Wednesday, July 15, 2020

Ruckh v. Salus Rehabilitation: Eleventh Circuit Reinstates Most of Huge False Claims Act Verdict

Dear Readers:

Just recently, the Eleventh Circuit largely overturned the District Court’s decision in US and State of Florida ex re Ruckh v. Salus Rehabilitation, LLC, et al. In that non-intervened qui tam, the District Court overturned the jury’s verdict in favor of the relator and with it a $347 million judgement against the defendants. See my Jan. 29, 2018, blog post,“Discerning the True Meaning of Escobar: the remarkable case of US ex rel Ruckh v. Salus Rehabilitation.”

The District Court’s decision was a dramatic one. For lack of a better phrase, it was a legal “bang” to awaken the public and the legal community to the punitive impact of False Claims Act (FCA) verdicts on a vulnerable industry such as Florida nursing homes. Ruckh, as I observed in my previous blog post: 
“does so much more than apply a simplistic Escobar analysis of whether the government would have objected to this or that individual billing practice or paperwork errors--what I would call a retail analysis of disputed practices. Rather, acknowledging the punitive nature of the FCA’s treble damages and penalties, the Court evaluates the materiality of defendants’ disputed practices in light of ‘common sense’ and the impact of an FCA judgment would have on the delivery of nursing home care to a large, vulnerable population. For the Court, the ‘controlling question’ is essentially whether the government would effectively shut down 53 nursing homes on the basis of what appears to be paperwork errors–-what the court calls ‘traps, zaps and zingers’--about which the government ‘has permitted . . . to remain in place for years without complaint or inquiry.’”
Well, that’s all over now. The Eleventh Circuit (the Court) ignored the sweeping language of the District Court and the broader questions it posed about determining materiality. We are back to a “just the facts, ma’am” type of approach. The Court did not look at the larger questions, at least with regard to Medicare and the liability of the management company that did not submit the claims at issue. Instead, it largely focused on whether this or that type of billing practice would have caused Medicare to pay more than it should and, if so, whether there was sufficient evidence for the jury’s verdict.

The Court upheld most of the jury’s verdict. It found that the Defendants, 53 skilled nursing facilities and their management company, violated the FCA by submitting 420 allegedly fraudulent Medicare claims. The fraudulent Medicare claims arose from “upcoding” and “ramping,” which is the “artificial timing of services to coincide with Medicare’s regularly scheduled assessment periods.”  Once the matter is returned to the District Court, we can anticipate the District Court entering a judgment in excess of $255 million in favor of the relator and the government.

The District Court’s Ruling On Medicare and Medicaid Claims

According to the District Court, determining if a defendant’s disputed act or practice is material to the government required a far broader context and circumstance than simply whether the government would object to this or that individual disputed practice.  For both the Medicare and Medicaid clams at issue, the District Court found that the “evidence and the history of this action establish that the federal and state government regard the disputed practices with leniency or tolerance or indifference.” The District Court observed that “relator’s evidence” proved that these “disputed practices” were not material. This is because “Medicaid and Medicare consistently paid ‘in the mine run of cases’ despite Medicare’s routine audits and Medicaid’s knowledge of billing and documentation deficiencies.”

The Eleventh Circuit’s Ruling On Medicare Claims

The Eleventh Circuit, though respectful, was not having any of that. The jury ruled “the evidence at trial permitted a reasonable jury to find that the defendant’s committed Medicare-related fraud . . . through the use of two improper practices: upcoding and ramping.”

As to materiality, the Eleventh Circuit simply declared that “[c]ontrary to the district’s decision, these types of affirmative representations are material.” The Court did not cite any authority to support its statement. Rather, determining materiality was simple: upcoding caused Medicare to pay the defendants “higher amounts than they were truly owed. This plain and obvious materiality went to the heart of the [skilled nursing facilities’] ability to obtain reimbursement from Medicare.” “Ramping,” the Court explained further, “causes Medicare to reimburse at a higher level than it would had the [skilled nursing facilities] reported the appropriate level of services. Like upcoding, ramping is material as it goes to the essence of the parties’ economic relationship.”

The Eleventh Circuit rejected the District Court’s alternative order for a new trial. It sustained the jury’s single damages for $85,137,095 on the Medicare claims. It instructed the District Court to enter judgment on those claims after applying trebling and statutory penalties.  The Court further sustained the jury’s finding that even though the management company did not submit the claims, it was responsible for “causing” false claims to be presented for payment. Having not previously addressed the “appropriate standard to prove causation in FCA ‘cause to be presented’ actions,” the Court held that “proximate causation” was a “useful and appropriate standard by which to determine whether there is a sufficient nexus between the defendant’s conduct and the submission of a false claim.”

The Eleventh Circuit's Ruling on Medicaid Claims

Surprisingly, the Eleventh Circuit found that “no jury could have reasonably concluded that the defendants defrauded Medicaid.” It upheld the District Court’s judgement as a matter of law on those claims. The relator based her Medicaid fraud claim on the defendant’s “failure to prepare and maintain comprehensive care plans” for the nursing home residents. The Court acknowledged that Florida’s Medicaid regulations:
  • Require that skilled nursing facilities are “responsible for developing a comprehensive plan of care for each resident”
  • Instruct that “Medicaid payments for services that lack required documentation or appropriate signatures will be recouped”
  • Caution providers to submit “true and accurate claims” and to certify that billing information is “true, accurate and complete.”
The relator argued at trial that Florida “would or could automatically deny payment if the state were to discover care plans were missing.”

The Eleventh Circuit found that there was “no evidence that the state ever declines payment for, or otherwise enforces, these types of violations.” Citing Escobar, the Court noted that was “very strong evidence that those requirements are not material.” The relator’s “scant evidence,” the Court observed, “supported only the conclusion that care plans are, at most, labeled as conditions of payment under Medicaid regulations” and is “without more…insufficient to establish materiality.” The Court also concluded that the relator’s “implied certification theory of liability” for its Medicaid fraud claims failed as well. “Implied certification claims,” the Court explained, must be founded not only on a request for payment. The claims also must make “specific [false] representations about the goods or services provided.” The relator, however, failed to “connect the absence of care plans to specific representations regarding the services provided” and “without more, the failure to create and maintain plans cannot serve as a basis for FCA liability.”

Why did the Eleventh Circuit Rule Differently on Medicare and Medicaid Claims?

The Eleventh Circuit does not explain how the defendants’ Medicare billing practices were material but defendants’ Medicaid billings were not. I believe the Court’s analysis is based on the difference between how these services were billed at the time. Medicare, the Court observed, reimbursed the skilled nursing facilities services on a “fee-for-service model” in which Medicare pays the skilled nursing facility for providing specific services. The skilled nursing facilities “indicated they had provided more services -in quantity and quality- than they, in fact, provided.” This caused Medicare to pay “higher amounts than they were truly owed.” Basically, it is saying that your bills say you did X, but you really only did Y, and Medicare paid more as a result.

Florida Medicaid, by contrast, only “reimburses SNFs for resident care at a flat daily rate.” That’s the difference, apparently. The Medicaid bill essentially says: residential care provided to patient A on Z date. Now, the requirements for defendants to provide that “care” are contained in the Florida Medicaid regulations. The SNFs must certify generally that they fulfill those requirements. But, I assume the Court’s point is that the relator did not show that Florida Medicaid actually rejected such bills when it discovered or knew that such comprehensive care plans were not provided. Still, there’s something that just does not sit well with that.

And there’s more in the case, such as a lengthy discussion about whether the relator loses standing by entering in an agreement to sell part of her recovering to a litigation funding company – it does not. As to guidance about if a relator can use a sampling to determine liability or if the damages were excessive – readers will have to look other places for that. The Court was not having any of it, finding that defendants either did not raise it or adequately address it.

In sum, the Eleventh Circuit’s decision in US and State of Florida ex re Ruckh v.Salus Rehabilitation, LLC, et al. is rather anti-climactic on the scope of Escobar and how to evaluate materiality of a defendant’s billing practices. Defense counsel will have to look elsewhere for more expansive discussions of materiality and Medicare such as those found in the District Court’s opinion.

A. Brian Albritton
July 15, 2020