Health Law Daily $347M FCA judgment stayed to avoid disrupting SNF market, displacing patients
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Friday, March 17, 2017

$347M FCA judgment stayed to avoid disrupting SNF market, displacing patients

By Kayla R. Bryant, J.D.

Judgments exceeding $347 million against Salus Rehabilitation, Inc. (Salus) were stayed pending a decision on a renewed motion for judgment as a matter of law. The U.S. District Court for the Middle District of Florida noted that this payment could force the closure of 183 skilled nursing facilities (SNFs) and the stay appropriate, but permitted the relator as well as the state and federal governments to gain access to Salus’s financial records (U.S. ex rel. Ruckh v. Salus Rehabilitation, Inc., March 15, 2017, Merryday, S.).

Judgment. The qui tam relator, a former employee of a SNF operating company, sued several companies, alleging that these companies defrauded the government at 53 facilities. The extensive complaint alleged that the fraud occurred through "upcoding" and "upcharging" (see Court says statistical sampling might add up to prove an FCA violation, April 30, 2015). At trial, the jury found Salus liable for 466 violations of the False Claims Act (FCA) (31 U.S.C. §3729).

Stay of execution. Salus moved for a stay of execution on the $347 million judgment, arguing that such execution could "trigger the collapse of scores of skilled nursing facilities in 17 states." Additionally, a Salus facility’s failure to pay a judgment over $500,000 will trigger a default on a loan from Midcap Financial (MidCap) totaling about $168 million, in the event that a judgment creditor begins collection or if the judgment exists for over 20 days without being stayed. MidCap provides operating capital twice a week for payroll and rent, and the facilities and their receivables are pledged as collateral. If a default is triggered, MidCap will halt lending and accelerate the loan. The court noted that halting operations will result in the closure of over 80 SNFs in Florida, jeopardizing patient health. The court entered the stay pending the motion of judgment as a matter of law, but in the meantime Salus may only make transactions that are in the ordinary course of business and must allow inspection of its financial records.

The case is No. 8:11-cv-1303-T-23TBM.

Attorneys: Jonathan H. Gold, U.S. Department of Justice, for the United States of America. Carroll Skehan (Akin, Gump, Strauss, Hauer & Feld, LLP) for Salus Rehabilitation, LLC d/b/a LaVie Rehab, 207 Marshall Drive Operations, LLC d/b/a Marshall Health and Rehabilitation Center and Sea Crest Health Care Management, LLC.

Companies: United States of America; State of Florida; Salus Rehabilitation, LLC d/b/a LaVie Rehab; 207 Marshall Drive Operations, LLC d/b/a Marshall Health and Rehabilitation Center; Sea Crest Health Care Management, LLC

MainStory: TopStory CaseDecisions CMSNews BillingNews EnforcementNews PartANews QuiTamNews SNFNews FloridaNews

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