Sheehan outlines emerging fraud theories

An area that is likely to see increased use of the False Claims Act is "the theory of worthless services," says James Sheehan, the long-time assistant U.S. Attorney in the Eastern District of Philadelphia, who last month was promoted to the post of associate U.S. attorney for civil programs.

According to Sheehan, the use of the False Claims Act is changing along with reimbursement systems. He notes that cost reports are being replaced by payment for specific diagnoses and treatments as well as capitation. In neither instance is there a claim that explicitly says what services were provided. "Rather, it says, We have a patient with medical necessity for certain treatments, and we promise to provide medically necessary care to do what is appropriate.’"

Sheehan contends that the government should not be involved in false certification cases where the violation does not go to the essence of the deal. "What you want to do is focus on cases where a jury can find there is a nondelivery of the service that is understood and promised; and second, that it is done intentionally or with reckless disregard," he says.

Sheehan points to three areas where he says "the theory of worthless services" is likely to apply. The first involves nursing homes and residential care situations, specifically cases that involve decubitis ulcers, inadequate nutrition, patient restraints, patient control through medication, as well as falls, fractures, and "wander-offs."

The second area is behavioral health. Sheehan highlights a recent case the state attorney general in Minnesota brought against Blue Cross where the contract stated that access to mental health care would be provided but the care was unavailable.

"The point is that you get paid for behavioral health services as part of your capitation payment," he says. "And part of what you pay for is the ability to access the care when you need it."

Finally, Sheehan points to clinical trials where patients participate in studies funded by the federal government. Among the key questions: Are they telling the patient the truth? Is there compliance with the independent review board requirements? Should the study have gotten off the ground?

When it comes to research fraud, Sheehan says the question is not only specific certifications but whether the purpose of the research itself is compromised by scientific misconduct.

Kathleen McGuan, a partner with Reed Smith in Washington, DC, says that what the government overlooks in its zeal to apply the False Claims Act to quality-of-care issues is the amount of money being paid for these services.

"The fact of the matter is, you cannot have one nurse, or even one nursing assistant, for every patient or every resident in a nursing home on what Medicaid pays to the nursing home," she maintains. "The answer might be to pay more money, but the answer is not to walk behind the regulator and say it is fraud."

McGuan argues that of all the applications of the False Claims Act pioneered by Sheehan, the least promising for the government is one modeled after a case in which it was argued that claims for nursing home services did not meet the quality of care required by federal regulations and conditions of participation.

McGuan points out that every nursing home that participates in the federal Medicare and Medicaid program has been certified by the Centers for Medicare & Medicare Services.

She argues that the certification is a conclusion of law that the nursing home is providing good enough care to participate in the program. "It is not compliance; it is substantial compliance," she argues. "It is absolutely clear that the nursing home can be surveyed, deficiencies can be found, and they can continue to bill Medicare and Medicaid, and it is not a false claim."

Robert Griffith, a health care fraud and abuse attorney in Boston, takes a similar view. "Too often, what the government is paying for is not spelled out in sufficient detail to credibly claim that the failure to provide one or more elements of care translates into criminal conduct," he says.