Prosecuting Substandard Care With the False Claims Act, as appeared in McKnight’s Long-Term Care News & Assisted Living Magazine

The federal False Claims Act ("FCA"), originally known as "Lincoln's Law," has its roots in the Civil War era. Its original purpose was to fight fraud in the defense industry, but it has become the weapon of choice for the government and qui tam "relators." They are acting in the name of the United States to combat healthcare fraud—primarily involving Medicare and Medicaid claims.

Recently, the U.S. Attorney for the Eastern District of Pennsylvania employed the FCA to settle allegations against a nursing home for submitting claims for payment for inadequate care involving the treatment and prevention of pressure ulcers, incontinence care, infection control, diabetic care, weight monitoring, nutritional provision and physician care. The theory in this case was that the nursing home submitted a false claim each time a bill to the government was presented for inadequate care. While this was not the first instance in which the FCA was used to target substandard care, it may signal a renewed prosecutorial interest as the government seeks to heighten its efforts to prevent fraud, waste and abuse, and increase quality of care.

The FCA makes it unlawful for a person to "knowingly" make a "false or fraudulent" claim to the government for payment of government funds. Although the FCA imposes liability only when the claimant acts knowingly, it does not require that the person submitting the claim have actual knowledge that the claim is false. A person who acts in reckless disregard or in deliberate ignorance of the truth or falsity of the information can also be found liable under the FCA.

The government has routinely pursued FCA cases when nursing homes submit fraudulent claims, including, but not limited to, 1) bills for services that were not provided, 2) bills for services that were medically unnecessary, 3) bills for services or items that were included in the facility's per diem rate, and 4) claims to Medicare Part A when the resident is not eligible for the Part A benefit. In addition to these more typical enforcement actions, the FCA is being expanded to include billing for services where the care was substandard.

To participate in Medicare or Medicaid, providers must certify that they are abiding by all applicable statutes, rules and regulations regarding the provision of quality of care and safety. In FCA substandard care cases, the government alleges that by merely requesting payment, the provider implicitly certifies compliance with governing federal rules, regulations and contractual provisions that are a precondition to receiving payment. The government asserts this FCA implied certification theory when a nursing home submits a claim for Medicare or Medicaid reimbursement but is not fully compliant with quality of care regulations, including the Nursing Home Reform Act ("NHRA").

The NHRA establishes quality of life and quality of care requirements that facilities must meet in order to participate in the Medicare and Medicaid programs. For example, under the NHRA, a "skilled nursing facility must provide services to attain or maintain the highest practicable physical, mental and psychosocial well-being of each resident," including but not limited to nursing services, specialized rehabilitative services, pharmaceutical services and dietary services.

By submitting bills to Medicare or Medicaid, nursing homes implicitly certify to the government that they are in full compliance with applicable statutes, rules and regulations regarding the appropriate quality of care and safety. In its case against Willowcrest Nursing Home and Willow Terrace at Germantown (collectively, "Willowcrest"), the government pursued an implied certification theory claiming that by providing inadequate or worthless services, Willowcrest submitted false claims for reimbursement to the federal healthcare programs. 

Facing a potential civil penalty in the maximum amount of $10,000 per claim, plus three times the amount of damages, Willowcrest settled its claim with the U.S. Attorney for the Eastern District of Pennsylvania. Willowcrest's settlement requires that it 1) make a cash payment to the United States in the amount of $305,072, 2) hire a full-time physician assistant or nurse practitioner, and 3) retain a qualified monitor for three years who will assess the effectiveness, reliability and thoroughness of its internal control systems, training programs, and its response to quality of care issues.

It is likely that federal prosecutors will continue to use the theory of implied certification to combat substandard care when the government is paying for the provision of healthcare services. Accordingly, to minimize the risk of defending itself against the government's FCA claims for substandard care, a nursing home should develop and implement a comprehensive compliance program that serves to reduce fraud and abuse, enhance operational functions, improve the quality of healthcare services, and decrease the cost of health care. At a minimum, a comprehensive compliance program should contain written policies and procedures that are adopted to prevent fraud and abuse and ensure an appropriate level of care for the residents.

Even if a nursing home has current compliance policies and procedures, it should conduct a baseline assessment of risk areas, particularly in the area of quality of care. According to the OIG, common risk areas for a nursing home involving quality of care include:

  • Inappropriate or insufficient treatment and services to address residents' clinical condition;
  • Inadequate staffing levels or insufficiently trained or supervised staff to provide medical, nursing and related services;
  • Failure to accommodate individual needs and preferences;
  • Failure to properly prescribe, administer and monitor prescription drug usage;
  • Failure to provide appropriate therapy services; and
  • Failure to provide appropriate services to assist residents with activities of daily living (e.g. feeding, dressing)

The goal for a nursing home in conducting the risk assessment for quality of care is to ensure that the employees, managers and directors are aware of the risks and that it takes steps to minimize the types of problems identified. Written policies and procedures are an effective tool for improving quality of care for nursing home residents. But it is equally important to implement such policies through effective training and supervision.

By taking steps proactively to address quality of care deficiencies, a nursing home may not have to later defend itself from the government's FCA claim of substandard care.

Mark S. Armstrong is a member of Epstein Becker Green Wickliff & Hall in its Health Care and Life Sciences practice group. He focuses primarily on regulatory, reimbursement and litigation matters involving a wide range of healthcare providers, including, academic medical centers, durable medical equipment suppliers, hospitals, managed care organizations, pharmaceutical companies, pharmaceutical wholesalers, pharmacies, pharmacy benefit managers and physician practices.