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Robert Trusiak Discusses Compliance Requirements After Escobar, Ruckh And The Set Aside Of $347M False Claims Act Jury Award

My comments follow and generally address the legal and compliance considerations associated w/ the set aside of a jury verdict for $347M due to FCA violations determined by a jury related to the absence of nursing home care. These views were generally addressed in an interview by me appearing in the Report on Medicare Compliance, V. 27, #3, Jan. 22, 2018. See (United States ex rel. Ruckh v Salus Rehabilitation, LLC, 2018 US Dist LEXIS 5148 [MD Fla Jan. 11, 2018, No. 8:11-cv-1303-T-23TBM].) The case was filed in 2011. DOJ declined intervention. The case commenced trial on Jan 17, 2017 w/ a jury verdict returned on February 15, 2017.

The court granted on Jan 11, 2018 the defendants motion for judgment as a matter of law overturning the jury verdict that found 446 false claims submitted to the government. A review of the opinion offers several points worthy of discussion as providers and their counsel assess risk and develop 2018 compliance strategies.

The Ruckh court determined the actual, not alleged, violations by the nursing home system were immaterial deficiencies unable to support False Claims Act liability. A review of the opinion reveals there is something for everyone—compliance officers, hospital counsel, nursing home counsel, whistleblowers and defense counsel--as Escobar continues to mature through judicial development at the district court and appellate level. The points follow:

  • Go it alone cases continue the trend of creating law unfavorable to the govt and favorable to the defense bar. The government declined intervention in this case. The materiality discussion by the court is unhelpful for whistleblowers and government counsel; however, beneficial to the defense bar given the court's characterization of fundamental nursing home clinical care coordination and plan of care documents as a "record-keeping deficiency".
  • Nursing home cases pose significant False Claims Act challenges. The federal government has a keen interest in protecting the vulnerable residents of a nursing home. The enforcement efforts thru the FCA, however, have been checkered due to the system-wide approaches occasioned by use of the FCA to redress specific incidents of neglect and abuse. The compliance takeaway is obviously not that nursing homes are insulated from anything other than CMS and state audit oversight with the modest remedial tool of a deficiency citation. The compliance takeaway should be that Medicaid Fraud Control Units probably are the most significant law enforcement risk and best equipped to redress neglect and abuse thru the use of granny cams and other covert techniques serving to support criminal, not civil, actions against abusive staff.
  • Too big to fail. Although the opinion is ostensibly about materiality in light of the Supreme Court's Escobar decision, a critical review of the opinion and prior filings demonstrates the case result is more about money than materiality. Quite simply, the defendants — the owners and operators of fifty three specialized nursing facilities in several states —were too big to fail. The district court in March 2017 issued a stay against enforcing the $347M judgment based on a litany of defense claims concerning the draconian consequences of enforcing the judgment; namely, the judgment enforcement will "trigger the collapse of scores of skilled nursing facilities in 17 states." Additionally, a Salus facility's failure to pay a judgment over $500,000 will trigger a default on a loan from Midcap Financial (MidCap) totaling about $168 million, in the event that a judgment creditor begins collection or if the judgment exists for over 20 days without being stayed. MidCap provides operating capital twice a week for payroll and rent, and the facilities and their receivables are pledged as collateral. If a default is triggered, MidCap will halt lending and accelerate the loan. The court noted that halting operations will result in the closure of over 80 SNFs in Florida, jeopardizing patient health. Money, profits, cash calls, defaults are all irrelevant to the Escobar materiality analysis; however, the court's opinion vacating the judgment of the jury expressly noted the "slim profit margin" of nursing home providers. Too big to fail was successfully used in 2008 during the financial crisis. Ruckh demonstrates it remains a viable defense strategy today.
  • Hobson's Choice. The Ruckh court, like many courts, struggled with the complexity of the Medicare system. Medicare is unique and the failure to critically understand the multifaceted complexities results in curious conclusions. For ex., the court indicated that continued payment impedes materiality apparently based on the inference that continued payment is somehow an implicit substantive government position on the allegations of wrongdoing since "the federal and state governments regard the disputed practices with leniency or tolerance " based on continued payment. CMS possesses the statutory and regulatory power to suspend payments. CMS, in my govt experience, chooses to exercise or withhold the exercise of that power based on a number of legal reasons, financial reasons and clinical reasons related to patient care. For ex., is there immediate jeopardy to nursing home patients; is the provider without assets to satisfy a downstream judgment; or will the suspension jeopardize the wellbeing of patients? CMS could logically conclude in this type of case that allegations of wrongdoing, not involving immediate jeopardy to residents (e.g., stage 4 bed sores and poor nutrition and hydration throughout the system, patient death, chemical restraints) require it to balance factors and forbear from immediate suspension pending a resolution. The Ruckh decision would force the government to make the Hobson's choice of suspending payments now, and create immediate jeopardy for residents, to preserve the ability to litigate an FCA case months or years away from trial. The law does not require such a Hobson's choice. The irony follows: if CMS would have suspended payments, then the same defense arguments in the stay motion on the judgment would have been used to support a claim for injunctive relief by defendants against CMS to lift the suspension for the same alleged financial calamities expressed in the stay motion. Allegations of wrongdoing, government decisions to decline intervention, suspension of payments and continued payments are decisions based on resource constraints, harm to patients and the unremarkable and august agency view of requiring facts, not allegations, to support action. Stated otherwise, continued payment is not easily reducible to the singular notion that payments estop the government or a relator from later pursuing FCA relief based on the immateriality of the alleged fraud. The compliance takeaway should not be, and never be, that continued payment by Medicare, Medicaid or Tricare constitutes some type of implicit approval of the questioned practice. Compliance officers all struggle with the incantation by staff that Medicare has always paid the claim, therefore, it must be "OK". It was important before Escobar, and remains so today, for providers of all types to ensure their claim submissions support the claim. If the underlying documentation does not support a level 5 E&M, then Escobar provides no relief to the provider. If the underlying documentation does not support the medical necessity for the admission, procedure or drug, then Escobar provides no relief to the misrepresenting provider.
  • Complexity is not simple. Health care cases require a fluency in the complexities of Medicare and medicine. Nursing home care, or the lack thereof, is demonstrated through documentation provided to patients on certain dates and consistent with care plans to ensure the government receives—the taxpayer—the benefit of the bargain. A nursing home documents care thru a CCP—comprehensive care plan. CMS has defined the CCP as the essential communication tool to be used by the interdisciplinary team to provide coordinated services. The judicial characterization of the failure to sign and date and complete this fundamental document determining and defining nursing home care as "administrative non-compliance" or a "record-keeping deficiency" is difficult to reconcile against the basic mantra known to every medical practitioner: if it is not documented, then it didn't happen. The compliance takeaway should be that mantra continues unabated. Complete documentation of care, prepared in accordance with state and federal rules, including signed and dated, will always be the best means to mitigate risk.
  • The government possesses multiple non-exclusive remedies. The court also suggests the failure to exhaust administrative remedies is somehow a prerequisite to seeking FCA relief ("My guess is that under these circumstances no government answerable to the people would refuse to pay, especially in Florida and especially in the pertinent patient population, unless every administrative and other remedy was exhausted…."). The FCA obviously contains no such administrative exhaustion requirement. The government may pursue an administrative remedy to redress fraud. The govt may pursue a statutory remedy to redress fraud. The government may choose to contemporaneously exercise regulatory and statutory remedies. The FCA contains no implicit or explicit provision requiring remedy by turns. The compliance takeaway remains simple and straightforward: Risk due to coding, deficient care, off label promotion, physician compensation and other areas remains a multifaceted exercise due to FCA risk, Stark risk, Kickback risk, state enforcement risk and administrative risk.
  • Same as it ever was.

What does all this mean to the health care or compliance professional?

Nothing. Stay on Task.

The federal appellate courts will fashion appropriate and legitimate factors to define materiality under Escobar and weed out outlier materiality claims. DOJ and the whistleblower bar will respond to Escobar and file complaints addressing materiality sufficient to avoid dismissal and permit discovery. Remember, providers bill imperfectly everyday despite their best efforts. Remember, no investigation ends where it starts—it generally expands to include other areas. The purpose of compliance efforts, in general, includes the avoidance of whistleblower suits and keep at bay state and federal law enforcement risks to avoid the detection and action against those risks that occur despite your best efforts.

The FCA in general, and whistleblowers in particular, will continue to be an omnipresent and significant risk to health care providers. DOJ recently reported that 12 whistleblower cases are filed every week. See The FCA will continue to be the primary govt fraud weapon to attempt to address the many and varied fact fraud and procurement fraud theories historically cognizable and successfully prosecuted by the govt or relators, including Stark, physician compensation, kickback, off label, medical necessity, overutilization and upcoding. Although Escobar will rightly continue to affect certain FCA matters, for example, licensure or ministerial approvals; Ruckh by no means portends a reduction in FCA risk for providers based on the above rationale.

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