Legal experts keep watchful eye on 'worthless services' cases

Over the past year, false claims prosecution under the "worthless services" theory has picked up traction. Now that the Department of Justice (DOJ) plans to simultaneously prosecute civil and criminal whistleblower claims, this legal approach may take on an even larger role, according to a blog post by the law firm Ober Kaler.

Attorney Gina L. Simms points to three particular cases within the last year that have shaped the way prosecutors utilize this approach.

  • Most recently, in October 2014, Extendicare Health Services Inc. settled false claims allegations with the government for $38 million after prosecutors claimed that Extendicare had provided "materially substandard" care in 33 of its nursing homes.
  • Surprisingly, this settlement came on heels of an appellate court ruling that threw out a $9 million verdict against Momence Meadows Nursing Center Inc. Originally, a jury found the nursing home provided substandard care which led to more than 1,700 false claims. However, upon appeal, the court ruled that prosecutors had not done enough to show that the services were indeed worthless.
  • Finally, an ongoing case against two California nursing homes alleges that defendants submitted claims for "grossly inadequate, materially substandard and/or worthless services," including overmedicating residents in a manner that caused adverse health conditions. Prosecutors further allege that top officials knew about the substandard care, but allowed it to continue.

Simms writes that the DOJ's announcement regarding parallel prosecution should serve as a warning sign to healthcare providers, particularly nursing homes. Previous legal reports have also pointed to worthless services as a method of prosecution despite the Momence Meadows ruling in August. Additionally, this theory may have implications on peer review protections, according to a FierceHealthPayer: AntiFraud exclusive interview with Michael Callahan, a partner at Katten Muchin Rosenman LLP in Chicago.

"To prepare for this new reality, skilled nursing facilities would be well advised to redouble efforts to maintain adequate and highly skilled staff who are particularly attuned to residents' medication needs," Simms wrote in her post. "Failure to do so increases the likelihood that the government could prevail in a worthless services prosecution against your facility."

For more:
- read the Ober Kaler blog post

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