3/30/2014. A Perfect Storm? DOJ Nursing Home Initiatives. Health Care Compliance Association s 18 th Annual Compliance Institute San Diego, CA

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1 Health Care Compliance Association s 18 th Annual Compliance Institute San Diego, CA Pursuing, Defending and Resolving False Claims Act Cases in Long-Term Care March 30, 2014 Kathleen McDermott Morgan, Lewis & Bockius Washington, DC A Perfect Storm? Industry Under DOJ and Whistleblower Scrutiny. Quality of Care Billing ACA Mandates Changing Care Models Congressional interest Consumer/Patient interest Media interest. Transparency Initiatives 2 DOJ Nursing Home Initiatives Task Force and Coordination Approach Investigation criteria for quality of care allegations. Qui tam role in identifying viable investigation issues. Role of CMS in DOJ quality of care initiatives. Role of State surveyors and survey process. Use of outside experts in DOJ quality of care investigations. Data mining-what is it and how does it work in DOJ investigations? 1

2 Spotlight: Therapy Services Therapy Services provided to Medicare and Medicaid patients under Medicare Part A and Medicare Part B. Investigation Subpoenas and CIDs. Medical necessity issues Business practices to increase therapy services. Business incentives to prevent licensed therapists from exercising medical judgment. Clinical initiatives and presumptions for Medicare Part A therapy services and impact on RUG levels. LifeCare Litigation Proceeding (M.D. Tenn.). Motion to dismiss denied 3/25/14. Court's description of UH criteria. Therapy Settlements. Therapy Enforcement LifeCare Centers (M.D. Tenn.). Ongoing Litigation. Allegations of unrealistic corporate targets for UH therapy that prevented therapists from exercising medical judgment. Medically unnecessary and too much therapy alleged (level of care). Motion to dismiss denied Rehab Care. $30 million. Ensign Nursing. $48 million. Grace Healthcare. $2.7 million. Roberts Aquatics. $328,000 Fairfax. $700,000 5 Spotlight: Hospice Services Qui tam investigations Regulatory compliance with certification requirements and length of stay. Clinical questions for duration of benefit that impact reimbursement. Therapy Cap issues. Marketing practices to gain and increase hospice census. Live discharge practices for long lengths of stay. 2

3 Trends in Asserted Liability Inadequate Staffing. Acuity Based Algorithms. Level of Care (Worthless Services) False Certifications Related to Inadequate Care. Quality Metrics Substandard (Falls, Nutrition, Wound Care, Geri- Psyche services, Medication Errors). Quality of life issues: nutrition, activities, social services. Poor Survey Performance. Yo-Yo Compliance, Pattern of Gs. Unqualified or Incompetent Managers and Health Care Professionals. Demonstrable Patient Harm. Falsification of Medical Records. FCA Legal Theories Worthless Services-Challenges to Level of Care or Deficiencies in Care. VillaSpring Litigation. DOJ: Not necessary to show services are completely lacking but only that patients not provided care that meets statutory standards. Court: Must show nursing home was Ineligible to receive payment during its period of of noncompliance. Contrast to Swann decision-must show equivalence to no performance at all. False Certifications. Express or Implied. Conditions of Participation or Payment. Judicial skepticism reflect in decisions for FCA liability. Medical Necessity Linked to Payment. Medicare only pays for services that are reasonable and necessary... Billing Issues. MDS, RUGs, Overpayments. 8 OIG CIA Provisions-Quality of Care Monitor Provisions. QA Program, Staffing, Site Visits. Not linked to regulations or survey process. Staffing. Extensive assessments and standards. Increased training and periodic training. Designated senior personnel (CDO, Quality Officer). Reportable Events tracked, investigate and report violations related to violations of professionally recognized health care standards or obligation to provide items or services that meet professionally recognized standards of care OR placing residents in unnecessarily high risk situations. Grant Park. Church Street. Penalty and Exclusion Potential. 9 3

4 Momence Meadows Nursing Center (Ongoing Litigation) 2013/2014 District: N.D. Illinois allegations of inadequate care and falsification of records. two former nurses alleged that the nursing home failed to provide adequate staffing and neglected patients (e.g., permitted patients to lie in urine and feces, failed to deliver prescribed medications, failed to deliver meals, failed to provide a sanitary environment, and failed to take appropriate skin precautions) and then forged and destroyed medical documents, logs, etc. to conceal the failures in care. The government did not intervene, but the relators pursued the case, ultimately winning a $28 million dollar jury verdict against the nursing home and its former owner. The $28 million dollar verdict was subsequently reduced to $9 million, after the Court ruled that the other $19 million in penalties levied by the jury were excessive under the 8th Amendment. Defendants appealed the verdict, and relators cross-appealed, arguing that the nursing home should pay the $19 million in FCA penalties, rather than the $9 million penalty issued by the federal court. The matter is ongoing. Villaspring Health Care Center (February 2013) District: Eastern District of Kentucky FCA Settlement Amount: $350,000 Corporate Integrity Agreement: As part of the agreement, Villaspring and Carespring agreed to retain an independent compliance consultant, subject to the approval of the USAO, for a period of 3 years. Settlement agreement resolved allegations that defendants provided inadequate care to patients resulting in the deaths of five residents and actual harm to additional residents. The investigation appears to have been initiated after poor survey performance. MonPointe Continuing Care Center (March 2012) District: Northern District of West Virginia FCA Settlement Amount: $2.25 million Corporate Integrity Agreement: None Settlement agreement resolved allegations that MonPointe submitted fraudulent claims to Medicare and Medicaid for substandard care of skilled nursing facility patients provided as a result of inadequate staffing. The federal investigation leading to the settlement was initiated after state inspectors closed the facility. 4

5 Golden Living (December 2012) District: Northern District of Georgia FCA Settlement Amount: $613,300 Corporate Integrity Agreement: Golden Living entered into a 5-year CIA covering 6 facilities in the greater Atlanta region. Qui tam. Settlement agreement resolved allegations that Golden Living provided inadequate and worthless wound care services at 2 of its Atlanta area nursing homes. Maxim Healthcare (September 2011) District: District of New Jersey FCA Settlement Amount: $130 million Corporate Integrity Agreement: Maxim entered into a 5-year Corporate Integrity Agreement. Qui tam. Maxim Healthcare, a home health services provider based in Columbia, Maryland, agreed to pay a $20 million criminal fine and $130 million to resolve civil False Claims Act allegations. The Deferred Prosecution Agreement resolved allegations that Maxim emphasized sales goals at the expense of clinical and compliance responsibilities and billed federal healthcare programs for services not documented or not actually rendered. Allegations of fraud included falsification of time sheets, training records, and caregiver qualifications. Note: Nine individuals pleaded guilty in connection with the allegations. Cathedral Rock (January 2010) District: Eastern District of Missouri FCA Settlement Amount: $628,000 Corporate Integrity Agreement: Cathedral Rock also entered into a 5-year CIA Qui tam. Cathedral Rock Nursing Homes entered into a deferred prosecution agreement for a period of 2 years. Pursuant to the plea and deferred prosecution agreement, the company s 5 nursing homes and majority owner agreed to jointly pay $1 million in criminal fines and penalties. In addition, Cathedral Rock agreed to pay $628,000 to resolve civil FCA allegations. In the plea agreement, Cathedral Rock admitted to (1) providing inadequate staffing, resulting in inadequate care; (2) failing to provide wound care; (3) failing to deliver medications as prescribed; (4) falsifying medical records related to medication administration; and (5) submitting false claims for services either not provided or so substandard as to be deemed worthless. The enforcement action was brought by the Eastern District of Missouri. 5

6 Harbor Senior Concepts (April 2010) District: Eastern District of Wisconsin FCA Settlement Amount: $258,000 Corporate Integrity Agreement: Harbor Senior Concepts entered into a 5-year CIA. Settlement agreement resolved allegations that the assisted living chain provided substandard and worthless care to Medicaid beneficiaries in Wisconsin and that services were not provided in compliance with state law. Willowcrest Nursing Home (August 2009) District: Eastern District of Pennsylvania FCA Settlement Amount: $305,072 Corporate Integrity Agreement: The Settlement Agreement required Willowcrest to hire a full-time physician assistant or nurse practitioner to be responsible for care of residents on a full-time basis, at a minimal annual cost of $120,000, in order to supplement monthly physician s visits required under federal regulations. In addition, the Settlement Agreement required Willowcrest to retain an independent monitor, approved by the government, to assess the effectiveness, reliability, and thoroughness of Willowcrest s quality control systems, training programs, and monitoring and corrective action. Further, Willowcrest was required to implement an enhanced corporate compliance program, appoint an internal Compliance Officer, create a Quality Assurance Committee, and provide annual training to employees on compliance with federal and state health care regulations, directives, and guidelines. Willocrest s obligations under the settlement agreement lasted 3 years. Settlement agreement resolved allegations that Willocrest provided sub-standard pressure ulcer treatment and prevention, incontinence care, pain management, nutrition, weight monitoring, infection control, and diabetic care. Grant Park (November 2008) District: District of Columbia FCA Settlement Amount: $2 million Corporate Integrity Agreement: Grant Park entered into a 5-year CIA. Qui tam. Settlement agreement resolved allegations that Grant Park (1) reduced staffing levels of certified nurse aides, licensed practical nurses, and registered nurses resulting in compromised patient care, and (2) billed for services not provided. More specifically, the government alleged that numerous residents suffered from dehydration, malnutrition and increased infections; that residents were left alone for extended periods of time without cleaning or bathing and often contracted preventable pressure sores; and that Grant Park failed to develop and follow resident care plans to meet the individual needs of each resident. 6

7 Pleasant Care (March 2006) District: State of California FCA Settlement Amount: $1.3 million (CA state FCA) Corporate Integrity Agreement: Pleasant Care entered into a 5-year CIA. Settlement Agreement with the State of California, agreeing to pay $1.3 million in civil penalties and investigative reimbursement, in order to resolve allegations that the company failed to meet professionally recognized standards of care with respect to (1) patient care planning and assessments; (2) nurses signal systems; (3) medications and treatments; (4) prescription drug orders; (5) skin care protocols; (6) resident supervision; (7) resident hygiene; (8) monitoring of medical conditions; and (9) required staffing levels under state law. The allegations, which related to covered services provided between 2001 and 2005, stemmed from 2 patient deaths in one of Pleasant Care s 30 nursing homes in California. Life Care Centers of Laurenceville (December 2005) District: Northern District of Georgia FCA Settlement Amount: $2.5 million Corporate Integrity Agreement: Life Care was required to enter into a 5-year CIA. Qui tam. Settlement agreement resolved allegations that LifeCare billed for services that either were not provided or were worthless. Specifically, the complaint alleged severe understaffing, inadequate staff training, high staff turnover, an ineffective medical director, poor nursing documentation, and insufficient budgetary allowances, which resulted in a systemic failure to provide adequate care to residents. American HealthCare Management (October 2005) District: Eastern District of Missouri FCA Settlement Amount: $1.25 million Corporate Integrity Agreement: None. American Health Management and three of its facilities were permanently excluded. Settlement agreement resolved allegations that numerous residents of the three homes suffered dehydration and malnutrition, went long periods without cleaning or bathing, and contracted preventable pressure sores. The United States also alleged that American HealthCare Management provided insufficient staff to meet the residents needs and submitted false claims for payment when the facilities failed to provide the federally-required standard of care. 7

8 Hillcrest (2005) District: District of Connecticut FCA Settlement Amount: $750,000 Corporate Integrity Agreement: None. Hillcrest was permanently excluded from the Medicare and Medicaid programs. Settlement agreement resolved allegations of quality care issues including severe pressure ulcers, dehydration, weight loss, inadequate staffing, and failure to follow plans of care. The government alleged that one resident died as a result of inadequate care. U.S. ex rel. David Antoon v. Cleveland Clinic Foundation et al., 3:12-cv TMR (S.D. Oh. 2013) A surgery patient and spouse brought an FCA action under a false certification theory for a surgical procedure that had negative consequences for the patient s health, alleging services violated conditions of participation of Medicare program. Antoon suffered soaking night sweats, incontinence, and impotence. Dr. Kaouk and the clinic at which the surgery was performed submitted a health insurance claim form to the federal government for reimbursement certifying that the services were medically indicated and necessary and were personally furnished by the surgeon. After Antoon s condition did not improve, he filed the qui tam. The court found that the plaintiffs failed to allege actionable false claims act claims and dismissed the complaint. U.S. v. Villaspring Health Care Center, Inc., No. 3: DCR (E.D. KY December 19, 2011) DOJ alleged that Villaspring defrauded the United States and the State of Kentucky by seeking, and receiving, substantial reimbursement from the Medicare and Kentucky Medicaid programs for care purportedly provided to [residents], despite knowing that such care was either non-existent or so inadequate as to be worthless. Specifically, the government alleged that (1) Villaspring had inadequate staffing resulting in harm to patients, including failure to treat pressure sores and administer medications as prescribed; (2) residents did not receive their medication as prescribed; (3) residents did not receive adequate wound care; and (4) Villaspring did not provide proper nutrition to residents. The court denied Villaspring s motion to dismiss. The parties ultimately settled in February of 2013, with Villaspring agreeing to pay $350,000. 8

9 U.S. ex rel. Foglia v. Renal Ventures Management, No (D.N.J. November 23, 2011) DOJ declined to intervene in qui tam. The relator pursued action, alleging that the defendant improperly administered single vials of Zemplar to multiple patients contrary to Food and Drug Administration (FDA) recommendations. The relator also claimed that, under State administrative regulations, the defendant was required to staff its dialysis centers with at least one RN for every nine patients and at least one RN, LPN, or trained patient care technician for every three patients, but that the defendant routinely failed to staff according to that ratio. The court granted defendant s motion to dismiss, concluding that the relator had not asserted an FCA claim under either an express or implied certification theory because he failed to show any of the alleged violations were a precondition to payment by the federal government. Chesbrough v. VPA, P.C., 655 F.3d 461 (6th Cir. 2011) DOJ declined to intervene in qui tam. The relator owned and operated a radiology service business ( RMC ), which entered into an agreement with VPA, a provider of medical services for homebound patients, to interpret images created by VPA s technologists. The relator alleged that (1) the images VPA provided them for interpretation were often of poor quality or defective, because the films were overexposed, underexposed, improperly positioned, or omitted necessary clinical information; and (2) the diagnostic studies billed by VPA to Medicare and Medicaid were false because the tests were either not properly documented as to indication, were performed with equipment that did not conform to industry standards, or were administered by inadequately trained radiology technologists. The Sixth Circuit found that submitting claims for services that fail to meet industry standards does not constitute fraud under the FCA unless there is an express certification to comply with those standards as a prerequisite for payment. However, the court also found that for five studies that the relator alleged were nondiagnostic, the basis of an FCA claim was present because VPA would have effectively submitted claims for services that of no medical value. Nonetheless, because the relator failed to allege facts to show that VPA actually submitted nondiagnostic tests to the government for payment, the court affirmed the district court's dismissal of the action. U.S. ex rel. Blundell v. Dialysis Clinic, Inc., No. 5:09-cv (N.D.N.Y. Jan. 19, 2011) DOJ declined to intervene in qui tam. The relator alleged that Dialysis Clinic, Inc. failed to provide adequate staffing and utilized unqualified and untrained personnel, but certified that it was in compliance with generally accepted practices for quality of care. The Court dismissed the complaint, holding that the relator failed to state a claim under either express or implied false certification theories or a worthless services theory: (1) Relator failed to allege the defendant made the certifications on the Medicare enrollment form knowing that they were false when made (no express certification); (2) alleged noncompliance with conditions of participation, which are not prerequisites to payment, does not give rise to FCA liability (no implied certification); and (3) relator failed to state a claim for worthless services because he did not allege that the clinic failed to provide any services whatsoever, but simply challenged the level of care provided (which is not the equivalent of no performance at all). 9

10 United States ex rel. Sanchez-Smith v. Tulsa Reg. Med. Ctr., 754 F. Supp. 2d 1270 (N.D. Okla. 2010) DOJ declined to intervene in qui tam. Relators alleged that the hospital billed for inpatient psychiatric services that did not meet federal requirements that psychiatric services involve active treatment. The court rejected the relator s factually false theory finding that the hospital did not submit any claims that were, on their face, false. However, the court denied defendant s motion to dismiss with respect to relator s implied false certification theory, holding that Oklahoma s Medicaid statute s active treatment regulations were not merely conditions of participation, and that a genuine issue of material fact existed with respect to (1) whether the hospital knowingly violated the treatment regulations; and (2) whether the hospital s false certification was material to the government s decision to pay its claims. U.S. ex rel. Conner v. Salina Regional Health Center, 543 F.3d 1211 (10th Cir. 2008) DOJ declined to intervene in qui tam. Relator, an ophthalmologist and eye surgeon on the hospital's medical staff, contended that the hospital submitted false claims because, in its cost report, it certified that it complied with the rules and regulations governing the Medicare program when, in fact, the hospital had failed to comply with a number of Medicare's conditions of participation. For example, the relator claimed that the defendant had failed to provide adequate nurses and other personnel; failed to establish a quality assurance program that meets regulatory standards; failed to properly maintain medical records; and dumped patients without proper screening, evaluation and treatment. The Tenth Circuit affirmed the dismissal of defendant s motion to dismiss, rejecting the relator s view that a false hospital cost report certification, by itself, triggers FCA liability, noting that the FCA applies only if a false certification "leads the government to make a payment which it would not otherwise have made." U.S. ex rel. Landers v. Baptist Memorial Hospital, 525 F. Supp. 2d 972 (W.D. Tenn. 2007) DOJ declined to intervene in qui tam. Relator alleged that the medical center had severe staffing shortages, used surgical technicians instead of nurses in operating rooms, failed to meet applicable standards of care for sterilization of instruments and/or cleanliness, and failed to meet other applicable standards of care for surgical procedures. The court granted the defendant s motion to dismiss and held that (1) the alleged non-compliance with Medicare conditions of participation did not give rise to liability under either express or implied certification ( the FCA does not encompass those instances of regulatory noncompliance that are irrelevant to the government s disbursement decisions ); (2) alleged non-compliance with Medicare conditions of participation were not material to the government s decision to make payments; and (3) allegations of non-compliance with conditions of participation did not create a genuine issue of material fact as to a worthless services claim. 10

11 United States ex rel. Lee v. Smithkline Beecham, 245 F.3d 1048 (9th Cir. 2001) DOJ declined to intervene in qui tam. Relator alleged that Smithkline Beecham, an owner and operator of clinical laboratories, mishandled control samples by falsifying results when control samples fell outside of the standard of error and, further, made no attempt to investigate or correct the issue causing the problem. The Ninth Circuit affirmed the district court s dismissal of the relator s complaint, but remanded to allow the relator to amend his complaint. The district court had dismissed the suit on the basis that the relator failed to allege that Smithkline falsely certified compliance with rules and regulations that were a condition of payment. The Ninth Circuit found that the complaint advanced a worthless services theory, which was potentially viable: In an appropriate case, knowingly billing for worthless services or recklessly doing so with deliberate ignorance may be actionable under [the FCA], regardless of any false certification conduct. U.S. ex rel. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) DOJ declined to intervene in qui tam. Relator alleged that spirometry procedures performed by physician practice failed to comply with guidelines issued by the American Thoracic Society (ATS) for calibration of spirometry equipment and that the claims submitted for those services were, as a result, false. The Court considered the relator s claims under both express and implied false certification theories and worthless services theory. The Second Circuit affirmed the district court s dismissal of the relator s complaint. The court (1) rejected the relator s implied certification theory, holding that a claim for reimbursement made to the government is not legally false simply because the particular service furnished failed to comply with the mandates of a statute, regulation or contractual term that is only tangential to the service for which reimbursement is sought; (2) rejected the relator s express certification theory, finding that medical necessity is not qualitative and that defendant s representations about the medical necessity of the services were not false simply because they failed to calibrate their equipment in accordance with industry standards; and (3) rejected the plaintiff s worthless services claims because it found that the defendants believed that the spirometers were appropriately calibrated and therefore lacked the requisite intent. U.S. ex rel. Swan v. Covenant Care, Inc., 279 F.Supp.2d 1212 (E.D. Cal. 2002) DOJ declined to intervene in qui tam. The relators alleged they personally witnessed multiple instances of substandard patient care at various nursing homes operated by the defendant in California and Illinois. The relators contended that one of the nursing homes was so severely understaffed that patients were often denied the most basic care such as repositioning, feeding, bathing and wound treatment. The relators further alleged that the nursing home administrator directed CNAs to alter patient charts (ADLs) and fill in blank spaces on ADL forms to reflect that patients had received routine care, when the patients actually had not. The relators alleged that, over a certain period, about 75% of the ADL forms were inaccurate and 90% had been altered to falsely reflect that patients were timely repositioned. The court granted the nursing homes motion for summary judgment and dismissed the action because (1) there was no worthless services claim, as the relators did not allege that the nursing homes care was so poor that it was the equivalent of no performance at all; (2) there was no false certification claim because the relator introduced no evidence to demonstrate that the nursing homes certified compliance with the applicable Medicare regulations as a prerequisite to receiving federal payment. The court noted that [t]o allow FCA suits to proceed where government payment of Medicare claims is not conditioned on perfect regulatory compliance and where HHS may choose to waive administrative remedies, or impose a less drastic sanction than full denial of payment would improperly permit qui tam plaintiffs to supplant the regulatory discretion of [HHS], essentially turning a discretionary denial of payment remedy into a mandatory penalty for failure to meet Medicare requirements. 11

12 Discussion Topics Coordinate survey compliance with other quality compliance in managing risk? Inadequate staffing is alleged in all cases. Do staffing mandates or changes work to manage resident care issues? Is recruitment and retention really different in long term care? Today, what is best approach to troubled building. How best to assess and implement change, particularly culture changes? When should an independent consultant should be considered for a troubled building? What are prevention strategies that have worked to avoid allegations of substandard care? 34 Discussion Topics Investigation Defense Strategies. Does being nice work? Litigation Defense Strategies. When to fight about what and why? Settlement Strategies. What can a company really live with? How are damages divined? Does a CIA with an IQM make sense? What is the cost and risk of CIAs? What to do with a declined qui tam? Can remedial efforts be undertaken while under investigation or litigation? Is quality assurance program under attack in investigation or litigation? 35 Contact Information Katie McDermott, Esquire Morgan, Lewis & Bockius, LLP 1111 Pennsylvania Ave, NW Washington, DC kmcdermott@morganlewis.com 36 12