Judgment For Nursing Home Chain in False Claims Act Lawsuit Results in a “Pennies on the Dollar” Award to Nurse and to the US Government
I’ve written a lot recently about the constant attempt by for-profit nursing homes to use legal maneuvers in order to avoid paying in False Claims Act cases. In fact, I was involved in a False Claims Act case several years beforehand.
In the recent judgment by the U.S. Bankruptcy Court in Delaware with the regard to Florida based Consulate Health Care, the Justice Department has agreed to settle a $258 million civil fraud judgment against Consulate Health for $4.5 million.
The nurse, Angela Ruckh, originally brought forward the case against an earlier owner of Consulate’s nursing homes in 2011, previously known as La Vie Rehab, where she had worked at two of the chain’s nursing homes. She had filed suit against the company claiming that it was overcharging Medicare and Medicaid, otherwise known as upcoding.
The U.S. Bankruptcy Court approved an award to the nurse of $1.125 million while the US government will receive $3.375 million.
According to the bankruptcy consultant working with Consulate, neither the nurse who brought the case the forward nor the US government will be able to collect the original judgment through litigation.
Under the False Claims Act liability is typically focused on the direct actor – the company that actually committed the fraud, explains nursing home attorney Jeffrey Downey. When fraudulent dollars are passed up a complex corporate chain set up to avoid liability, it can be difficult for the government or private whistleblowers to recoup these funds. The few companies that get prosecuted typically end up paying a fraction of their ill-gotten gains, at the taxpayers’ expense.
The Entities operating under Consulate Health Care, with ties to private equity company Formation Capital, filed for Chapter 11 bankruptcy in March.
Consulate Health Care, the sixth-largest nursing home chain the country with 140 facilities from the Golf Coast to the Mid-Atlantic, including Virginia, said in its filing it did not have the resources to pay the large False Claim Act judgment against it.
The 2011 was later upheld in 2017 by the U.S. Court of Appeals, which concluded that nursing homes now owned by Consulate defrauded taxpayers through inflated billing for rehabilitation services for residents. Initially the award amount was for $115 million, but in the 2017 judgement, the amount was tripled. There were 446 cited false claims with $5,500 minimum penalty for each.
The 2017 verdict was tossed out by a Florida judge in January 2018 saying that there wasn’t enough evidence, and Ruck appealed.
In 2020, the Eleventh Circuit Court of Appeals stated that Ruckh did have enough evidence, according the publication Business Insurance.
Now in 2021, as part of the settlement outlined by US Bankruptcy Court In Delaware, Consulate’s Florida-based operations division and two of its nursing homes will be sold to another entity that is related to Consulate.
Early in the bankruptcy procedure, creditors requested to examine why its operation arms, CMC II LLC, transferred $1.6 billion to a parent entity in 2020. Earlier this summer, the examination request was withdrawn.
That’s how a settlement over $250 million from the 2020 ruling fell gently down to a meager $4.5 million.
Toby S. Edelman, senior policy attorney at the nonprofit Center for Medicare Advocacy, says this “pennies on the dollar” settlement undermines the government’s ability to make nursing homes comply with the laws regarding financial dealings and resident care.
Consulate, like many nursing homes and their corporate affiliates, explains Downey, have used the pandemic as a crutch to say that it says has damaged the nursing home industry as well as its corporate affiliates, and that going through bankruptcy is the only option to save their business operations.
If you or a loved have been injured as a result of negligence on the part of a nursing home or assisted living facility, contact the Law Office of Jeffrey J. Downey, P.C.
The Law Office of Jeffrey J. Downey
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The Law Office of Jeffrey J. Downey
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