On April 15, 2020, the Eastern District of Pennsylvania issued a defense-favorable order, granting summary judgment in a False Claims Act case brought on a “worthless services” theory. U.S. ex rel. Jackson v. DePaul Health System, Case No. 2:15-CV-00020-E (E.D. Pa. Apr. 15, 2020). Relators have brought False Claims Act cases under this theory alleging that claims submitted to the government were false because the care provided and billed for was so deficient as to be worthless.
In Jackson, the relator worked as a part time Certified Nursing Assistant (CNA) for River’s Edge Rehabilitation and Healthcare Center, operated by Defendants. As a CNA, her job was to assist nurses in caring for patients and to fill out Activities of Daily Living (ADL) forms. The relator was never involved with billing Medicare or Medicaid, staffing, supplies procurement, or Department of Health inspections. Nonetheless, the relator alleged that the facility was understaffed, provided substandard care to its residents, and must have submitted fraudulent compliance forms to the federal government. But, ironically, the relator acknowledged that the care that she provided to facility residents was fair, good, or excellent.
Defendants filed a motion for summary judgment, arguing that the services provided by the facility were not sufficiently substandard to constitute a factually false claim. The Court found that “a claim is factually false when the service the government was billed for was not provided. . . .This includes when the service billed for was worthless in that it was so substandard that it was tantamount to no service at all.”
The Court went on to acknowledge that “a nursing home that does not care for its residents in a way that promotes their quality of life may be liable under a worthless services theory.” But the Court explained that “more than mere regulatory noncompliance is required for liability to attach; the noncompliance must be so great that effectively no services were provided.” In reaching this conclusion, the Court cited a landmark worthless services case, United States ex rel Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699 (7th Cir. 2014). Absher cautioned that it is insufficient “that the defendant provided services that are worth some amount less than the service paid for” because “a diminished value of services theory does not exist.” Id. at 710. Instead, there must be a finding of gross negligence or significantly substandard care.
Ultimately, the Court found that even if the relator were able to demonstrate that negligent care was given, that would be insufficient to allow a reasonable inference that there was a factually false claim through the provision of worthless services. “If an FCA claim could proceed on the basis of care rendered with ordinary negligence amounting to the provision of substandard care – as opposed to grossly negligent care amounting to significantly substandard care – the FCA would turn into a tool for ensuring regulatory compliance,” which is not permissible. Consequently, the Court granted Defendants’ motion for summary judgment as to the relator’s worthless services theory.
This case gives defendants a roadmap to successfully defeating worthless services claims at the summary judgment phase. Although at this point of the proceedings, Defendants have already endured costly discovery, it is not too late to seek dismissal of FCA complaints and avoid the expense of trial by developing a factual record to demonstrate that some value was provided to a patient whose treatment by the defendant was subject to government reimbursement. That is, just because there is an allegation that the services rendered were “worth less” (than payment), does not mean that the services were “worthless.”