Enforcing quality standards in long-term care: the False Claims Act and other remedies.

• Author: Miskis, Constantinos I.
• Position: Florida

The government must consider its decision to deploy the false claimes laws in terms of the statement it makes to the long-term care provider community as a whole.

The 1986 amendments to the Federal Civil False Claims Act[1] provided the federal government with a powerful means to exact large settlements from entities who fail to accurately bill the government for products and services.[2] With each success, the government demonstrates an increased willingness to use this law to address issues traditionally resolved in other forums. A recent example of this trend is the use of the false claims laws against long-term care facilities who fail to provide adequate care to their residents. Given the monetary penalty provisions of the Federal Civil False Claims Act,[3] the consequences of an adverse verdict can be devastating to these facilities.

Recently, the State of Florida demonstrated its willingness to deploy the Florida False Claims Act[4] against an intermediate care facility for the developmentally disabled in response to allegations of substandard care.[5] As the false claims laws increasingly appear to be the government's weapon of choice in addressing identified instances of inadequate care, this article examines the propriety of using these laws against long-term care providers. Given the unique issues that quality of care problems present, alternative remedies also will be discussed.

Setting the Stage: Federal Actions

Recent cases filed by the U.S. Department of Justice demonstrate that the government can and will use the Federal Civil False Claims Act to address substandard care problems. In United States v. GMS Management-Tucker, Inc. and Tucker House II, Case No. 96-1271 (E.D. Pa. 1996) ("GMS-Tucker"), the U.S. Attorney's Office in Philadelphia sued a nursing home and its management company under the Federal Civil False Claims Act for failing to provide adequate wound and nutritional care to the nursing home residents. Specifically, the complaint alleged that the nursing home had a duty "to fulfill the residents' care plans by providing, or arranging the provision of ... nursing and related services ... that attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident ... and dietary services that assure that the meals meet the daily nutritional and special dietary needs of each resident."[6] The government charged that by entering into a provider agreement with the state Medicaid agency, the defendants agreed that the submission of any claim for services constituted certification that such services were actually provided in accordance with all applicable laws and regulations.

In its complaint, the government identified three nursing home residents whose nutritional and wound care needs were not adequately met, thereby causing the residents to suffer clinical complications (e.g., decubitus ulcers). With this in mind, the government alleged that continued billing to the Medicare and Medicaid programs for services which were obviously inadequate was tantamount to the submission of false and fraudulent claims, since the facility's Medicaid contract provided that the submission of claims for payment constitutes certification that services were actually provided. Rather than contest these charges, the defendants entered into a consent agreement providing for repayment of $600,000 and implementation of a compliance program to ensure that the nutritional and wound care needs of the residents would be met.

Recognizing the effectiveness of using the false claims laws against poorly performing nursing homes, the U.S. Attorney's Office in Philadelphia sued another three nursing homes and their corporate owner for lack of adequate resident care. In United States v. Chester Care Center, et al., Case No. 98-CV-139 (E.D. Pa. 1998), the government charged each nursing home with failing to render necessary nutrition and wound care, and neglecting to monitor and respond to medical complications suffered by three diabetic residents. As in the GMS-Tucker case, the government pleaded violations of the Federal Civil False Claims Act based on the defendants' continued billing for services which, given the condition of the residents, obviously were not provided. As in GMS-Tucker, the Chester Care Center defendants entered into a consent agreement which provided for repayment of $500,000 to the government, and implementation of a compliance plan addressing the nutritional, wound care, and diabetic care needs of all residents.

The government has not limited its use of the Federal Civil False Claims Act to poorly performing nursing homes. In United States ex rel. Aranda v. Community Psychiatric Centers of Oklahoma, Inc., 945 F. Supp. 1485 (W.D. Okla. 1996), the government intervened in a qui tam suit against a psychiatric hospital that alleged that the hospital knowingly failed "to provide the government insured patients with a safe environment."[7] This amounted to a violation of the false claims laws, argued the government, because the hospital implicitly certified that it was abiding by applicable laws and regulations when submitting claims to the government for psychiatric care services. The government charged that such certification included the hospital "providing to its patients ... a safe and secure environment ... "[8] In response, the defendant moved to dismiss the government's case for failure to state a claim.

In denying the defendant's motion to dismiss, the court addressed the defendant's argument that the existence of a comprehensive regulatory compliance scheme necessarily precludes liability under the Federal Civil False Claims Act. In short, the court concluded that there was no legal authority to support the contention that "the Medicaid program's internal enforcement scheme is the government's exclusive remedy when a provider fails to meet appropriate quality of care standards."[9] Concluding that the government had stated a proper claim, the court reasoned that billings to the government for psychiatric care of patients subjected to "unreasonable risks of physical and mental harm" could form the basis for a...