Recognizing ‘Worthless Services’ Under the False Claims Act

When it comes to committing fraud against Medicare and Medicaid, there are a number of ways for doctors, hospitals, and medical companies to get around the rules. Some encourage billing specialists to “upcode” for higher reimbursement rates, essentially billing Medicare or Medicaid for services never rendered. Others, quite alarmingly, perform unnecessary medical services, including surgeries and invasive procedures, in order to pad profits.

However, what happens when a practitioner does actually provide a service to patients, but that service is considered to be ‘worthless’ under the current regulations? Is the practitioner thereafter prohibited from billing for the time and supplies used in treating the patient? What exactly constitutes a worthless service?

In today’s post, we explore this area of False Claims Act liability, as the federal courts are dealing with more and more cases alleging fraudulent billing for worthless medical services. In tomorrow’s post, we explore several recent case holdings involving worthless services, which will highlight the type of misconduct to look for in your place of employment.

What is a ‘worthless service?’

The phrase ‘worthless service’ is essentially a term of art coined under the False Claims Act as it applies to fraudulent healthcare billing practices. In general, the term refers to medical care and services that are so “woefully inadequate” so as to be rendered completely worthless and not eligible for reimbursement. In one recent case, the term was defined as follows:

But “the performance of the service [must be] so deficient that for all practical purposes it is the equivalent of no performance at all.” It is not enough to offer evidence that the defendant provided services that are worth some amount less than the services paid for.

– U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., 764 F.3d 699 (7^th Cir. 2014).

This case arrived at the Seventh Circuit on an appeal from the district court, which held that a worthless service could actually include services that were still of worth to the patient, but were not of the value sought by the defendant upon reimbursement. The Seventh Circuit rejected this notion, stating that “a ‘diminished value’ of services theory does not satisfy this standard. Services that are ‘worth less’ are not ‘worthless.’” Id., 710.

Interestingly, the ‘worthless services’ theory presented by the relator in the Absher case was dismissed, primarily due to the Court’s recognition that if medical services had been so substandard as to be considered without value, the facility would not have been able to continue its operation under applicable state regulations. However, in tomorrow’s post we will explore variations in the ‘worthless services’ argument and highlight misconduct amounting to truly valueless medical care.

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