SNF CHAIN HIT WITH $347 MILLION FRAUD JUDGMENT / LIST OF RUG UPCODING CASES GROWS

• Therapy upcoding case brings $347 million verdict against a national nursing facility chain.
• Government cases targeting RUG selection are more common than ever & target standard nursing facility practices.
• All nursing facilities are at risk – SNFs must act proactively to limit their exposure and examine practices that the DOJ considers questionable and indicators of RUG upcoding.

A March 1^st judgment from a Florida District Court added another SNF chain to the ever-growing list of facilities that have made massive payouts in response to False Claims Act (“FCA”) cases based on MDS and therapy practices. The theory of these cases often call into question practices that are standard across the long-term care industry, such as providing residents the highest level of therapy tolerated and setting company goals for RUG levels and productivity. Few nursing facilities are exempt from the risk of a similar verdict.

This most recent case arose when the relator, a facility’s MDS coordinator, made allegations regarding the company’s therapy practices. The relator alleged that whenever the company accepted a new Medicare resident, the company’s practice was to provide the new resident with all three therapeutic services: speech, occupational and physical therapy, and thereafter, bill to Medicare at an “ultra" level (RU). The allegation was that immediately after the resident’s initial treatment, the level of care for the resident would drop off until the next MDS assessment was due, and that a few days before the resident's next assessment, the provision of care would again be "ramped up" for billing purposes, regardless of need.

After years of litigation, the jury sided with the relator on February 15th, finding damages of $115 million. The court then tripled these damages as required by the False Claims Act, and assessed statutory penalties of $5,500 for each of the 446 cited false claim submissions.

While this judgment against Consulate Health Care is an outlier in terms of magnitude, FCA cases against skilled nursing facilities are common. 2016 had the third highest annual recovery in FCA history at $4.7 billion, $2.5 billion of which came from the health care industry. Cases from SNFs accounted for more than $160 million in settlements and judgments in 2016. Skilled nursing facility chains across the country have paid millions to settle RUG upcoding allegations, including:

• Brandon Woods of Dartmouth and Blaire House of Milford - $750,000
• Ensign Group Inc. - $48 million
• Essex Group Management - $1.375 million
• Extendicare Health Services Inc. - $38 million
• Genesis Healthcare - $52.7 million
• Grace Healthcare LLC and Grace Ancillary Services LLC - $2.7 million
• Life Care Centers of America Inc. - $145 million
• RehabCare Group Inc./Kindred - $125 million
• THI of Pennsylvania at Broomall LLC and THI of Texas at Fort Worth LLC - $2.2 million
• Wingate Healthcare Inc. - $3.9 million

Now more than ever, nursing facilities must understand that they are not exempt from the risk of an FCA lawsuit. SNFs should be acting proactively to limit their exposure and examine practices the Department of Justice (the “DOJ”) considers questionable and indicators of therapy upcoding. Those facilities that are interested in learning more about the common practices and patterns commonly cited by the DOJ as indicators of therapy upcoding, can review our blog post HERE.

ROLF focuses its practice in representing post-acute providers and has experience handling high risk False Claims Act qui tam and other whistleblower claims. ROLF assists providers in defending these types of actions, implementing preventative compliance measures to prevent these types of claims, and consults with other law firms on False Claims Act cases.

Please note that this alert is intended to be informational only, and is not intended to be nor should it be relied upon as legal advice. Rolf Goffman Martin Lang LLP will not be responsible for any actions taken or arrangements structured based upon this alert. The receipt of this alert by an organization that is not a current client of Rolf Goffman Martin Lang LLP does not create an attorney-client relationship between the recipient and the law firm.