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Fraud Suits, DOJ Probes Await Nursing Homes After Virus Abates

April 28, 2020, 9:33 AM

Mounting coronavirus infections and deaths at U.S. nursing homes will spur a storm of private litigation under a federal anti-fraud statute and possible criminal investigations by a Justice Department eager to probe substandard care at the facilities.

More than 10,000 nursing home residents and staff members have died from Covid-19—the illness caused by the coronavirus—and nearly 51,000 are infected with the coronavirus itself at more than 4,000 facilities in 36 states, according to an analysis of state data by the Kaiser Family Foundation. The numbers would be higher, but only 36 states currently report the information.

Expect the families of deceased residents and workers, along with government agencies, to bring legal action against problem facilities under the federal False Claims Act, say attorneys Daniel Gottesman and David Schweighoefer, partner and counsel, respectively, at Ulmer & Berne LLP in Cleveland.

The False Claims Act holds individuals and companies liable for defrauding governmental programs. The law also allows private citizens to sue on behalf of the government. In fiscal year 2019, the DOJ netted more than $3 billion in settlements and judgments from fraud and false claims cases, the department said.

“That’s the biggest weapon in their arsenal,” Schweighoefer said in an interview. ”The math of the claims going back years would put any operator in bankruptcy in a heartbeat.” That’s because violators are liable for treble damages and a penalty that’s adjusted for inflation.

Schweighoefer expects most cases will argue that, when submitting claims to Medicare and Medicaid, the problem nursing homes falsely certified that their care met federal and state standards.

Medicare Administrator Seema Verma last week said hand-washing, proper use of personal protective equipment, and separating residents by their coronavirus status “continues to be a challenge” at the nation’s nursing homes.

“This line of reasoning then argues that since care was grossly substandard, leading to the COVID-19 outbreak, the facility certification was false and facilities provided inadequate or worthless services, thereby violating the False Claims Act,” Schweighoefer and Gottesman wrote in a April 24 blog.

‘Good Old-Fashioned Fraud’

Those actions could also go another direction, said Brandon Essig, a partner with Lightfoot, Franklin & White LLC in Birmingham, Ala.

“As you are submitting documents about diagnoses of patients, you’re falsifying those in some way because you’re afraid of your coronavirus numbers and having to report those as being too high,” Essig said, as an example. “I think what you’re initially likely to see is just some sort of straightforward, kind of good old-fashioned fraud, for lack of a better term.”

Concerns about substandard care during the pandemic could also fuel new civil and criminal investigations under National Nursing Home Initiative of the Department of Justice. The enforcement effort, announced March 3, is already probing nearly 30 facilities in nine states, the DOJ said.

Nursing home operators should expect more to come, Essig said, as the DOJ’s focus on “the worst” nursing homes turns to the pandemic.

“My expectation is that the government is going to look for ways to make a statement, to show that they’re addressing this in some way,” Essig said.

Nursing industry leaders say the facilities, which care for 1.3 million Americans, are doing their best amid staff shortages, inadequate testing and a lack of personal protective gear.

States Offer Protections

Sensitive to their plight as valuable front-line providers in a national public health emergency, at least six governors have issued executive orders that protect nursing homes from civil liability in the injury or death of Covid-19 patients during the pandemic.

New York and Massachusetts have passed similar laws. The measures are designed to allow essential workers to keep practicing during the health emergency without fear of costly litigation.

But Schweighoefer said the orders wouldn’t block a False Claims Act case.

“I don’t think the executive orders would preempt investigations or prosecution under the False Claims Act because that’s entirely a federal statute,” he said. “But for state-level liability claims and so forth,” the orders will likely provide protection, in absence of negligence.

False Claims Act violations can result in settlements that require heavy penalties and the development of a corrective action plan. Some require the offending facility to enter into a corporate integrity agreement, a rigorous compliance program typically overseen by a third party.

“What’s worrisome about that is it’s costly to comply, but facilities don’t have any choice. So it’s the one that I would worry about most if I were thinking about ‘what tools are they going to use?’” Schweighoefer said.

DOJ Initiative

The DOJ’s nursing home initiative will target facilities where problems like poor hygiene, lax infection controls, and inadequate nurse staffing levels have put Medicare and Medicaid residents in danger. In 2017, long before the coronavirus outbreak, 39% of U.S. nursing homes had problems controlling the spread of infections, according to the Kaiser Family Foundation.

Verma said “nursing homes were ‘ground zero’” for the pandemic.

The Centers for Medicare & Medicaid Services recently required nursing homes to report Covid-19 deaths and coronavirus infections to the Centers for Disease Control and Prevention. Only state and local health departments had been receiving the information.

The CMS plans to make the CDC data public, Verma said, just like information about abuse and neglect at nursing homes.

Advice for Nursing Homes

Nursing homes anticipating legal and regulatory scrutiny should have an updated compliance program for infection control related to the coronavirus that documents employee training and other activities, Schweighoefer said.

“Infection control procedures almost always require a log of what was cleaned, when it was cleaned, by whom and using what. So you need to pull that stuff out and make sure that it is active right now,” Schweighoefer said.

If the facility can document affirmative efforts to adhere to its compliance program, “then it’s difficult for the government to prove there was reckless disregard of the rules,” he added.

Most False Claims Act investigations start out as civil matters —unless they uncover something that suggests possible criminal intent, like falsifying bills.

“The bad news for the providers here is that much of this investigation is sealed and you don’t know that you’re being investigated,” Schweighoefer said.

The best advice for nursing homes? Be as truthful and transparent as possible in your recordkeeping, Essig said.

“That would be sort of the biggest caution I would provide. Do the best you can, and triage the best you can, and be open and honest,” Essig said. “Don’t lie. Don’t mislead. In particular, when you have regulators that come to you and ask you to report, I would over share rather than under share.”

To contact the reporter on this story: Tony Pugh in Washington at

To contact the editors responsible for this story: Fawn Johnson at; Brent Bierman at