Enforcement Trends Against Elder Care Providers and Their Management Companies Under the Federal False Claims Act

The Department of Justice (“DOJ”) recently established the Elder Justice Initiative (“EJI”), which directs Government efforts to combat elder abuse, neglect, and financial fraud. The EJI seeks to address several schemes affecting older Americans, including but not limited to healthcare providers that furnish substandard care and/or submit false claims to federal healthcare programs.

As several recent False Claims Act (“FCA”) enforcement actions demonstrate, the focus is not only on providers of care to geriatric patients, but their management companies are also being named in Federal District Court actions alleging violations of the FCA. As reported in a recent Frier Levitt article, management companies are frequently held jointly and severally liable alongside clinical providers in FCA actions. As the complex healthcare needs of our nation’s aging population have increased, there has been a corresponding uptick in scrutiny on elder care providers and their affiliates, often affecting millions of Federal healthcare program dollars.

On June 15, 2022, the DOJ announced a complaint against a foundation, management corporation, and three affiliated nursing homes in Ohio and Pennsylvania alleged to have provided grossly substandard care and unnecessary medications, including powerful antipsychotics and other psychotropic medications, to its elderly residents. The complaint also alleges that the defendant nursing homes were unsanitary and unsafe and that the residents had personal items stolen while also being subjected to mockery and abuse. Despite repeated citations arising from state surveys, the complaint alleges that the management company directed the nursing homes to increase the number of residents and invest reserves rather than resolve the facility’s documented deficiencies. As seen in the Complaint, the Government seeks damages and civil monetary penalties for claims submitted from at least January 1, 2016, to December 31, 2018, under the FCA, in part because the claims did not conform to the requirements of the Nursing Home Reform Act, 42 U.S.C. §§ 1395i-3, 1396r et seq. and if “CMS (or a reasonable person) had known, beyond what was uncovered during the state surveys, the grossly substandard care that was regularly provided at these facilities during all relevant times, it would have affected future payment decisions, let alone whether the Defendant facilities could continue to participate in the Medicare and Medicaid programs.” As a result, at least two years of claims stand to be recouped.

Similarly, on November 23, 2021, the Department of Justice announced a $5.5 million global settlement with a resolution of claims brought under two separate qui tam actions, brought under the FCA) in the Southern District of Ohio and Western District of Tennessee for false claims submitted to Medicare for hospice services reportedly furnished to patients who were not terminally ill. Defendants included several limited liability companies providing hospice and palliative care services, all of which are owned and operated by the same managing member, as well as a management company, responsible for submission of claims and other administrative functions.

The whistleblowers, three (3) nurse employees of the management company and a home health physician, alleged that the defendants knowingly submitted claims for hospice services to patients with Alzheimer’s and dementia in violation of the FCA under an express certification theory. Under the Medicare program, claims for hospice care may only be paid for terminally ill patients, e.g. patients with a life expectancy of six (6) months or less. Relators in the Southern District of Ohio action alleged that the vast majority of claims submitted by defendants for hospice services in seven (7) states were based on false certifications and recertifications. In the complaints, the relators alleged that doctors created falsified medical records in support of certifications and recertifications indicating that patients were eligible for hospice care. Furthermore, it is alleged that as a matter of policy, the management company had to approve requests to discharge patients from hospice care, rather than such decisions being solely based on the professional judgment of a licensed physician. Employees of defendants were reportedly incentivized to maintain a high number of hospice patients by being paid a “census bonus,” for admitting hospice patients and maintaining inaccurate medical records to support the associated claims for services. In the Southern District of Ohio action, relators also asserted claims for violations of the Stark Law and Anti-Kickback Statute.

Under the Settlement Agreement, the Government expressly limited the scope of the settlement to the alleged violations of the FCA between January 1, 2012 and December 31, 2014 for claims submitted in connection with patients having diagnosis codes of dementia and Alzheimer’s Disease only (the “Covered Conduct”). The Government agreed to dismiss all other claims brought by Relators without prejudice, but notably, did not release its right to take action under the Internal Revenue Code, or otherwise release any civil claims arising from conduct outside the Covered Conduct, or any criminal liability, or administrative actions, including but not limited to mandatory exclusion from participation in Federal Health Care programs.

Earlier this month, the DOJ also announced enforcement activity in connection with two other actions in which the elderly were targets of healthcare fraud. The U.S. Attorneys’ Office for the Northern District of Illinois released a statement on June 6, 2022, describing a $3.5 million settlement for a diagnostic testing company alleged to have violated the FCA by billing medically unnecessary services for multiple nights of home sleep testing when, in fact, the company knew that only a single night of testing was needed to effectively diagnose obstructive sleep apnea. In this case, defendant allegedly collected higher copays from senior citizens who were Medicare beneficiaries. On June 8, 2022, the U.S. Attorneys’ Office for the Northern District of Illinois announced the sentencing of the Chief Executive Officer of an in-home health care services company who had pled guilty to a Federal health care fraud charge. This CEO was sentenced to a year and a day, as well as payment of $1.1 million of restitution, for the submission of false claims for services that were either not rendered, or far less complicated than reported in claims submissions to Medicare.

While the cases noted here allege brazenly egregious conduct by the defendants, they appear as a bellwether of future enforcement priorities. Clinical providers of hospice, palliative care, and home health services and their management companies should anticipate scrutiny, and are well-advised to implement proactive compliance programs to minimize the risk of an FCA violation.

How Frier Levitt Can Help

Frier Levitt attorneys are experienced in the representation of providers seeking to structure compliant management services arrangements, and/or defending audits or allegations that may lead to FCA liability. We regularly counsel providers seeking to implement proactive compliance programs and/or corrective action plans for identified deficiencies. In certain qualifying circumstances, voluntary self-disclosure may be an option for avoiding the harshest penalties.  For more information, contact Frier Levitt to speak with an attorney.