Nursing homes looking to protect themselves from False Claim Act investigations should maintain at least a 3-star rating and ensure they don’t delay discharges to get extra reimbursement, a panel of industry attorneys recommends. 

Those were just two of the valuable insights experts from law firm Sheppard Mullin revealed when on a  webinar examining an uptick in cases being brought by the US Department of Justice. The firm also offered warnings against giving investigators “low-hanging fruit.”

“Nursing facilities that lack adequate staffing are increasing their FCA risk,” said Gregory Smith, a partner in the Governmental Practice in the firm’s New York office, during the Aug 2. webinar. “The easiest allegation for the government to make is that you were understaffed and, therefore, you could not provide quality care and your care was substandard.”

Smith suggested that facilities maintain a staffing rating of at least three stars.

“Anything less is low-hanging fruit,” he observed. 

In fiscal year 2021, the federal government recovered $5.6 billion from False Claims Act cases with $1.6 billion coming from qui tam — or whistleblower — investigations across healthcare settings. There were 598 new qui tam cases that year in total. While the amount of money recovered dropped to $2.2 billion in Fiscal Year 2022, the number of new qui tam cases rose to 652. The total number of cases brought that year was 948, a new record, Smith said. 

The most common reasons a nursing home could be investigated under the False Claims Act, per Smith, include kickbacks, poor documentation to support claims and improper disenrollment practices such as the facility initiating disenrollment from Medicare Advantage into Medicare, which must be initiated by the resident or resident’s family, and delays in discharge. 

“If [a resident is] ready for discharge, you need to be focused on getting them out of their bed and into their homes or the next level of care,” instead of stalling the process to obtain another day’s reimbursement, Smith said.

Smith also cautioned that nursing homes should have legal counsel vet all marketing and sales agreements to ensure compliance with all jurisdictions. Facilities can run into legal trouble if they pay marketers for patient referrals, especially Medicare referrals, or for taking a home’s census into account when calculating marketing compensation. 

Last year, the Biden administration announced a series of reforms aimed at improving the quality of care and transparency for nursing home ownership. Those reforms include the long-anticipated minimum staffing requirement that is sitting at the Office of Management and Budget, awaiting public release.   Congress, too, has stepped up its attention to the sector, holding hearings and issuing stern and lengthy reports on the quality of care, state oversight, and investments and holdings from private equity firms and real estate trusts. 

Facilities are operating in an “era of heightened enforcement and risks,” added Danielle Vrabie, a partner in the Business Trial Practice Group in the firm’s New York office and a member of the healthcare practice team.

“The False Claims Act has had a bizarre history of being an inconsequential statute to now really being at the forefront of government enforcement actions,” she said during the webinar, which was titled, “Home Health Agencies, Skilled Nursing Facilities Face Increased False Claims Act Enforcement Risk.”

In March 2020, a federal initiative to coordinate False Claims Act cases led to investigations at approximately 30 facilities in nine states, Vrabie said. The complaints were filed under seal, but Vrabie said they are starting to be made public. The sector should expect to see press releases from the Department of Justice spur media reports, which often lead to heightened scrutiny from lawmakers and regulators.