Despite the medical adage “do no harm,” mistakes are inevitable. Traditionally, harmed patients seek to address egregious medical errors through private causes of action against providers for medical malpractice. But a complaint filed on June 14, 2022 (the Complaint), reminds us that poor quality or substandard care, nonexistent care, or lack of medical reasonableness for the care provided can trigger False Claims Act (FCA) liability, according to the federal government. See United States v. American Health Foundation Inc., No. 2:22-cv-02344 (E.D. Pa. 2022); see also 31 U.S.C. §§ 3729-3733 (the FCA).
In the Complaint, the United States alleges that American Health Foundation, Inc. (AHF) and related entities provided non-existent or grossly substandard services to Medicare and Medicaid beneficiaries (the Beneficiaries). Additionally, AHF allegedly failed to maintain adequate staffing levels and repeatedly failed to follow infection control protocols. Among other things, the Complaint alleges that: (1) certain health care providers were not following proper hand hygiene while caring for Beneficiaries; (2) certain Beneficiaries developed pressure ulcers and remained untreated; (3) numerous Beneficiaries suffered from repeated falls at the health care facility; and (4) unnecessary medications were provided to the Beneficiaries. At the same time, AHF failed to provide proper psychiatric medicine, allegedly resulting in a patient’s suicide.
The Complaint underscores the commitment of the Department of Justice (DOJ) to view quality of care cases as potential FCA cases. According to DOJ, every claim to a federally funded health care program certifies that the services provided meet the standard of care. Therefore, services that fail to meet a certain standard of care are considered false. Stated differently, the Government expects to purchase services of a certain quality, and when it is of the opinion that it did not receive that quality, a potential FCA claim exists.
Theories of FCA Liability for Substandard Care
DOJ brings FCA claims for payment of substandard care under two theories of liability: the “worthless services theory,” and an “implied certification theory.” With respect to the worthless services theory, DOJ alleges instances in which services are literally not provided, or the services are so substandard as to be tantamount to no service at all. For a provider, DOJ must do more than offer evidence that his or her services are worth some amount less than the services paid for. That is, a ‘diminished value’ of services theory does not satisfy this standard – services that are ‘worth less’ are not ‘worthless.’
With respect to the “implied certification” theory, DOJ believes a FCA violation exists when a claim is filed for reimbursement despite the provider’s failure to treat Beneficiaries with an appropriate level of care or in a safe and secure environment. Under this theory, DOJ alleges (1) a provider’s substandard care violated a statutory, regulatory, or contractual requirement; and (2) had the government known of that violation, it would not have paid the provider’s claims for that care.
Further, courts have required that a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the government’s payment decision. When addressing potential FCA liability under an “implied certification theory,” a health care organization or provider should consider these factors when assessing materiality, among others: (1) whether the government has expressly identified compliance with the particular requirement as a condition of payment; (2) whether the government consistently refuses to pay claims in other cases based on noncompliance; (3) whether the government, with actual knowledge of noncompliance, paid claims; and (4) whether noncompliance is “minor or insubstantial” or goes “to the very essence of the bargain” for paying the claim.
FCA enforcement related to substandard care and worthless services has been consistent and costly. In 2021, SavaSeniorCare, LLC and related entities (Sava), based in Georgia, agreed to pay over $11.2 million to resolve FCA allegations whereby Sava billed federal programs for grossly substandard services. In 2019, Vanguard Healthcare, LLC, various affiliated companies, and certain providers agreed to pay $18.6 million to resolve state and federal FCA allegations, including the failure to properly administer prescribed medications, provide standard infection control and wound care, and meet basic nutrition and hygiene requirements, amongst others.
In 2018, an ophthalmologist and his practice, Metropolitan Retina Associates, Inc., agreed to pay $2.064 million to resolve claims that they billed Medicare and Medicaid for substandard diagnostic tests that were of such poor quality as to be effectively worthless and for ophthalmic ultrasounds that were either not performed or lacked any supporting documentation. Finally, in 2017, DOJ announced a staggering $53.6 million settlement with Genesis Healthcare, Inc., to resolve allegations that it billed federal payors for grossly substandard and worthless services ineligible for payment.
Moving forward, this level of enforcement will require health care providers to use increased caution when certifying regulatory compliance, especially with Medicaid and Medicare regulations. In addition, health care providers should use additional oversight when monitoring the quality of care and the medical necessity of procedures to reduce the chance of liability under the FCA.
An adequate compliance program is essential. Compliance programs should be updated to include audits or other investigations designed to review the quality of services being provided. All complaints about poor quality must be taken seriously and investigated just as any other compliance complaint would be. Quality complaints should not just be shifted to risk management. Instead, because such complaints are a risk and compliance issue, compliance programs should also be updated to include risk management, where necessary, to carry out a strong investigation.
Fortunately, companies that do business with the government can minimize their exposure to FCA liability by implementing strong compliance programs. At a minimum, a comprehensive compliance program should contain written policies and procedures that are adopted to prevent fraud and abuse and ensure an appropriate level of care for patients. Further, a well-implemented compliance program can demonstrate that even if unlawful conduct did occur, it was carried out by rogue actors without company knowledge or acquiescence. By taking steps proactively to address quality of care deficiencies, a health care organization or provider may not have to later defend itself from a FCA claim for substandard care.
Health care attorneys at Morris, Manning, & Martin are experienced in developing sophisticated compliance programs suitable to mitigate FCA liability and advising clients on self-disclosure requirements. If you have any questions about this legal update or would like assistance with your current compliance program, please contact a member of the healthcare team.