Member Article

A federal court jury in Illinois found that nursing home operator Momence Meadows fraudulently billed Medicare and Medicaid for “worthless services” and falsely certified compliance with health care laws and regulations, resulting in $28 million in damages to the government. United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., No. 2:04-cv-02289 (C.D. Ill. Feb. 8, 2013). Two former nurses brought the lawsuit under the False Claims Act and the Illinois Whistleblower Reward and Protection Act, alleging that facility operators mistreated residents and fraudulently billed the government. Both whistleblowers also claimed that they were wrongfully terminated after raising concerns with management.

This case – and the sizable verdict – demonstrate the risk of mishandling compliance issues at nursing homes and other skilled health facilities. The case may also encourage similar suits in other jurisdictions.

Background

The plaintiffs in Momence Meadows alleged that the facility was understaffed and failed to provide basic care to residents, resulting in outbreaks of scabies, bedsores, and even the death of one resident. The plaintiffs further alleged that the facility tried to cover up its substandard care by falsifying medical records and destroying any adverse documentation.

After a nine-day trial, the jury agreed that the facility was deficient and therefore that the defendants had submitted 1,729 false claims for payment to Medicare and Medicaid, resulting in $3,030,409 in damages to the government. According to the Second Circuit’s landmark case on the issue, “[i]n a worthless services claim, the performance of the service is so deficient that for all practical purposes it is the equivalent of no performance at all.” The jury then awarded the maximum statutory penalty of $11,000 per false claim and trebled the damages award. In addition, the jury found that the defendants falsely certified compliance with applicable health care laws and regulations, resulting in an additional $19 million in damages and penalties. Finally, the jury awarded more than $400,000 to the plaintiffs on their wrongful termination claims.

Impact

Though the worthless services doctrine imposes a high burden on plaintiffs, the large damages award in this case could encourage whistleblowers to bring similar claims against nursing home operators. Health care providers should take note of the tremendous liability that can result from allegations of substandard care or retaliation against internal whistleblowers.

If you have any questions or would like to discuss these issues further, please visit the False Claims Act litigation or Healthcare pages of the Haynes and Boone, LLP website, or contact: