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INSIGHT: Nursing Homes Face Heightened Criminal Enforcement During Covid-19

June 15, 2020, 8:00 AM

With the Covid-19 pandemic sweeping the U.S., the nation’s approximately 15,000 nursing homes have been at the center of infections and deaths.

Tragically, the 1.3 million residents and workers at such facilities are among the hardest-hit populations in the U.S., disproportionately accounting for at least a third of the nation’s Covid-19 fatalities. Estimates indicate that 10% of nursing homes have publicly reported cases of Covid-19.

The criminal enforcement landscape for nursing homes has drastically changed in just a few months. Below, we provide predictions for the coming months of enforcement and offer best practices for nursing homes to remain compliant.

Background on NNHI

The Department of Justice, in partnership with the Department of Health and Human Services, announced on March 3 the creation of the National Nursing Home Initiative (NNHI). Although ostensibly unrelated, in an eerie twist, just a few weeks earlier in February 2020, one of the first Covid-19 outbreaks in the U.S. unfolded at the Life Care Center in Kirkland, Washington.

The DOJ has stated that the NNHI will pursue criminal and civil enforcement actions against nursing homes that provide “grossly substandard care” in areas including hygiene and infection control.

At the time of NNHI’s announcement, the DOJ stated it had opened investigations into approximately 30 nursing facilities. Look for the DOJ to use the NNHI as a springboard to increase its enforcement emphasis on problematic nursing homes, with a Covid-19 overlay.

Sources of Potential Criminal Referrals

Law enforcement will have a wealth of referral sources for criminal nursing home cases, including:

Whistleblowers. Whistleblowers (including disgruntled current or former nursing home employees, residents and their relatives), will provide a ready-made source for federal referrals. During the pandemic, many medical professionals have been fired, disciplined, sued or have threatened to sue due to their facilities’ alleged lack of personal protective equipment (PPE).

Wrongful death lawsuits. The numerous civil lawsuits filed by the estates of deceased nursing home workers and patients will provide a source of referrals. In one recent California suit, the plaintiffs (the family of a deceased patient) alleged that the nursing home concealed that staffers and patients had been exposed to Covid-19, leading to 10 deaths.

Although not a traditional source for criminal health care fraud cases, expect federal law enforcement to follow up on wrongful death lawsuits. Although at least 15 states have enacted laws that fully or partially immunize nursing homes from Covid-19 lawsuits, such state law immunity is not a bar to federal criminal enforcement.

On-site inspections and audits. The on-site inspections and audits being performed by federal and state authorities will provide a stream of referrals to the DOJ and HHS-OIG. The number of non-compliant facilities is large—according to the Washington Post, 40% of more than 650 nursing homes nationwide with publicly reported cases of Covid-19 had been cited multiple times in the recent past for violating federal infection-control standards.

Expect the DOJ to focus on the “worst of the worst” and the homes where there is evidence of intentional or willfully blind noncompliance.

Covid-19 reporting data. Expect the DOJ and HHS-OIG to proactively comb through regulatory data from agencies, including the CMS and the Centers for Disease Control and Prevention. On April 19, the CMS started requiring long-term care facilities to report Covid-19 cases.

Given that nursing home industry groups have acknowledged that not all coronavirus deaths have been counted, look for law enforcement to examine whether nursing homes have intentionally underreported mortality rates.

The CDC made recommendations on April 30 for coronavirus testing during postmortem exams. This may shed light on facilities that underreported Covid-19 deaths or failed to perform testing that would have led to infections being discovered.

Scrutiny of acceptance of CARES Act relief funds. CARES Act funding presents a “second wave” of risk for nursing homes because of the significant compliance requirements that accompany the acceptance of such funds. The HHS announced May 22 that skilled nursing facilities will receive $4.9 billon to pay for expenses related to the pandemic, such as the cost of PPE and increased testing capacity. Per HHS FAQs, providers must submit federal tax returns, provide estimates of lost revenue, and certify they will use the funds “for increased healthcare-related expenses or lost revenue attributable to coronavirus.”

The HHS has warned that it will engage in “significant anti-fraud monitoring of the funds distributed” and that it reserves the right to audit recipients to ensure compliance. Receiving federal funds is never a “no strings attached” proposition.

Nursing homes that mispresent their financials or use the funds for unauthorized purposes could find themselves on HHS-OIG’s radar screen. And intentional misrepresentations connected to receipt of federal funds could expose a facility and its management to potential criminal liability for federal fraud offenses.

Best Practices for Nursing Homes

In the coming months, nursing homes should anticipate and prepare for heightened legal and regulatory scrutiny related to the pandemic. This is especially true for homes with Covid-19 infections or deaths, and those that accept CARES Act funds. Regulatory requirements are rapidly changing, and the federal government is releasing federal funds on a rush basis with arguably ambiguous guidance.

However, nursing homes should keep in mind that the federal criminal enforcement look-back will not be kind for facilities that are perceived as willfully noncompliant or those who put profits over patients. The DOJ will view nursing homes with 20/20 hindsight, so maintaining “defensive” contemporaneous documentation is key.

This need to document applies to operational functions (testing, infection control, the use of PPE and other regulatory compliance requirements), as well as maintaining financial records related to how federal funds are spent. Facilities that can prove, with an adequate documentary trail, that they have remained in compliance will position themselves favorably in the face of an HHS audit or a DOJ criminal investigation.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Sarah M. Hall is a former federal prosecutor and is senior counsel in Thompson Hine’s White Collar Criminal Practice, Internal Investigations & Government Enforcement group in Washington, D.C. She represents corporations and individuals in government investigations and prosecutions of alleged violations of the anti-fraud, procurement, FCPA, health care, sanctions, export control, securities, commodities and criminal tax laws. Prior to joining Thompson Hine, Hall served for seven years with the Fraud Section of DOJ’s Criminal Division as a white-collar crime and health-care fraud prosecutor.

Cori R. Haper is chair of the Thompson Hine’s Health Care practice and a partner in the firm’s Dayton, Ohio, office. She focuses her practice on representing health-care providers in business, compliance, and regulatory matters. Haper represents a wide spectrum of health-care clients, including hospitals, clinical laboratories, hospices, home health agencies, skilled nursing facilities, pharmacies, opioid treatment centers, federally qualified health centers, and physician practices.

Brian K. Steinwascher is an associate in the Thompson Hine’s Business Litigation group in New York. His primary practice focuses on health-care fraud including defending False Claims Act cases.