While nursing home operators are dealing with a host of financial and operational challenges, they must as always be alert to how the Department of Justice (DOJ) is pursuing False Claims Act cases against providers.
Nursing home practices under Covid-era waivers, the transition to the Patient-Driven Payment Model (PDPM), and concerns over substandard care are a few of the issues likely to drive near-term False Claims Act litigation.
That’s according to two legal experts in the field who recently spoke to Skilled Nursing News: Mark Reagan, partner at Hooper, Lundy & Bookman, and Thomas Barnard, an attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz.
Reagan, who has served as general counsel for nursing home associations in California and Massachusetts, as well as the American Health Care Association (ACHA), emphasized that investigations linked to the pandemic may still be underway.
Under the FCA, skilled nursing facilities can be held liable for submitting false or fraudulent claims for payment from government programs, like the 1135 waivers implemented during COVID. The waivers allowed SNFs to admit Medicare Part A covered patients without the usual requirement of a three-day qualifying inpatient stay.
Reagan said he expects to see investigations regarding whether all patients classified as needing skilled care under these waivers were truly appropriate for such care.
“I expect a lot of activity there,” he said. “And it’s going to be a really challenging area because the COVID experience was very different and took very many unexpected twists and turns and there was a different level of knowledge.”
Government scrutiny has extended to COVID funding programs, such as the Paycheck Protection Program (PPP). The program was designed to offer financial support to health care providers, but the Department of Justice is closely examining how funds were utilized and whether providers met the eligibility criteria.
“We’ve seen some investigatory activity around that program,” he said. “That’s pretty new. And then, maybe we’ll see things with respect to the Provider Relief Fund.”
The intersection of billing integrity and compliance
For operators, adherence to billing accuracy is paramount, as any inaccuracies can potentially lead to FCA claims.
Ensuring that all claims submitted to Medicare are accurate, well-documented, and genuinely reflect the care provided to residents is crucial, in addition to understanding the intricacies of the Medicare reimbursement system, especially the Patient-Driven Payment Model (PDPM).
Reagan said the transition from the previous Resource Utilization Group (RUG) system to PDPM brought about substantial changes, with some concerns centering on possible overbilling due to perceived incentives for therapy provision.
He said the RUG system was designed to provide economic incentives for the greater provision of physical therapy, occupational therapy, and speech language pathology to help patients recover and be discharged from Part A care as soon as possible. However, the federal government was concerned that providers were overusing therapy services due to these economic incentives, leading to false claims cases.
The dispute revolves around the fundamental goal of treatment, Reagan said. While regulations under the Nursing Home Reform Act aimed at residents attaining and maintaining their highest practicable level of physical, mental, and psychosocial functioning, the Department of Justice did not recognize this as the standard in the RUG cases.
Instead, they argued that the standard should be whether a safe discharge from the facility could be achieved. This led to a legal battle about the balance between providing therapy for economic gain and meeting the clinical standard of achieving the highest practicable functioning for patients.
“The fight over the RUGs cases really had to do with you saying we’re providing too much therapy because it’s economically advantageous to us, but we’re held to a standard of attaining or maintaining the highest practicable functioning condition,” he said. “And now [the government] is telling us it should be whether or not there can be a safe discharge home.”
Reagan acknowledged that the “COVID wrinkle” has the federal government playing catch-up as it relates to FCA investigations under the new PDPM system.
“Ultimately, the PDPM system will be an area where there will be some Department of Justice activity,” he said. “The thing that happened was that the transition from the RUGs reimbursement system to PDPM, and then COVID hit. So, there’s a significant COVID wrinkle, that the Department of Justice is also interested in how that ties to the new system.”
Barnard emphasized the need for transparency in reporting patient data, noting that patient acuity levels could be manipulated to receive higher reimbursement rates.
“One of the things the government may look at when you establish MDS [Minimum Data Set] is the acuity of the patient,” he said. “Do you make them [out to be] much worse than they actually are, so you get paid a higher amount, because they require more care?”
Provider Relationships with hospitals
FCA litigation can also extend to examining relationships between SNFs and other health care providers. This includes assessing fair market value compensation to medical directors, which must align with anti-kickback laws and other regulations.
Barnard also pointed out that nursing homes should be cautious about having improper relationships with referral sources like hospitals or doctors, as this could raise concerns under the Anti-Kickback Statute.
“Are there some kind of incentives for doctors to refer patients to you or hospitals to refer patients to you?” he asked.
The attorney stressed the importance of ensuring that specialty care services are offered for the right reasons and without financial incentives that could be viewed as kickbacks.
“There’s a lot of specialty care that comes into nursing homes,” he said. “Those are other areas that the government looks at pretty closely because those get to be billed in addition to the per-diem payments that you get for the resident … anywhere where you can earn extra money, the government takes a close look.”
Substandard care as a False Claims Act case
While historical FCA cases centered on billing, government attention is increasingly turning to substandard quality of care as the basis for FCA claims. Issues may encompass the inappropriate use of psychotherapeutic drugs or insufficient staffing levels, particularly for nurses and nurse assistants.
Barnard mentioned the “worthless service” theory under the False Claims Act, which suggests that if care is extraordinarily subpar it could lead to a liability issue.
“A worthless service means that the care provided is so bad, that the government is essentially paying for nothing,” he said.
The central dispute centers around whether substandard care is tantamount to a false claim or if it must be so profoundly inadequate that it offers no value whatsoever.
“It’s a difficult theory for the government to prove because it’s much more than just poor care or negligent care,” he said. “It literally means that you ran a hotel, that no one provided any care.”
Although the theory is difficult to prove, Barnard said that one of the factors the government looks at in regard to the”‘worthless service” theory is staffing.
“The way they meet it is by looking at things like, did you have adequate staffing,” he said. “So, now there’s a lot of [potential litigation] related to staffing ratios and requirements.”
Companies featured in this article:
