Judge Throws Out False Claims Act Case Against ManorCare Hospice Arm

A False Claims Act (FCA) case against HCR ManorCare’s Heartland hospice affiliates was dismissed with prejudice on Wednesday by Judge James Carr of the U.S. District Court for the Northern District of Ohio.

The government had previously declined to intervene in the qui tam complaint made by Kathi Holloway, who worked as a regional hospice consultant at ManorCare’s Heartland hospice businesses. That meant that Holloway became the sole plaintiff, though the government could have decided to intervene “upon the showing of a good cause.”

Holloway alleged that Heartland violated the FCA by billing the government for hospice services provided to unqualified patients. The complaint also alleged that Heartland dodged its obligation to repay those funds.

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It’s not the first FCA case against ManorCare that has been dismissed; in November 2017, the Department of Justice (DOJ) dropped a Medicare fraud case against the skilled nursing provider, a move that came after a federal judge ordered the government to pay ManorCare’s legal fees and threw out the testimony of a key witness.

For Eric Dubelier of law firm Reed Smith, who represented ManorCare in the case, the dismissal would seem to indicate an ebb of these types of cases.

“I’m not a health care regulatory lawyer, but I think the hospice cases have pretty much run their course,” he told Skilled Nursing News.

In this particular case, Holloway alleged that Heartland presented false claims for payment to the government, prepared false records to support the claims, and kept the resulting payment. To support the claims, she alleged corporate-wide practices to inflate the hospice census, including an incentive system, employee training, and the authorization to override physician recommendations.

But Heartland’s argument that her claims did not meet the “particularity standard” had merit, Carr ruled in his judgment.

False Claims Act cases have been a persistent thorn in the side of skilled nursing operators in recent years, with the federal government using the law — which dates back to the Civil War era — as a way to go after allegations of fraudulent billing. Providers routinely end up settling the cases while maintaining their innocence in order to avoid costly legal battles, with the exact settlements sometimes reaching the tens of millions.

Still, Dubelier pointed to the dismissal of two cases against ManorCare in two years as signs that the tide is turning, noting that in both instances, the company was caught up in an industry-wide dragnet.

“The mistake that gets made over and over again in the SNF industry is there’s an assumption on the part of the government, and there’s an assumption on the part of these relators’ lawyers, that if any provider is doing something improper then all the other providers are doing the same thing improperly,” he said.

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