False Claims Act: How it is Being Applied and Misapplied in Long Term Care Cases

heap of dollars with stethoscopeThe False Claims Act (FCA) allows a whistleblower, called a relator, to sue for false statements made in connection with requests for payment to the government. For long term care facilities (LTCs), this typically arises in the Medicare and Medicaid reimbursement context.  The false claims could be submitting reimbursement requests for care not provided or care not required.  A claim may also arise when valid reimbursement requests are made, but the facility certifies, when submitting the paperwork, that it has complied with all regulatory requirements and, in fact, it has not.  Intent to defraud is not required, but the facility must have actual knowledge of the false claim or must have acted with deliberate ignorance of or reckless disregard for the truth or falsity.

In June 2016, the U.S. Supreme Court broadly interpreted the FCA to apply when a patient was provided psychiatric services and the medical facility sought Medicaid reimbursement.1  The care providers were not properly licensed.  The Court noted that false claims occurred when reimbursement requests were made because the medical facility impliedly certified that the conditions for reimbursement (services by qualified professionals) were satisfied.  The Court stated that the facility was required to disclose its noncompliance when making the reimbursement request and that the noncompliance did not have to deal with specific terms of payment.  The undisclosed information did have to be a material fact upon which the government would rely when deciding whether to reimburse.

FCA lawsuits by LTC employees or former employees are currently pending in courts across the United States related to reported irregularities in services provided for which Medicare or Medicaid reimbursements were sought.  The troubling aspect of these claims is the attempts to bypass the burden of proof requirements to establish each false claim. A FCA plaintiff must prove the false statement or fraudulent conduct; knowledge of the falsity or fraud; materiality of the statement or conduct in influencing payment on the claim; and a claim made to the government.  Plaintiffs are now attempting to avoid their proof obligations through the use of statistical sampling.

In U.S.A. ex rel. Michaels v. Agape Senior Community, the Fourth Circuit Court of Appeals is considering whether to allow the plaintiffs to use a small sampling of false claims from one LTC facility and apply it across the board to all of Agape’s facilities in South Carolina.  The Michaels claims relate to reimbursement for purportedly unnecessary hospice services.  The statistical sampling approach allows the plaintiffs to avoid proving each instance of a false claim and deprives the defendants their due process rights to the defense that some claims are not factually accurate.  This attempted due process violation is especially compelling when the claims of inappropriate hospice care depend on each resident’s medical condition – facts that may not be similar from claim to claim.  Further, whether a resident is eligible for hospice is a medical diagnosis which can differ from physician to physician, who may not be employed by the LTC facility.

The Michaels plaintiffs assert that statistical sampling is warranted because of the sheer number of reimbursements for between 10,000 to 20,000 residents.  That volume is precisely why statistical sampling should not be used.  The financial impact on a LTC chain would be devastating, especially when it is denied fundamental due process rights to defend against each claim related to residents whose profiles for hospice care is not the same.

This end-run around the plaintiff’s obligation to prove liability has been championed by the Department of Justice (“DOJ”).  The DOJ recovered $4.7 billion on FCA cases in 2016.  The damages scheme allows recovery of a penalty for each claim of $5000 to $10,000 plus three times the amount of the claims falsely submitted.  Moreover, the whistleblowers are awarded a bounty of from 15% to 30% of the recovery.

The Fourth Circuit has not yet issued a decision on the statistical sampling issue.  The issue in relation to care provided in LTC facilities has not been decided at the appellate level.  We will see what is in store for LTC facilities in this high stakes litigation and in light of the change in the Presidency, which oversees the Department of Justice.


1     Universal Health Services, Inc. v. Escobar, 579 U.S. ____, (2016).

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