By Jeffrey H. Brochin, J.D.
A relator’s evidence at trial about a multi-facility nursing home operator’s failure to maintain comprehensive care plans as required by Medicaid regulations, was not sufficient to establish the requisite materiality and scienter necessary for a False Claims Act (FCA) cause of action, a federal district court in Florida has ruled. The relator offered no meaningful and competent proof that the federal or the state government, if either or both had known of the disputed practices, would have regarded the disputed practices as material to each government’s decision to pay the provider and, consequently, that each government would have refused to pay the providers (U.S. ex rel. Ruckh v. Salus Rehabilitation, January 11, 2018, Merryday, S.).
Background. A relator in an FCA case alleged that the owners and operators of 53 specialized nursing facilities in Florida billed the state and federal governments for unnecessary, inadequate or incompetent service. She based her complaint on the failure of the providers to maintain a comprehensive care plan for patients as required by Medicaid regulations. The relator won judgments for almost $350 million based on the theory that upcoding of Resource Utilization Group (RUG) levels and failure to maintain care plans made the claims to Medicare and Medicaid false or fraudulent.
Deficient proofs. The court noted that both governments were aware of the providers’ disputed practices, aware of the instant action, aware of the allegations, aware of the evidence, and aware of the judgments for the relator, yet neither government ceased to pay or even threatened to stop paying for the services provided to patients throughout Florida since long before the FCA action began in 2011.
Not only did the relator fail to prove that the governments regarded the disputed practices as material and would have refused to pay, but the relator failed to prove that the providers submitted claims for payment despite the providers’ knowing that the governments would refuse to pay the claims if either or both governments had known about the disputed practices.
Elements of implied false certification. As established by the U.S. Supreme Court in Universal Health Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016), the implied false certification theory under the FCA can only be a basis for liability if: (1) a claim for payment makes specific representations about the goods or services provided; (2) the defendant knowingly fails to disclose the defendant’s non-compliance with a statutory, regulatory, or contractual requirement; and (3) the omission renders those representations misleading.
Liability for implied false certification does not depend on the government’s labels of "condition of payment" or "condition of participation," but rather, to be actionable under the FCA, a misrepresentation about compliance must be material to the government’s decision to pay.
No evidence practice regarded as material. The providers argued persuasively that the relator failed to offer evidence of materiality, and in fact, the evidence and the history of the FCA action established that the federal and state governments regarded the disputed practices with leniency, or tolerance, or indifference, or perhaps with resignation to the colossal difficulty of precise, pervasive, ponderous, and permanent record-keeping in the pertinent clinical environment. The evidence did not establish a single threat of nonpayment, a single complaint or demand, nor a single resort to an administrative remedy or other sanction for the same practices that resulted in the enormous verdict at issue.
Furthermore, the relator failed to offer competent evidence that the providers knew that the governments regarded the disputed practices as material, but that despite such guilty knowledge, the providers requested money from the governments. The court found that with no evidence that the governments regarded the disputed practices as material, establishing the providers’ knowledge of materiality seemed at least impractical, if not impossible. As the providers correctly pointed out, the relator’s evidence proved the contrary: Medicaid and Medicare consistently paid "in the mine run of cases" despite Medicare’s routine audits and Medicaid’s knowledge of billing and documentation deficiencies.
Based on the foregoing, the court found that the relator failed to meet the rigorous and demanding materiality requirement under Escobar, and that her claims regarding lack of comprehensive care plans were fatally flawed. The providers’ motion for judgment as a matter of law was granted, and the judgments were vacated.
The case is No. 8:10-cv-01303-SDM-TBM.
Attorneys: Bradley E. Oppenheimer (Kellogg Hansen Todd Figel & Frederick, PLLC) for Angela Ruckh. Carroll Skehan (Akin, Gump, Strauss, Hauer & Feld, LLP) for Salus Rehabilitation LLC.
Companies: Salus Rehabilitation LLC
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