If a participating nursing facility fails to meet a requirement for participation, the Department of Health and Human Services (HHS) has the ability to impose a variety of sanctions, including, but not limited to, civil monetary penalties, temporary government management, denial of payment or termination of participation. However, noncompliance-even substantial noncompliance-by a nursing facility does not mean that it was ineligible for claims made during the noncompliant period. In fact, a nursing facility may be entitled to payment for claims even after it is found noncompliant as long as a corrective plan of action is undertaken.
Second, the separation between quality of care and reimbursement within nursing facilities is nowhere better reflected than in their payment structure: a per diem PPS. This payment system focuses solely on objective criteria irrespective of QoC issues. Nursing facilities do not bill for each individual service they perform for a resident. Instead, encompassed within the per diem payment are a broad array of services such as room and board, nursing services, minor medical supplies, therapies, drugs, lab services and capital costs including land, building and equipment.
THEORIES USED TO ATTACK QOC
Relators have used three FCA theories of liability to attack QoC issues: (1) express false certification; (2) implied false certification; and (3) worthless service. The false certification theories target legally false claims, which are claims for goods or services provided in violation of a regulation, statute or prescribed contractual term, despite certification to the contrary. The worthless service theory targets factually false claims, which are claims for goods or services never actually provided. Detailed explanations of these theories follow.
1. Express False Certification. The express false certification theory alleges that a defendant affirmatively, but falsely, stated compliance with a statute or regulation and the government required such certification for payment. To illustrate, pursuant to 42 U.S.C. § 1395y(a)(1)(A), no payment may be made under Medicare Part A or B unless it is certified that items or services provided are “reasonable and necessary.” Courts have found liability under this theory when defendants performed procedures solely for profit or performed an experimental procedure, yet certified that they were medically necessary.
Medical necessity, however, implicates the level of care and not the quality of that care. Accordingly, no express false certification can be found regarding medical necessity when a plaintiff challenges the quality of the procedure, but not the decision to order the procedure for a patient.2 Because the regulations that govern quality of care in nursing facilities are not directly linked to any payment decision, the express certification theory faces significant challenges whenever a plaintiff solely challenges the facility's quality of care.
2. Implied False Certification. The implied false certification theory is based on the notion that the mere act of submitting a claim for reimbursement itself implicitly certifies compliance with all governing federal rules that are a precondition to payment. To illustrate: In 1994, a court found that a defendant implicitly certified continued adherence to the eligibility requirements of a federal small business statutory program by submitting payment vouchers even though the vouchers did not contain express certification language.7
Likewise, relators have attempted to use the implied certification theory to hold nursing facilities liable under the FCA for failure to maintain perfect compliance within the conditions of participation in the Medicare and Medicaid programs. Courts, however, have been hesitant to allow FCA suits to proceed where government payment of claims is not conditioned on perfect regulatory compliance. Compliance with the conditions of participation in nursing homes is not directly tied to reimbursement, and the HHS is given the discretion to waive administrative remedies or impose a less drastic sanction than full denial of payment when noncompliance is discovered.
The FCA was not designed to reach every kind of fraud practiced on the government and the prevailing view is that the government should not be allowed to turn a discretionary denial of payment under the regulatory structure of nursing facilities into a mandatory penalty under the FCA. Furthermore, many courts have rejected the implied certification theory altogether holding that a claim under the FCA is only legally false when a party expressly certifies compliance with a statute or regulation as a condition to governmental payment.
3. The Worthless Service Theory. The worthless service theory is based on the notion that some services can be so deficient in quality that they amount to no service at all. A straightforward worthless service claim involves a specific function or test that was performed so poorly that, in effect, it was not done at all. However, as previously discussed, under the per diem PPS, nursing facilities do not bill separately for individual acts of patient care, such as feeding, changing or bathing.