How Courts are Holding on ‘Worthless Services’ Allegations Under the False Claims Act

In yesterday’s post, we examined the emerging concept known as ‘worthless services’ within the context of the False Claims Act. Under the FCA, a defendant may face liability for intentionally submitting claims for reimbursement to Medicare or Medicaid that are known to be false or based on false information. On this blog, we have covered several examples of healthcare fraud, including upcoding or the provision of medically unnecessary procedures. However, ‘worthless services’ is a relative newcomer and the federal courts are increasingly weighing this option when deciding upon qui tam lawsuits filed by whistleblowers.

Claiming reimbursement for worthless services, in essence, involves seeking government funds for medical services that were so substandard that no value can be assigned. This concept is evidently extremely dangerous and can cause great harm or death to unsuspecting patients. For this reason, we encourage all healthcare providers to remain aware of the possible warning signs of worthless services and contact the proper authorities as quickly as possible.

What is (and is not) a worthless service?

As explained by the Seventh Circuit in U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., worthless services are distinguishable from those that are ‘worth less.’ In other words, filing a successful lawsuit under this theory requires evidence to show that the facility or practitioner’s services were of absolutely no value, not just diminished value.

Unfortunately, a number of relators have faced a dismissal – or reversal on appeal – of a worthless service claim, primarily due to the distinction between a diminished value and true lack of any worth (or other procedural issues). While the court in Absher took a skeptical viewpoint of the concept as a distinct theory under the FCA, other Circuits have recognized the theory as potentially actionable upon the showing of sufficient evidence.

In 2001, for example, the Ninth Circuit introduced the concept of worthless services and held that a relator’s claim should not necessarily have been dismissed by the district court, saying, “knowingly billing [the] federal government for worthless services or recklessly doing so with deliberate ignorance could be actionable under FCA in appropriate case.” U.S. ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048 (9^th Cir. 2001).

In 2011, relators found some success in the Sixth Circuit as it recognized the concept of worthless services within the context of non-diagnostic imaging charges submitted to Medicare and Medicaid for reimbursement. In that case, the relators were ultimately unsuccessful in their overall case, but the court enhanced the worthless services concept by holding, “[t]he [relators] do attach to their complaint five studies that are allegedly ‘nondiagnostic.’ These, we believe, could form the basis of an FCA claim. A test known to be of ‘no medical value,’ that is billed to the government would constitute a claim for ‘worthless services,’ because the test is ‘so deficient that for all practical purposes it is the equivalent of no performance at all.’” Chesbrough v. VPA, P.C., 655 F.3d 461 (6^th Cir. 2011).

District Court finds possible worthless services amid egregious allegations

In 2014, a Mississippi District Court upheld the relator’s and government’s argument in favor of liability based on a worthless services theory, denying the defendant’s motion for summary judgment. In that case, the Court held that, “[t]he facts alleged in the Complaint, including the heinous examples of grossly deficient care suffered by the seven representative residents…. if taken as true, support the overall charge in the USA Complaint that Defendants had actual knowledge, recklessly disregarded, and/or remained in deliberate ignorance, of the truth or falsity of the claims and statements made to Medicaid and Medicare, and thus ‘knowingly’ made or caused to be made to Medicaid and Medicare false or fraudulent claims and statements, within the meaning of the FCA….” U.S. ex rel. Academy Health Center, Inc. v. Hyperion Foundation, Inc., 2014 WL 3385189 (S.D. Miss. 2014).

In that case, the defendant (a long-term care facility) is alleged to have committed the following acts or omissions, amounting to worthless care:

•  Lack of sufficient staffing and personnel
• Failure to clean and maintain hygiene standards
• Reusing medical tubing
• Pervasive mold
• Forcing patients to shower in groups
• Pervasive pest problems, including the following allegation noted in an inspector’s report: “A snake entered the facility and was found in a bed-ridden resident’s bed. The snake was   discovered when a staff member investigated the resident’s complaint of leg pain. When she pulled back the covers, a snake jumped out at her from the area of the resident’s legs while the resident was still in the bed.”
• Failure to monitor patients at a heightened risk for wandering
• Failure to safeguard medications
• Widespread reports of bed sores, malnutrition, and other issues relating to neglect.

While the District Court has yet to decide upon the merits of the case, it has concluded that the relator’s worthless services claims should withstand any attempts at dismissal based on summary judgment, and the case is currently pending in the discovery phase of litigation.

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