Courts Applying a Broader Brush to False Claims Act Suits

Developments in a False Claims Act (FCA) suit involving Curo Health Services signal that mounting a defense may become more complicated for accused hospices.

Regulators and investigators have sharpened their gaze on alleged False Claims Act violations by hospice providers, as well as the closely related anti-kickback statute, sometimes resulting in multi-million settlements. These cases often hinge on the question of patient eligibility for hospice care based on a six-month terminal prognosis.

In the Curo Case, the court rejected the company’s motion to dismiss, saying that the government sufficiently alleged that the hospice physician’s medical opinion may have been inaccurate or dishonestly held.

This ruling does not assign any guilt to Curo at this time, but it does mean that the court felt that the government’s allegations were sufficiently credible to continue the proceedings.

“I think it signals that at least [the Middle Tennessee District Court] is going to be pretty open to giving the government and whistleblowers some leeway in how they plead their False Claims Act cases,” Chris Sabis, member of the law firm Sherrard, Roe, Voigt & Harbison, told Hospice News. “I think that providers should be aware that based on this decision — just to use an old saying — one bad apple can spoil the bunch.”

Sabis is a former assistant U.S. attorney who has worked on FCA cases.

The U.S. Department of Justice and the State of Tennessee last June filed a consolidated complaint against Curo Health Services Holdings and a number of affiliated agencies. The complaint alleged that these entities violated the FCA as well as Tennessee state laws.

A second case involving the Curo subsidiary Southerncare is also in process.

The complaint alleges that Curo failed to return Medicare and Medicaid payments they had received despite internal audits showing that some patients were not hospice eligible. The Justice Department and the Tennessee government also allege that the defendants did not adequately train clinical staff to identify and assess terminal illnesses.

The law requires relators and the government to provide specific examples of fraud when filing an FCA suit. The significant difference in the Curo case is that, while the court did require those examples, the judge indicated that it was not necessary for the complaint to include details on every single instance of fraud that allegedly occurred.

“The issue here that hospice providers need to be aware of is that the court essentially allowed the [state and federal] governments to go to discovery on allegations of fraud against two dozen hospice locations for whom they did not lead to a specific example,” Sabis said. “The standard applied here does provide an awful lot of leeway for someone bringing a False Claims Act case. They have to provide specific examples, but they can leave out an awful lot of territory there.”

These cases center around qui tam complaints. This occurs occurs when a whistleblower, called a “relator” by the courts, files a False Claims Act suit in concert with the government and possibly receives a portion of any funds recovered by the government via the lawsuit, typically ranging from 15% to 25%.

The federal government in 2021 recovered more than $5 billion in civil fraud settlements and judgments involving the health care industry, according to a report from the law firm Bass, Berry and Sims. This total includes all federal health care fraud cases across all settings.

In some cases, the impact of FCA suits can be felt by an organization’s parent company as well the provider itself.

Private equity owners of health care companies from a variety of settings have paid out settlements in response to FCA allegations, reaching as high as $19.95 million, according to the Bass, Berry and Sims report.

Most of the alleged violations in the Curo complaint occurred before Humana Inc. (NYSE: HUM) acquired the company in July 2018 for $1.4 billion. Humana has not been accused of any wrongdoing and is not named in the complaint.

Nevertheless, entities that own hospices would be wise to take note of the potential liabilities.

“There are risks to the parent companies. This is actually a very hot issue in False Claims Act litigation right now,” Sabis told Hospice News. “The courts have said that parent companies’ actions in providing certain financial incentives for reaching certain targets — and setting company-wide documentation policies that seem to favor findings of terminal illness — were sufficient to provide potential liability.”