Long Island-Based Health System Prevails in Medicare Fraud Suit

Catholic Health System of Long Island won’t have to defend allegations that it committed fraud by falsely certifying compliance with federal law at a time when it was diverting a nursing home’s medical services payments to another medical facility.

Federal law doesn’t require the recipient of a Medicare or Medicaid reimbursement payment to use the money in a particular way, the US Court of Appeals for the Second Circuit said Monday. The system, therefore, couldn’t be sued under the False Claims Act or its state equivalent for using a nursing home’s reimbursements to pay a medical center instead of providing benefits to a resident, the court said in sending the suit back to the the district court with orders to dismiss it..

The court’s decision resolved a nationwide question of first impression regarding the meaning of the Benefits Conversion Statute, which whistleblower Michael Quartararo said precluded the system from diverting money meant for St. Catherine of Siena Nursing Home to St. Catherine of Siena Medical Center, the court said.

Quartararo’s attorney criticized the Second Circuit’s reasoning. The decision “makes zero sense, has no basis in any statutory provision or judicial ruling, and now invites nursing homes across the nation to be robbed by unscrupulous owners,” Daniel J. Kaiser, of Kaiser Saurborn & Mair PC, New York, said.

A spokeswoman for Catholic Health didn’t immediately respond to Bloomberg Law’s request for comment.

Quartararo sued the health-care provider in 2012. He alleged that the system falsely certified its compliance with federal law because it had violated the benefits statute by using the nursing home’s Medicare and Medicaid reimbursements to pay the medical center for ancillary services instead of using the funds to pay for residents’ care. Federal and state authorities declined to intervene in the qui tam lawsuit.

The implied false certification claim, however, could succeed only if the system actually violated the law, the court said. The Benefits Conversion Statute specifically forbids a provider that’s received a payment for another person’s use or benefit from knowingly and willfully converting that payment to a third party’s use or benefit, it said.

Medicare and Medicaid payments, however, reimburse medical providers for past services, the court said. They aren’t intended to be used for the future use and benefit of another person, it said.

Here, the nursing home received a fixed dollar amount for every day of care it provided to a Medicare or Medicaid patient, the court said. It filed after-the-fact claim forms that detailed a patient’s care during a certain time frame, it said. The government then reimbursed the nursing home for those services, it said.

The payment “ended the life cycle of the claim,” the court said. Having already provided the services, the nursing home had no duty to spend the money it received from the government in any particular way, Judge Richard J. Sullivan said.

Judges Guido Calabresi and José A. Cabranes joined.

Ward Greenberg Heller & Reidy LLP represents CHS.

The case is United States ex rel. Quartararo v. Catholic Health Sys. of Long Island, Inc., 2d Cir., No. 21-1534, 10/16/23.