Federal Judge Tosses $350M False Claims Act Penalty Against Provider

A federal judge last week threw out a $350 million False Claims Act judgment against a Florida nursing home provider, writing that its occasionally inaccurate record-keeping didn’t amount to deliberate fraud.

In a fiery ruling, U.S. District Judge Steven D. Merryday wrote that the claims brought by a whistleblower against Salus Rehabilitation, LLC — namely that the provider defrauded Medicaid by failing to have a “comprehensive care plan” — weren’t enough to merit a staggering FCA judgment.

Law360 first reported on the judgment.

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Merryday heavily relied on Universal Health Services v. Escobar, a 2016 Supreme Court ruling that established a stringent set of requirements that must be met before a False Claims Act judgment can be brought against a health provider.

In that case, Merryday wrote, a nurse with a degree from an “Internet college” represented herself as a PhD. and submitted claims for reimbursement for mental health services. Had the government known this about the provider, it likely would have withheld payment, the Supreme Court argued in that case, establishing a precedent for future actions.

But in the Salus case, the government continued to pay for the services rendered, and Merryday ruled that the whistleblower didn’t provide enough evidence to prove that the Medicaid reimbursements would have stopped even if the government were aware of problems with the paperwork at Salus.

“In fact, the evidence and the history of this action establish that the federal and state governments regard 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,” Merryday wrote.

Merryday — a George H.W. Bush appointee — also sounded off on the power of the False Claims Act as a weapon against health care providers and other government contractors.

“The judgments effect an unwarranted, unjustified, unconscionable, and probably unconstitutional forfeiture — times three — sufficient in proportion and irrationality to deter any prudent business from providing services and products to a government armed with the untethered and hair-trigger artillery of a False Claims Act invoked by a heavily invested relator,” he wrote.

Written by Alex Spanko

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