National Nursing Home Initiative Picks Up Steam Under the FCA

In March 2020, DOJ implemented the National Nursing Home Initiative (“the Initiative”) to coordinate and enhance civil and criminal efforts to pursue nursing homes that allegedly provide substandard care to their residents. DOJ noted in its announcement of the Initiative that it had already begun investigating approximately 30 nursing facilities in nine states. However, since that announcement, DOJ’s FCA activity as part of this project has been limited. But earlier this week, DOJ announced the filing of one of its first FCA complaints resulting from an investigation launched as part of the Initiative. This case also comes in the wake of the White House’s announcement earlier this year of new initiatives by CMS to enhance the quality of care at nursing homes. In light of both DOJ and White House priorities in this space, this complaint could reflect DOJ’s intention to step up its use of the FCA to police quality of care at nursing homes.

DOJ’s complaint alleges that the American Health Foundation (“AHF”), its affiliate AHF Management Corporation, and three affiliated nursing homes provided grossly substandard skilled nursing services, in the form of “general care deficiencies,” filthy physical facilities, failure to achieve infection control or provide sufficient mental health services, inadequate staffing, and the provision of unnecessary drugs.

This complaint serves as another warning shot to providers that DOJ will continue to use data both to identify targets for investigation and support its theories of liability under the FCA (as discussed further here). In particular:

• General care deficiencies: The complaint alleges that one of the facilities was “an outlier on several CMS quality measures, which are metrics that CMS has designated as potentially useful in evaluating nursing home performance.” According to DOJ, the facility had access to its quality scores through CMS reports and could have determined it was an outlier.
• Staffing: The complaint alleges widespread staffing shortages and deficiencies at the three facilities. Although federal regulations do not currently impose any specific minimum staffing requirements, the White House earlier this year called on CMS to develop and implement such standards. Without being able to point to any specific staffing ratios that were violated, DOJ focused on circumstantial evidence of inadequate staffing, such as internal emails complaining of staff shortages and low CMS star ratings relating to facility staffing levels.
• Prescription drugs: The complaint describes how one facility allegedly administered unnecessary prescription drugs to residents, especially antipsychotic, anxiolytic, and hypnotic medications. DOJ criticized the facility because it had allegedly received reports from an external consultant pharmacist indicating that the facility was administering these drugs at two to three times the state average rate, yet did not materially alter its practices. DOJ’s focus on appropriate prescribing is also consistent with the White House nursing home announcement, which stated that “CMS will launch a new effort to identify problematic diagnoses and refocus efforts to continue to bring down the inappropriate use of antipsychotic medications.”

DOJ further alleged that the grossly substandard care provided by the nursing facilities was a consequence of the corporate environment that the management company created. According to the complaint, AHF, acting through AHF Management, exerted extensive control over the skilled nursing facilities because it made budgetary decisions, chose facility leadership, certified financial statements, maintained possession of facility financial records, signed tax returns, established care policies and protocols, set compensation rates, oversaw union negotiations, and approved plans of correction for care deficiencies. Moreover, the management company was supposedly aware of at least some of the quality of care issues but failed to remediate them. In particular, DOJ alleges that “facility staff internally reported problems up to facility managers, who in turn often alerted executives and key individuals at AHF and AHF Management. In addition, AHF Management personnel periodically visited the facilities to perform their own inspections and relay the results to facility managers and AHF and AHF Management executives.” As such, DOJ asserts that AHF and AHF Management should also be held liable with the nursing home facilities.

A copy of DOJ’s complaint is available here.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.