Billing Medicare for poor care not a false claim, court rules

A recent appellate court ruling in favor of an Illinois nursing home could shield other healthcare providers from False Claims Act allegations that involve poor quality of care.

Last week, the 7th U.S. Circuit Court of Appeals vacated a judgment against Momence (Ill.) Meadows Nursing Center and in favor of two whistle-blowers, both nurses who used to work at the facility. A District Court ordered Momence to pay more than $9 million under the False Claims Act. The appeals court, however, concluded that the plaintiffs' argument rested on an incorrect application of the “worthless services” theory.

Experts say the ruling reaffirms that the False Claims Act is rarely an appropriate tool for policing medical negligence. “It will serve as a standard by which other circuit courts will evaluate similar cases,” said Gary Eiland, a partner in the Houston office of law firm King & Spalding who works on healthcare false claims cases.

The nurses alleged Momence submitted thousands of claims to Medicare and Medicaid for substandard and noncompliant healthcare services. They said a lack of infection and pest control led to quality issues, including a scabies outbreak. The nurses also alleged patient care did not live up to government standards. They said one patient died due to a colostomy bag malfunction. The U.S. Justice Department declined to join the case.

At trial, the plaintiffs argued the poor care at the nursing home should qualify under the “worthless services” theory of the False Claims Act. The judge instructed the jury that they need not find that the patients received no services at all in order to find that the facility submitted false claims. “If Uncle Sam paid Momence $200 and they only got $120 worth of value, [then] Momence defrauded them of $80 worth of services,” the judge told jurors, according to the 7th Circuit opinion.

Momence countered that the CMS and the Illinois Department of Public Health had already fined the nursing home on several occasions for the services in question and the nursing home took corrective action.

The 7th Circuit concluded that for service to be worthless under the False Claims Act, “the performance of the service (must be) so deficient that for all practical purposes, it is the equivalent of no performance at all.”

Attorneys for the plaintiffs and defendants were not immediately available for comment.

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