Increased Nursing Home Data Reporting Could Bring ‘Perfect Storm’ of Federal Lawsuits

Under regulations instituted as a result of the COVID-19 public health emergency, skilled nursing facilities are reporting a wealth of information to the federal government — on top of all the information they were required to submit pre-pandemic.

And that information could end up being the guiding light for the U.S. Department of Justice (DOJ) and the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG), according to a webinar hosted Thursday by the continuing education provider Strafford.

The presentation focused on reporting requirements for SNFs, government enforcement actions and compliance, and preparation for enhanced enforcement.

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The DOJ in early March – just before COVID-19 overturned everyday life in the U.S. — announced the creation of a specialized task force that would be investigating “grossly substandard care” in nursing homes, with both criminal and civil penalties on the table for owners and operators. At the time of the March 3 announcement, the DOJ had indicated approximately 30 facilities in nine states were under investigation, and that it would focus on operators with a history of abuse and neglect.

That initiative became overshadowed by the toll of the pandemic, but the lawyers on the Strafford webinar emphasized that that initiative is one of many possible venues for government enforcement actions against nursing homes — actions that could be guided by the COVID-19 data nursing homes are required to submit to the government.

On top of the DOJ initiative, according to Brian McGovern, partner at the law firm Crowell & Moring, the OIG is reviewing multiple facets of nursing home operations, including:

  • Medicaid nursing home life-safety and emergency preparedness reviews
  • Audits of nursing home compliance with COVID-19 reporting requirements
  • Why COVID-19 had the effect it did on the hardest-hit facilities
  • Infection prevention and control programs in nursing homes
  • Nursing home oversight

“Is this really the perfect storm, then, for a potential wave of lawsuits initiated by DOJ with a much richer database for targeting facilities with with a record in infection control surveys and IJs [immediate jeopardy deficiencies]?” McGovern asked on the webinar. “Time will tell about that. But it’s not simply DOJ. If DOJ doesn’t take the initiative, whistleblowers can also bring lawsuits under the False Claims Act (FCA) and seek to recover the considerable damages afforded under the FCA.”

FCA cases relate to the conduct of private companies that do business with Medicare, Medicaid, and other public health care funding sources, and generally involve fraud, as Bloomberg noted in September 2019 covering an announcement by the DOJ that it would pursue criminal charges in such cases that involved nursing homes.

Many of the claims that hit nursing homes related to the provision of therapy, such as the $30 million settlement agreed to by the Louisville, Ky.-based Signature HealthCARE, the $15 million settlement from Brockway, Pa.-based Guardian Elder Care, or the saga related to the case of several SNFs and a therapy company that eventually settled for $255 million.

The shift to the Patient-Driven Payment Model (PDPM) for Medicare payments to nursing homes will likely substantially reduce those types of lawsuits moving forward, as operators no longer have a financial incentive to provide as many therapy minutes as possible — a fact that underpinned many of those FCA lawsuits.

But there’s another reason why future FCA cases are likely to come with a major difference, Adam Tarosky, a partner at the law firm Nixon Peabody, noted during the webinar.

“Typically about 75% of False Claims Act cases come from whistleblowers, or [qui tam] relators,” Tarosky said. “I think that number is going to go down as DOJ and OIG both rely more on data analytics to identify outliers.”

This is particularly important in the context of COVID-19 because of the amount of data being generated around infection prevention and control, which makes it paramount for SNFs to monitor those numbers, where they are published, and what they show about SNFs relative to their peers in a given area, he explained. In fact, the wealth of data might even bring about instances where nursing home residents or their family members end up bringing qui tam cases, Tarosky noted later in the webinar.

Another point to consider for future FCA cases is the fact that the DOJ has rarely based the allegations of FCA liability on quality of care, McGovern said, since this is primarily a regulatory issue rather than a law enforcement one.

“However, there is a ready-made theory for liability under the FCA, known as the ‘worthless services’ theory, and this theory has been applied most often against nursing homes in particular,” McGovern said.

The definition is based on the provider’s performance of services being so deficient that, “for all practical purposes, it’s equivalent of providing no services at all,” he said.

“Under this theory, it’s the same as billing the federal government without having provided any services, if the care was so deficient —to borrow the phrase that DOJ used in announcing the initiative — so grossly substandard, that it was worthless, and the equivalent of no performance at all,” McGovern said.

That theory was based on a decision from the Seventh Circuit Court of Appeals in the case Absher v. Momence Meadows Nursing Center, and it will be worth watching how the DOJ proceeds given that decision and definition, Tarosky said.

“I suspect the government will take the position that it need not show that a service of a nursing home is completely worthless to recover under under the FCA for claims related to that service, particularly in light of the consequences of poor infection control measures that COVID-19 pandemic has really revealed and shown to us,” he said. “That even services, in the words of the Seventh Circuit that are ‘worth less’ — not worthless, but worth less — even such services can be a basis for an FCA claim. That was the position DOJ took for the Seventh Circuit, and I suspect it will continue to be its position, which I think is is bolstered by the pandemic and the consequences that we’ve seen.”

McGovern agreed that quality of care is now “front and center” as a part of a the provision of services by nursing homes that are receiving Medicare and Medicaid reimbursements.

That could lead to a change in both the DOJ and possibly in court as cases proceed, he said.

“I think that the experience of the COVID pandemic should alter the mindset both of DOJ and perhaps the courts to recognize that maybe the ‘worthless service’ standard was too narrow perhaps to accomplish FCA,” he said. “So it could actually open up a broader risk of liability than the prior precedents may have held.”

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