On August 20, 2014, the Seventh Circuit vacated a judgment against Momence Meadows Nursing Center in an anticipated decision that may limit the scope of “worthless services” liability under the False Claims Act.
In U.S. ex rel. Absher et al. v. Momence Meadows Nursing Center, Inc. et al., two former employees of Momence filed a whistleblower suit against the nursing home, alleging that Momence knowingly submitted “thousands of false claims to the Medicare and Medicaid programs” in violation of the FCA. The relators presented evidence that Momence systematically violated Medicare and Medicaid regulations concerning standards of care, duties of personnel, and protocols for addressing patient care issues, and that Momence actively concealed the extent of its non-compliance from government regulators. The relators argued that Momence violated the FCA based upon both “worthless services” and “false certification” theories of liability. The United States declined to intervene in this case.
As to the “worthless services” theory of liability, the district court instructed the jury that “[s]ervices can be worthless, and the claims for those services can, for that reason be false, even if the nursing facility in fact provided some services to the patient. To find the services worthless, you do not need to find that the patient received no services at all.” On appeal, the Seventh Circuit held that this jury instruction was “incorrect,” and that, to succeed on a “worthless services” claim under the FCA, “the performance of the service [must be] so deficient that for all practical purposes it is the equivalent of no performance at all.” The Court explained that “[i]t is not enough to offer evidence that the defendant provided services that are worth some amount less than the services paid for. That is, a ‘diminished value’ of services theory does not satisfy this standard. Services that are ‘worth less’ are not ‘worthless.’” Although the Court did not address the validity of the “worthless services” theory of liability, it held that, even if it were to recognize such a theory, “no reasonable jury could have found that Momence provided truly or effectively worthless nursing services to its residents.” In fact, the Court held that “any such claim would be absurd in light of the undisputed fact that Momence was allowed to continue operating and rendering services of some value despite regular visits by government surveyors.”
As to the false certification theory of liability, the relators argued that Momence violated the FCA by both expressly and impliedly certifying that Momence was compliant with Medicare and Medicaid regulations. The Seventh Circuit rejected these arguments for lack of evidence and/or failure to present the theories to the jury, and chose not to determine whether implied certification is a valid theory of FCA liability. The Court noted, however, that several other circuits have permitted FCA claims to proceed under an implied certification theory (citing U.S. ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 306 (3d Cir. 2011); U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 387 (1st Cir. 2011); U.S. v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1267-70 (D.C. Cir. 2010); Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 996 (9th Cir. 2010); U.S. ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211, 1217 (10th Cir. 2008); U.S. ex rel. Augustine v. Century Health Servs., Inc., 289 F.3d 409, 415 (6th Cir. 2002); Mikes v. Straus, 274 F.3d 687, 699-700 (2d Cir. 2001)).