The vast majority of False Claims Act hospice cases in which the United States has intervened have settled in favor of the United States without consideration by a jury, and every criminal hospice fraud prosecution by the United States to date has resulted in a guilty plea or a conviction by jury. (213) Every such case--whether civil or criminal--was initiated by a whistleblower under the public-private partnership of the False Claims Act. (214)
The FCA's whistleblower provisions have been highly effective at detecting fraud and recovering misappropriated Medicare dollars, but deterrence and prevention remain unattained goals.
The calculated business decision to settle False Claims Act allegations has proven over time to have a neutral-to-positive effect on corporate profitability in the hospice sector. For-profit hospice giants such as SouthernCare (215) and Odyssey, (216) who have paid eight figure settlements, have rebounded quickly and actually gained position over their competitors.
Notably, Odyssey rebounded twice, paying $12.9 million in 2006 and another $25 million in 2012. Shortly after its 2006 False Claims Act settlement, it remained heavily capitalized and positioned to complete a buy-out of rival Vistacare Hospice for $147 million. In a subsequent qui tarn action in 2010, while under another investigation by the Department of Justice and the Department of Health and Human Services Office of Inspector General, Odyssey nevertheless remained attractive to investors and ultimately was sold for $1 billion to Gentiva Health 212. See 42 C.F.R. [section] 418.104 (2015). care. (217) In turn, Gentiva---just three years after having to pay an additional $25 million settlement for alleged hospice fraud--sold its assets, including the Odyssey and Vistacare hospice brands, for $2 billion.
During that time, more than a dozen other hospice companies have settled False Claims Act qui tam allegations for varying sums. Only those company owners, such as Matthew Kolodesh, who have elected to try their cases before a jury in the criminal context, have suffered adverse consequences for themselves and their corporations--including prison terms, forfeiture and expulsion from participation in federally-funded healthcare programs.
Accordingly, settlements will continue to be the primary resolution of civil False Claims Act suits under the Medicare Hospice Benefit and will remain the most profitable business strategy. Likewise--absent some genuine reform by legislators for (1) how hospice patients are certified; (2) how and to whom hospice services are reimbursed by Medicare; or (3) the addition of provisions for stiffer penalties, such as mandatory bans from Medicare for individual executives and repeat offender corporations--fraudulent admission and recertification of non-terminal patients is likely to continue. Under the current framework, hospice fraud is simply too profitable and the deterrent is not great enough.
There is no turning back the clock to the days and visions of Dame Cicely Saunders and Elisabeth Kubler-Ross. The corporate takeover of hospice as a discipline and as a business is complete. Over the next decade, non-profit hospices will become fewer and fewer, and where they continue to exist, they will primarily service the most expensive terminally ill patients who are eschewed by the for-profit corporations. Non-profits that strive to compete against the for-profit corporations will be forced to adopt the same spurious business practices as many of the for-profits that have been held accountable under the False Claims Act. Moreover, many of the remaining non-profit hospices will likely fall under scrutiny for allegations of fraud involving admission and recertification of patients who are allegedly not terminally ill.
Likewise, the pattern of acquisitions of smaller hospices, including non-profits, by larger ones and the influx of investment capital into the hospice sector will continue, ultimately eroding the small community-based culture that originally fueled the hospice movement. Because there is little, if any, economy of scale in the provision of home-based hospice care, the demand for increases in value and dividends expected by investors will force the larger hospice companies to continue to seek additional revenue where they can find it--by increasing patient census regardless of the prognosis of the patient, by manipulating the aggregate cap, and by seeking those patients who require little, if any, care. The whistleblower provisions of the False Claims Act will continue to be the most effective way for enforcement agencies to detect hospice fraud. Physicians, nurses, and hospice executives inside hospice companies are the only people privy to a hospice's business practices that can lead to fraud, and are the only people in a position to know whether a patient's hospice diagnosis and prognosis are at odds with the patient's conditions. As more hospice whistleblowers come forward and succeed in recovering Medicare dollars for the taxpayers and rewards for themselves, others will be emboldened to do the same. Sophisticated plaintiff-oriented law firms will also take notice and become more and more interested in representing hospice whistleblowers and filing hospice False Claims Act suits.
Concurrently, the body of case law supporting False Claims Act hospice litigation and the unanimous rejection by courts of the physician's certification defense will eventually prompt some hospice companies to risk the odds at the last line of defense: testing their themes and theories before a jury. However, given that juries have universally convicted criminal defendants, such as Matthew Kolodesh, under a much higher burden of proof and on essentially the same statutory elements of knowledge and falsity, a jury trial remains a daunting proposition for civil False Claims Act hospice fraud defendants.
Nevertheless, while the whistleblower provisions of the False Claims Act have proven extremely effective at discovering hospice fraud and at recovering at least some of the lost Medicare funds, alone the statute has demonstrated very little deterrent effect. Outside of a legislative overhaul of the Medicare Hospice Benefit, the only effective deterrent scheme will be for enforcement officials to supplement their use of the civil False Claims Act with traditional criminal fraud statutes. For this to work, however, criminal penalties must be imposed not only on the relatively small-scale players, like Matthew Kolodesh and Home Care Hospice, but also on the mega hospice companies and their executives and owners.
Complete List of All Unsealed Hospice Cases with Dates of Filing, Brief Description, and Status of Litigation (218)
United States ex rel. Holt v. Gentiva Health Servs., Inc., No. 3:14-cv-00306 (N.D. Ala. Nov. 20, 2014).
* 02/20/2014: Complaint filed. (219)
* 07/15/2014: United States declined to intervene. (220)
* 11/19/2014: Relators file a voluntary motion to dismiss their claims with prejudice. (221)
* 11/20/2014: Order of voluntary dismissal entered. The Court dismissed the action with prejudice as to Donna Holt and Tonya Whitehead, and without prejudice as to the United States. Voluntary dismissal entered prior to defendant filing an answer or motion for summary judgment. (222)
United States ex rel. Rice v. Evercare Hospice, Inc., No. 1:14-cv-01647 (D. Colo. June 24, 2014).
* 06/05/2013: Original complaint filed in District Court for the Northern District of Illinois. (223)
* 06/11/2014: Case transferred to U.S. District Court for the District of Colorado. (224)
* 06/24/2014: Order granting motion to consolidate case with United States ex rel. Fowler v. Evercare Inc., No. 1:11-cv-00642 (D. Colo.). (225)
* 08/25/2014: United States elected to partially intervene. (226)
* 02/26/2015: Scheduling Order issued, preliminary discovery to be completed by August 24, 2015. (227)
United States ex rel. Houston v. UHS-Pruitt Holdings Inc., No. 1:13-cv-00976 (N.D. Ga. Aug. 29, 2013).
* 03/26/2013: Qui tarn complaint filed. (228)
* 08/27/2013: Motion for dismissal by Beth Houston. (229)
* 08/29/2013: Order of dismissal without prejudice entered. (230)
United States ex rel. Rush v. Agape Senior, LLC, No. 3:13-cv-00666 (D.S.C. Aug. 18, 2014).
* 03/12/2013: Qui tarn complaint filed. (231)
* 04/28/2014: United States filed motion that it is not intervening at this time. (232)
* 06/10/2014: Motion for failure to state a claim by defendants. (233)
* 08/18/2014: Order dismissing case without prejudice during the pending of United States ex rel. Michaels v. Agape, No. 0:12-cv-03466 (D.S.C.) on first to file grounds. (234)
United States ex rel. Smith v. Serenity Hospice Care, LLC, No. 3:13-cv-00001 (S.D. Ga. Nov. 12, 2014).
* 01/8/2013: Relator Christie Smith filed qui tam complaint under seal. (235)
* 02/10/2014: United States elected to intervene in part and declined to intervene in part. (236)
* 04/17/2014: Amended complaint in intervention filed. (237)
* 11/12/2014: Order dismissing case. (238) $581,504.46 settlement announced, relator will receive a total of $110,485.85, and Relator's attorneys will receive $45,000 plus interest over the payment plan period established by the settlement agreement. (239) The settlement resolved allegations that Serenity Hospice Care submitted or caused the submission of false claims to the Medicare program for patients who were not eligible for the hospice benefit. (240)
United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 0:12-cv-03466 (D.S.C. May 8, 2015).
* 12/07/2012: Complaint for damages and other relief under the False Claims Act, Anti-Kickback Statute and Health Care Fraud Statute filed by Brianna Michaels and Amy Whitesides. (241)
* 03/07/2013: United States declined to intervene. (242)
* 12/16/2014: Currently in discovery. Amended and final scheduling order entered (discovery due by 3/10/15, jury selection deadline for...