OIG attempts quality of care case against Kentucky nursing home

To build on what is becoming a focused blog series, starting with our article in the June 2011 issue of Long-Term Living and last month’s blog on quality of care corporate integrity agreements, this installment focuses on the U.S. government’s recent quality of care False Claims Act (FCA) lawsuit against a Kentucky nursing home, Villaspring Health Care Center of Erlanger. Depending on the outcome, this case could help determine the course of future FCA quality of care cases.

The lawsuit accuses Villaspring of charging Medicare and Medicaid for care that was “either non-existent or so inadequate as to be worthless.” The government also named as defendants an alleged “parent” company for the nursing home and its CEO, who is allegedly the “majority owner.”

As alleged in the complaint, the government defines “worthless services” as services that “were not provided, were deficient, inadequate, substandard, and did not promote the maintenance or enhancement of the quality of life of the residents of Villaspring, and were of a quality that failed to meet professionally recognized standards of health care.”

The complaint alleges that the facility received almost $16 million from the Medicare and Medicaid programs from 2004 through 2008; however, the complaint identifies just six residents whose care was allegedly deficient. For those six residents, the facility received $108,802.32 in total Medicare and Medicaid payments. Tellingly, the complaint does not specify whether the government contends that all of those payments were for “worthless services,” which as we have discussed in our prior submissions, is a major hurdle for the government in quality of care cases. Even if the full amount of the payments were trebled under the FCA, the total damages as identified in the lawsuit at this time would only equal $326,406.96.

Yet, the real exposure for the facility may be in the government’s definition of a “claim,” whereby each problematic claim could result in a penalty under the FCA of between $5,500 and $11,000, which would be on top of the treble actual damages claimed by the government. But how are “claims” defined in a nursing home that bills on a prospective payment basis or under a daily rate? Liability under the FCA occurs when a person “knowingly presents, or causes to be presented, to an officer or employee of the United States Government … a false or fraudulent claim for payment or approval.”

If nursing facilities billed for each individual act of care, then application of the worthless service theory would be relatively straightforward—courts could simply compare the acts billed for to the acts actually performed. Instead, the government has the burden of proving that the nursing facility did not provide the minimum level of care necessary under its obligation to the federal government. This standard has proven difficult, with courts commonly finding that what amounts to a mere dispute over the proper standard of care does not give rise to liability under the FCA.

Fortunately, courts have been judicious in allowing quality of care allegations into the FCA tent. Instead, they have largely declined to supplant regulatory oversight. For example, in one case, a court said that the FCA is violated only if payment of federal funds was explicitly conditioned on compliance with a certain regulation. In another case, a court wrote, “The False Claims Act was not designed for use as a blunt instrument to enforce compliance with all medical regulations.”

Nevertheless, the government continues to assert quality of care actions, finding some support in the courts and obtaining significant settlements with some providers, thereby further empowering the theory. Thus, the Villaspring case, the first of its kind in Kentucky, is one that nursing homes nationwide should monitor closely.

Jason E. Bring, Esq., is a member of the Healthcare Group of Arnall Golden Gregory LLP. Bring defends nursing facilities in medical liability and False Claims Act cases, as well as assists them in regulatory and reimbursement issues.

Disclaimer: This article is not legal advice. Consultation with licensed and experienced legal counsel is advised.

Topics: Risk Management