Prosecutors enjoyed a lengthy winning streak in 2017 when they lodged a string of high-profile False Claims Act, or whistleblower, cases against long-term care facilities.
With many cases ending in multimillion-dollar settlements, providers could easily conclude that the deck was unfairly stacked against them.
However, a recent Florida federal court decision interpreting the materiality requirement of the U.S. Supreme Court’s Escobar decision may highlight a golden ticket for LTC operators.
On Jan. 11, 2018, when a FCA judgment for nearly $350 million against 53 nursing facilities was vacated by U.S. District Judge Steven D. Merryday, the tables may have turned.
As previously reported, the decision in U.S. EX REL. RUCKH v. SALUS REHABILITATION, LLC, et al (Case No. 8:11-cv-1303-T-23TBM) was based on the Supreme Court’s Escobar opinion that qualifiedly endorsed a false certification theory.
The precedent-setting Escobar decision established that FCA liability can attach when a long-term care facility submits payment claims that make specific representations about services provided but fails to disclose noncompliance with statutory or regulatory standards — the false certification. The Court stated that false certification alone does not give rise to liability unless the noncompliance was material to the government’s payment decision, and the operator knew it was material to the payment decision.
The court noted that when the government regularly pays a claim in full, with actual knowledge that certain requirements were violated, then that conduct is strong evidence that the violation is not material to its payment decision.
Many of the Salus “whistleblower” claims relied on the implied “false certification theory.” In the Salus case, the purported FCA violation was for failure to maintain comprehensive care plans and other documentation as required by Centers for Medicare & Medicaid Services regulations.
But Judge Merryday’s analysis of Escobar — which illustrates a workaround for facilities facing FCA claims — indicates that if payment continues to be made with government knowledge of regulatory noncompliance, this constitutes an admission that the noncompliance was not material.
This admission also relieves the LTC facility of the knowledge requirement. It cannot be established that the facility knew the noncompliance was material to the payment decision when the government paid the claims with knowledge of noncompliance.
The Salus decision creates an opportunity for providers because they are heavily regulated and are, of course, required to report to, or be assessed by, governmental agencies that pay their claims. Facilities are required, by regulation, to report to the government any events that cause suspicion of or result in serious bodily injury; to establish quality assurance and performance improvement programs and submit them to federal and state agencies each year; and to be subjected to comprehensive annual surveys.
Throughout this extensive interaction, the government agencies are made aware of noncompliance with CMS and state regulations. The penalties enforced for significant noncompliance include a bar on government payments under Medicare and Medicaid programs.
Combining the stringent reporting requirements with the finding that payment of claims with knowledge of noncompliance is essentially a waiver of the materiality component of a FCA claim, operators should consider the level of detail provided to the government during surveys and in incident reports.
Facilities should continue to be extremely diligent with their reporting requirements since their event reports and surveys may serve as protection against FCA claims, particularly if a whistleblower cites a reported or similar event as the basis for the violation. If the facility has proof that the government was informed and the Medicare or Medicaid claims continued to be paid, the event cited by the whistleblower would therefore not be a material one. This potentially enables the facility to avoid liability under the Escobar and Salus reasoning.
The golden ticket for LTC facilities is the opportunity to shield themselves from FCA claims by diligence and detail in reporting non-compliance to government agencies.
Nancy Reynolds, Esq., is a shareholder in LeClairRyan’s Roanoke, VA, office and leader of the national law firm’s Long-Term Care Industry Team. She can be reached at: firstname.lastname@example.org.