A New York healthcare system that invested nursing home reimbursements in other parts of its business is not subject to False Claims Act litigation, a federal court has ruled.
The decision marks the first-ever ruling on the intent of the Benefits Conversion Statute and confirms that providers can spend reimbursements earned as they see fit, long-term care legal experts told McKnight’s Long-Term Care News.
Whistleblower Michael Quartararo filed suit in 2012 against Catholic Health System of Long Island, claiming it had incorrectly routed reimbursements earned for services at St. Catherine of Siena Nursing Home to St. Catherine of Siena Medical Center.
Federal and state laws, however, don’t dictate how Medicaid and Medicare reimbursements must be dispersed, ruled the US Court of Appeals for the Second Circuit this week. The Court sent the case back to US District Court for the Eastern District of New York on Monday with instructions to dismiss it.
Quartararo’s legal team held that the Benefits Conversion Statute should prevent one entity from routing money earned for one purpose to another provider or purpose.
The appeals court’s ruling has “no basis” in law nor judicial ruling and “now invites nursing homes across the nation to be robbed by unscrupulous owners,” claimed Daniel J. Kaiser, of Kaiser Saurborn & Mair PC, New York, according to a Bloomberg report.
The appeals court, however, disagreed. It ruled that the Benefits Conversion Statute is violated only if payment intended for another person’s benefit or use is converted for another’s use or benefit. Provider reimbursements via Medicaid and Medicaid, for example, are payment for past services rendered.
“Put differently, there are no forward-looking conditions that reimbursements be used in any specific way,” explained long-term care attorney and legal expert Norris Cunningham, a member with Stoll Keenon Ogden PLLC. “So the court is not giving the facilities newfound freedom to somehow convert money that was or has been earmarked for nursing home residents. Rather, the court is really standing for the principle that if a facility provides services to a resident and is appropriately paid by the government for those services, there is no requirement that the facility then confer future benefits for any other person, not even that resident to whom the past services were given.
“A good analogy for the relator’s misguided approach would be your employer paying you on Friday for all your hard work over the previous two weeks, but then telling you how you must spend that pay and whom you should allow to benefit from that pay,” Cunningham added. “That is wholly unreasonable.”
Long-term care providers have had their struggles with similar cases in the past.
“False Claims Act suits based on a theory of false certification have caused provider headaches for a number of years,” Matthew J. Murer, chairman of the healthcare division at Polsinelli LLP, told McKnight’s Long-Term Care News Wednesday. “While providers have fought against the application of this theory as being too broad and nebulous, it was validated in 2016, when the Supreme Court found that False Claims Act claims can arise under the theory of an implied certification in Universal Health Services, Inc. v. United States ex rel. Escobar, but imposed a strict standard for determining liability in such cases.”
The court held that liability could be found when the defendant submits a claim for payment that makes specific representations about the goods or services provided but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory or contractual requirement, Murer explained in an email. That did not happen in the Catholic Health System case.
The decision “affirms that a plaintiff need to show that the defendant knowingly failed to disclose non-compliance with a law rather than simply making a blanket assertion that the defendant was not in compliance with the law,” Murer said. “The court’s determination that the payment from Medicare ‘ended the life cycle of the claim’ is particularly helpful as it creates a clear end point barring speculative claims for actions taken by the defendant after payment.”
Multiple representatives of Catholic Health System of Long Island whom McKnight’s asked for comment Wednesday had not responded as of late Wednesday.
