Following the money: Complying with the False Claims Act is more important than ever for long-term care

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Frontline, ProPublica slam assisted living sector in documentary airing tonight
In an era where healthcare expenses are rising briskly, it's no wonder federal and state authorities are taking stock of all their options to track dollars. And while hardly new, the False Claims Act appears to be an increasingly popular tool for the government to use to round up expenditures it sees as being recoverable from healthcare providers.

Recent reports show that government prosecutors have been going after long-term care operators more often for Medicare and Medicaid funds under the FCA. Authorities are claiming that the programs were defrauded because facilities could not show proof they provided services they billed for.

Typical FCA citations have included fraudulent billing (services not delivered), double billing, misrepresenting the value of goods and services, billing for research not conducted, performing medical tests that were not required, billing for brand name medications when generics were used, and billing for hours not worked.
Not only can authorities revoke funds based on FCA rules, they also can levy financial penalties and pursue criminal charges against targeted providers. Recently passed amendments now give the government even more latitude in its investigations (see accompanying story).

The catalyst

Perhaps the best-known FCA crusader is James G. Sheehan, currently the head of New York's Office of Medicaid Inspector General. When he assumed his post in 2007, Sheehan's stated goal was to secure $1.5 billion in additional federal Medicaid funding for the state, contingent upon increasing New York's financial recoveries from Medicaid fraud enforcement activities.

Prior to becoming New York's Medicaid chief inspector general, Sheehan conducted several high profile nursing home prosecutions under the False Claims Act for the U.S. Attorney's Office in Philadelphia.

One such case involved an FCA complaint against Episcopal Long-Term Care, operators of Philadelphia Nursing Home, in 1998. As part of the ensuing settlement, PNH agreed to pay $50,000 for violating the False Claims Act.

Some legal analysts, such as John Durso of the Chicago-based law firm Ungaretti & Harris, believe the FCA rationale is flawed.

“The argument is that care is so deficient that it's considered fraud to ask for money from the government,” he said. “Where is the line? If I'm providing substandard care, that is what the certification and licensure process is about. All of those remedies are in the arsenal of the government to correct poor performing facilities. To pile FCA on to all of those other remedies is saying that a facility didn't provide anything of worth—yet residents were housed, fed and provided [with] nursing services. If the facility did a poor job, then they should be cited under regulations of the certification process.”

Toeing the line

Compliance is more critical than ever to keep investigators away, says Chip Kessler, general manager of Johnson City, TN-based Extended Care Products. He said he wasn't aware of FCA actions being taken against any of his clients.

The keys to a compliant operation, he says, are confidence, correspondence and diligence.

“I believe communication with residents and families is vitally important when it comes to facilities demonstrating good care,” he says. “Here customer service plays a key role. Facilities need to do as good a job as possible in training staff to develop a good customer service mindset, which includes being aware of residents' and families' needs.”

Family time

Establishing good relations with residents' families means opening up the facility so that they become more aware of the surroundings and familiar with staff members. By being comfortable with the environment and workers, families are more likely to ask questions and feel that the facility is providing a high level of customer service, Kessler notes.

“Accordingly, fostering a proper customer service mindset has the added benefit of enhancing a facility's reputation that goes beyond its doors and can translate into dealings with CMS or Office of Inspector General auditors,” he says. “Proper documentation of the care and services you provide also plays an important role.

“The bottom line is that you want to be giving the best care that is reasonably possible, keep good records that you are providing quality care and also be working with residents' families so they know you are offering an outstanding level of care. In doing this, I believe you can prevent potential problems down the road, including the possibility of a False Claims Act complaint or something else.”

Skillman, NJ-based attorney David S. Barmak specializes in developing corporate compliance programs for skilled nursing facilities and serves as chairman of the New Jersey State Bar Association's Health and Hospital section. At this point, he has not had any clients subjected to a federal or state False Claims Act lawsuit, also known as a qui tam or “whistleblower” action. Yet, he's concerned that an employment litigation claim could result in an FCA complaint.

“For example, suppose a nursing home is sued by a former employee for wrongful termination and that person was a nurse supervisor,” Barmak said. “I am concerned that the former employee, while prosecuting a wrongful termination lawsuit, might also collect evidence of substandard quality of care and simultaneously file a qui tam lawsuit.”

The difficulty in defending the nursing home is twofold, he explained: First, a qui tam suit can be hidden under a judicial seal and maintained that way until the government decides to remove it in order to proceed with prosecution; and second, if the wrongful termination suit can be settled, it is unknown whether the qui tam suit would be released.

“Can the former employee give such a comprehensive release and still maintain the qui tam lawsuit? The answer is clearly ‘no,'”

Barmak explains. “However, unless the former employee's attorney tells me about the qui tam, there is no way I can determine if that attorney is seeing the issue clearly and accurately. Moreover, qui tam lawsuits are brought by the government and not the former employee, so they have to be brought into it. This becomes very complicated and requires a coordinated effort involving multiple parties and multiple courts.”

Hammer home compliance

Knowledge and preparation are the facility operator's best protections against a False Claims Act lawsuit, whether the result of a mistake or whistleblower, Barmak said.

“The implementation and development of a dynamic corporate compliance program is the best way to get the government to walk away from an investigation,” he said.


Amendments increase FCA powers

An already formidable False Claims Act could become even more imposing for providers with the recent passage of several amendments designed to sharpen it. Signed into law by President Obama on May 20, the FCA amendments expand the scope of liability and give the government enhanced investigative powers.

Both the American Association of Homes and Services for the Aging and the American Health Care Association have dug into the details of this new legislation and what it could mean for long-term care providers.
Here is a brief overview of the amendments:

Liability for improper retention of government overpayments:

Failure to return an overpayment is now a basis for FCA action.

Expanded liability for claims or statements affecting government funds:

FCA liability now includes any false or fraudulent claim for government money, regardless of whether the government has physical custody of the money. Liability also extends to claims presented to government officials or employees, regardless of intent.

Expanded retaliation provisions:

These raise the bar on retaliation against “employees” and now includes retaliatory actions taken against any “contractor or agent.”
Expanded statute of limitations period for cases in which the government intervenes:

The government's action is now treated as being filed on the date of the original complaint, so that the time the government spends investigating a case or negotiating with a defendant does not count toward the statute of limitations.

Broadened investigative authority:

The amendments expand the attorney general's authority to issue civil investigative demands and broaden the government's authority to share documents obtained through subpoena with qui tam complainants and other parties.

AHCA has expressed “great concern” that the FCA amendments have removed safeguards against unfounded qui tam lawsuits. Following is a statement from the association prepared for McKnight's Long-Term Care News:

“This does not serve the best interests of U.S. taxpayers or businesses that partner with the federal government and instead discourages healthcare providers from participating in government-funded programs, which in turn jeopardize care access for our nation's frail, elderly and disabled citizens. We encourage all providers to become as aware and educated as possible on these amendments to ensure that they are prepared.”