Health Law Daily Government’s FCA settlement supported by reasonable claims analysis
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Friday, July 17, 2020

Government’s FCA settlement supported by reasonable claims analysis

By Todd Fanter, J.D.

The U.S. Attorney’s Office had a right to settle the case on its terms, and the relator did not show that the dismissal of claims would be fraudulent or illegal.

An Alabama district court found that the government’s proposed settlement of False Claims Act (FCA) (31 U.S.C. §3729 et seq) allegation were fair, adequate, and reasonable. The relator’s objections about the adequacy of the government’s investigation failed to support a contention that dismissing the claims would be fraudulent, arbitrary and capricious, or illegal (U.S. ex rel. Horsley v. Comfort Care Home Health, July 15, 2020, Proctor, R.).

Allegations. In February of 2019, the nurse filed her complaint on behalf of the government against Comfort Care Home Health, LLC (Comfort Care), which managed and partially owned some home health agencies, as well as individual administrators. She claimed that Comfort Care’s business practices misrepresented medical conditions in order to maximize billing. Specifically, the nurse alleged that Defendants violated the FCA by upcoding the severity of patients’ conditions, providing medically unnecessary therapy services to patients, recertifying patients who did not need home-health services, improperly "checking-in" new orders for home-health services, and billing for work that was not actually performed. The nurse also alleged that the agency automatically assigned patients to a physician services provider that offered home visits without the patients’ consent, even if the services were not medically necessary. The nurse filed a qui tam action and the government intervened.

Settlement. After the nurse’s complaint was received by the government, it began an analysis of the relevant Medicare claims and data. Eventually, the government reached a settlement agreement with Comfort Care, in which the businesses agreed to pay the government $704,999.26 but not admit liability. The government agreed to release the two companies from claims the government may have had under the FCA, or any other statute, based on the scope of alleged conduct. As part of the resolution, Comfort Care and Woodland also insisted the qui tam suit be dismissed.

Opposition to dismissal. In opposition to the dismissal, the nurse argued: 1) that the government failed to articulate a reasonable basis for settlement, or failed to show that she would not be unfairly prejudiced by the settlement; and 2) that the government neglected to provide a rational and valid basis for dismissal of the claims against Comfort Care’s other agencies and the physician services company. Additionally, the nurse argued the settlement amount was not reasonable because the government did not conclude full discovery. The nurse also contended that her potential qui tam recovery would be unfairly prejudiced because the government failed to extrapolate the Medicare claim data beyond Comfort Care’s Woodland location.

The government argued that the proposed settlement amount represented a large recovery. Additionally, the government valued the certainty derived from a settlement and that from an opportunity-cost standpoint, the settlement is appropriate because the U.S. Attorney’s Office has multiple, open healthcare fraud investigations and cannot afford to direct all of its resources to this case alone. The government also stated that the proposed settlement did not unfairly reduce the nurse’s potential qui tam recovery.

Reasonableness of settlement. The court ruled the reasonableness of the government’s decision to settle a matter did not necessarily depend on whether the settlement maximized the monetary recovery for the parties. The nurse neglected to acknowledge that the government was not required to bear the cost of discovery. Denying the government’s motion and forcing it to expend resources on discovery and further litigation activity would ignore the reasonable bases for settlement.

The court found that the government had determined it was best to settle the case before incurring the significant costs of protracted litigation that would expend valuable resources, reduce the value of settlement, and potentially affect the Defendants’ ability and willingness to settle. The court concluded that the government had shown a reasonable basis for settlement, the settlement was fair, adequate and reasonable and that the agreement did not unfairly reduce the nurse’s potential qui tam recovery. The court found she had not cited any legal authority that required discovery and/or data extrapolation before the parties may reach an FCA settlement.

The court found that the nurse failed to show that the dismissal of the claims would be fraudulent, arbitrary, capricious or illegal. The court found that the government had demonstrated a valid purpose that was rationally related to dismissal of the unreleased claims, and granted the government’s motion to dismiss all unreleased claims.

The case is No. 2:19-CV-00229-RDP.

Attorneys: Scott Thomas Morro (Morro Law Center, LLC) for Erin Horsley. James A. Hoover (Burr & Forman LLP) for Comfort Care Home Health LLC and Woodland Home Health Services.

Companies: Comfort Care Home Health LLC; Woodland Home Health Services

MainStory: TopStory CMSNews BillingNews FCANews FraudNews ProgramIntegrityNews QuiTamNews

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