Rise of Data Could Bring More False Claims Act Cases, CMS Scrutiny to Skilled Nursing

Attend any conference geared toward long-term and post-acute health care operators, and you’ll hear a common thread: Data is king.

In a landscape defined by value-based payment models such as Medicare Advantage plans and accountable care organizations (ACOs), investing in data analytics has become almost a prerequisite for success.

If a given operator can prove its strength on a variety of key metrics — lower rehospitalization rates, reduced episodic costs — its buildings are more likely to win entrance into hospitals’ preferred provider networks, and also potentially attract interest from investors.


But potential partners aren’t the only ones looking at that data.

Both the federal government and independent groups have access to an increasing fountain of statistics about nursing home performance and compliance, making the rise of data a double-edged sword for providers worried about attracting the attention of regulators — and potentially facing costly False Claims Act (FCA) cases.

“As claims data and similar information become increasingly available to analytics firms, providers should expect to see more opportunistic FCA cases brought based on data analytics and for traditional relators (such as employees or former employees) to seek to bolster their cases through publicly available reimbursement data,” law firm Bass, Berry & Sims noted in its recent recap of 2019 health care fraud and abuse cases. “These cases serve as an important reminder to providers to understand their own data because the government and relators certainly are endeavoring to do so.”


The Nashville-based firm released the report just a few weeks before Centers for Medicare & Medicaid Services (CMS) administrator Seema Verma laid out an aggressive plan to break down the walls between operators and the federal government as part of the agency’s overall enforcement efforts.

“Moving to a system where we’re able to take quality data from the EHR, we can combine it with claims data, we can see what’s going on in program integrity,” Verma said on a Tuesday call with reporters. “And we should be able to identify those high-quality providers on the front end, and then identify where we have weaknesses — I think, in a way, that’s been fairly unprecedented.”

CMS has already set data-based plans in motion on a variety of fronts, including its initiative to streamline the enforcement of state-level survey agencies for nursing homes, particularly around the issuance of civil monetary penalties (CMPs).

“According to our own data, we saw that CMPs were being levied at a level eight times greater in some parts of the country than in others,” Verma said in a Tuesday speech at the CMS Quality Conference in Baltimore. “Even accounting for geographic differences in quality of care, this variation was one that called for an explanation.”

CMS will extend that effort to the accreditation agencies that approve Medicare-certified facilities, Verma said this week, based on discrepancies between actual results and CMS analyses of their data.

Verma’s full-throated support of data initiatives is just the latest step in a brewing trend at the agency, which chief medical officer Kate Goodrich explained in even more explicit terms on a CMS podcast episode released last summer.

“We have a treasure trove of data here at CMS,” Goodrich said. “We are mining those data to note large patterns and identify workers within nursing homes with a previous history of abuse.”

Goodrich’s words also track with various warnings raised around the new Patient-Driven Payment Model (PDPM) for Medicare nursing home reimbursements — designed in part to reduce the potential for fraud by removing financial incentives for providing as much therapy as possible, and instead basing payments on resident need.

But the system doesn’t eliminate the temptation for fraud entirely; it merely shifts the definition of wrongdoing away from providing too much therapy and toward the potential rationing of care in order to reduce expenses.

That specter rose over the industry almost immediately after PDPM’s implementation on October 1, when stories of therapy layoffs and hour cuts swept the space.

“I think it’s really short-sighted that these companies are doing this, because they know CMS is watching, and they know if they have a dip in outcomes or dip in utilization, CMS is probably going to audit them,” Kara Gainer, director of regulatory affairs for the American Physical Therapy Association, said last fall.

Crucially, the shift to a new payment model doesn’t remove the federal government’s ability to go after providers for alleged fraud committed under the old system. Just last week, operator Diversicare Healthcare Services (OTC: DVCR) announced the successful completion of an eight-year FCA investigation into its therapy practices in a deal that included a $9.5 million settlement.

The same day, the Department of Justice touted a $15.5 million FCA settlement with Guardian Elder Care, resolving allegations of providing unnecessary therapy services that stretched back to 2011.

“Billing federal health care programs for medically unnecessary rehabilitation services not only depletes these programs’ funds but also exploits our most vulnerable citizens,” U.S. attorney Scott Brady said in a statement announcing the deal. “Our office will continue to aggressively pursue providers who take advantage of our seniors by putting financial gain ahead of patient care.”

In the Guardian case, a pair of former employees tipped off the DOJ and received a significant portion of the settlement — $2.8 million — under the qui tam provisions of the False Claims Act. Whistleblowers commonly factor into these investigations and eventual resolutions, but Bass, Berry & Sims warned that the data revolution could make such on-the-ground observations irrelevant.

“A number of recent qui tam lawsuits have been filed by corporate data-analytic relators seeking to pursue FCA allegations against health care providers by mining Medicare claims data or other publicly available data sources,” the Nashville, Tenn.-based firm noted. “Lawsuits pursued by such relators are not characterized by personal knowledge of factual information associated with the alleged wrongdoing, which is the typical hallmark of well-pleaded FCA allegations. Rather, these professional relators are opportunistic, drawing inferences of fraud based on their own data analysis.”

Bass, Berry & Sims in particular identified a Texas-based firm that exclusively brings fraud cases based on analytics, including accusations of improper therapy provision at skilled nursing facilities. While that specific group has not yet convinced the federal government to pursue a case, the firm warned that risk remains for operators in the industry.

“Providers have had only mixed results in seeking dismissal of these cases at the pleading stage under the FCA’s public disclosure bar and Rule 9(b),” the firm observed, referring to the burden of proof that accusers must clear.

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