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
