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September 16, 2014 Healthcare Fraud

Seventh Circuit Takes Aim at ‘Worthless Services’ False Claims Act Allegations

On the heels of a provocative op-ed in the New York Times discussing the nexus between Medicare and the expenses of nursing home care, the U.S. Court of Appeals for the Seventh Circuit issued its much-anticipated opinion in United States ex rel. Absher v. Momence Meadows Nursing Center, which involves the collision between the False Claims Act and nursing home providers’ submission of invoices for reimbursement. In its opinion, the Court reversed an expansive interpretation of one oft-cited trigger for FCA liability: worthless services. The opinion registers as pro-provider.

Factual Details of Absher

The Absher case was commenced by a group of former nurses at the Momence Nursing home who believed the facility was engaging in non-compliant care followed by requests for reimbursement from the federal government. Rendering medical care or services in violation of federal standards – and subsequently billing the government – triggers exposure to the False Claims Act and its treble damages requirement. The nurses made startling allegations of “sub-standard care” resulting in severe harm to patients.

Many of Momence’s patients were subsidized by Medicaid and Medicare benefits on a flat-rate per diem reimbursement per resident. These per diem amounts were documented by a form known as a “Minimum Data Sheet” (MDS), which is meant to describe the care and certify that the patient was receiving daily treatment that complies with federal law. According to the relators, Momence submitted at least 1,729 claims for reimbursement for patient care that did not meet federal standards.

The result following a trial was an $11,000 fine per claim, as well as compensatory damages totaling in excess of $3 million. The court declined to treble the penalties – citing the Eighth Amendment’s prohibition against excessive fines – and instead trebeled the compensatory damages amount to $9 million.

At the crux of the relators’ claims was the “worthless services” interpretation of the FCA, which assigns liability to any defendant receiving “reimbursement for products or services that [are] worthless.” These decisions have historically centered on a definition of “worthless service” to mean a performance of service that is “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.” As the Seventh Circuit pointed out, the trial court’s definition – and jury instruction – regarding “worthless service” was not as narrow as the law requires, prompting the appellate judge to pare back the ruling.

Seventh Circuit Reverses Decision

The Seventh Circuit held that the FCA does not expressly require a finding that the services rendered were essentially akin to receiving no service at all, and held that this jury instruction is an arcane and rejected definition of “worthless services” that several Circuit Courts have discarded. The Court further pointed out that an argument against Momence claiming that it essentially rendered no service at all is “absurd” in light of the fact the facility continued to operate and treat patients notwithstanding regular visits by government inspectors. The court further concluded that reimbursable services that are “worth less” are not the same as those that are “worthless.”

As a result of its analysis, the Seventh Circuit vacated (eliminated) the District Court’s holding in favor of the plaintiffs, and sent the case back to the District Court, directing it to enter a judgment in favor of the defendants.

Contact Berger Montague Today

If you are aware of possible nursing home deficiencies or healthcare fraud involving Medicare or Medicaid patients, we encourage you to contact us right away for more information on how you can commence your own False Claims Act case. For more information, contact our office today!