsity must be proven on a claim-by-claim basis, a number of courts have allowed sampling and extrapolation, citing the practical limitations of litigating cases potentially involving thousands of individual patients and claims. (U.S. ex rel. Martin v. LifeCare Centers of Am., Inc., No. 1:08-cv-251 (E.D. Tenn.) (involving extrapolation concerning claims by skilled nursing facilities).)  The first federal appellate decision regarding whether sampling can be used to establish FCA liability over a broader universe of claims is expected in the coming months. (U.S. ex rel. Michaels v. Agape Senior Community, Inc., No. 12-cv-03466 (D.S.C.) (involving extrapolation concerning claims for reimbursement for nursing home-related services).)  

Increased Focus on Individuals

Finally, DOJ’s release of the Yates Memo late last year reinforces the notion that long-term care providers must worry about more than just corporate civil liability when facing a government investigation. The memo (PDF), issued by Deputy Attorney General Sally Q. Yates, stressed that DOJ would continue to facilitate coordination of investigatory resources in connection with parallel civil and criminal investigations and would increase its focus on individual accountability stemming from such investigations. The Yates Memo followed criticism that companies too often were reaching significant settlements with the government, while the individuals responsible for the alleged misconduct largely avoided responsibility. It formalizes a message DOJ officials have been clearly forecasting during the last several years: Individuals responsible for corporate wrongdoing will be held accountable.

In light of the enforcement environment and increased risk of whistleblower lawsuits, how can long-term care providers reduce the risk finding themselves in the midst of a government investigation? First, providers should view these developments as an impetus to evaluate their corporate compliance program, including the effectiveness of the response to compliance concerns raised within their organization. Second, they should evaluate their own data to determine whether those data suggest the possibility that the provider is an outlier relative to peers. Third, providers should evaluate the effectiveness of the compliance training provided to their employees to determine whether it adequately addresses areas of concern. Finally, providers should monitor enforcement developments within their industry, as those developments often times reflect the enforcement priorities of government regulators or reflect key risk areas for providers.

No compliance program can guarantee that a healthcare provider will not find themselves the subject of a government investigation, but prudent steps to bolster compliance and respond to questions raised by whistleblowers before they become litigants certainly can minimize the risk.

Matt Curley is a partner at Bass Berry & Sims PLC, in Nashville, and practices in the firm’s Compliance and Government Investigations Practice Group.