There are a number of key issues that will drive the government’s enforcement efforts in the coming year and that will have a significant impact on how healthcare fraud matters are pursued by relators asserting FCA claims and are defended on behalf of healthcare providers. In the coming weeks, we will examine these issues in greater depth and why healthcare providers should keep a close eye on these issues. This week, we examine the government’s continued enforcement focus on long-term care providers.

The previous year saw the continued trend of an increasing number of FCA cases based on the theory that long-term care services (e.g., skilled nursing, home health, or hospice) provided to patients were medically unnecessary, and therefore, the healthcare provider submitted false claims in connection with those services.  See, e.g., U.S. ex rel. Hayward v. SavaSeniorCare, LLC, No. 3:11-cv-0821 (M.D. Tenn.), United States’ Consolidated Complaint in Intervention (Oct. 26, 2015); U.S. ex rel. HCR ManorCare, Inc., No. 1:09-cv-00013 (E.D. Va.), United States’ Consolidated Complaint in Intervention (April 10, 2015).

The falsity alleged in these cases often turns on contentious reviews of medical records by experts, with the parties arguing over whether proof of an objective falsehood necessary to establish falsity exists. In many cases, however, relators and/or the government attempt to establish the intent required to support an FCA violation (actual knowledge, deliberate ignorance or reckless disregard) not based upon any particular patient’s medical records, but rather from other business records of the defendant.  These records might include budgets or benchmarking relative to future services, or the tracking of performance across a larger population of patients to allow for comparison against prior forecasts.

It is common for plaintiffs in FCA cases to point to a provider’s stated “goals” or “benchmarks” as supposed pressure on the provider’s employees to provide medically unnecessary services. Not surprisingly, when providers track performance against those goals, benchmarks or budgets, or evaluate employees relative to those standards, such conduct likewise is highlighted as evidence of wrongdoing.

While it may be tempting for a court to allow FCA claims to proceed in the face of such allegations, at least one district court rejected this line of argument last year. In U.S. ex rel. Lawson v. Aegis Therapies, Inc., 2015 WL 1541491 (S.D. Ga. Mar. 31, 2015), DOJ had asserted that a skilled nursing provider knowingly submitted false claims by pointing to the provider’s utilization benchmarking and instruction provided to therapists regarding clinical documentation. The district court recognized that there are very legitimate business reasons for a healthcare provider to create budgets, establish goals and benchmarks, and to evaluate performance relative to the foregoing. As the district court explained, prudent business practices demand tracking of such information in order to evaluate effective delivery of care to patients, staffing needs, patient demographics, relational dynamics among clinicians and the overall business climate.

As more cases proceed against long-term care providers challenging the medical necessity of the care provided to patients, it will be increasingly important for courts to distinguish between legitimate business practices and those practices that actually evidence wrongful conduct. Without a willingness by courts to parse between such practices, providers will face increasingly difficult challenges in defending against FCA allegations involving alleged medical unnecessary services.