DOJ Bows Out of ManorCare FCA Case

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After years of investigation and litigation, and on the eve of a highly anticipated trial, the government abandoned its FCA case against ManorCare, the nation’s second-largest operator of skilled nursing homes and assisted living centers.  In a joint motion filed on November 8, 2017, the government announced that it would move for dismissal with prejudice of U.S. ex rel. Ribik v. HCR ManorCare Inc., No. 1:09-cv-00013 (E.D. Va.).  The move marks an unexpected victory for ManorCare and a significant defeat for the government, which was seeking to recover over $500 million in damages and fines in the case.

Government Alleged that ManorCare Provided Unreasonable and Unnecessary Services

The government intervened in the case in April 2015, alleging that between 2006 and 2012, ManorCare directed or otherwise encouraged employees to deliver skilled nursing services that were not reasonable and necessary to residents of the company’s nursing homes so that those services could be billed at Medicare’s highest Resource Utilization Group (RUG) rate.

The government planned to rely at trial on the expert testimony of a licensed physical therapist to establish that much of the therapy ManorCare’s patients received was not reasonable and necessary.  In discovery, the government produced documents relating to the expert’s review of medical records for 180 sample patients.

Government Failed to Produce Key Expert Information, Leading to the Witness Being Stricken

The government, however, failed to disclose or produce 131 pages of the expert’s handwritten notes and approximately 5,000 pages of electronic notes from the expert and her nurse reviewers pertaining to at least 101 of the patients at issue until after expert reports had been exchanged; depositions had been taken; discovery had closed; and motions in limine, Daubert motions, and motions for summary judgment had been filed.  This failure proved fatal to the government’s case.

At an October 27, 2017, hearing on ManorCare’s motion for sanctions regarding the late disclosure, the Magistrate Judge stated that she found it “inconceivable and incredible” that the government’s expert could have forgotten taking more than 100 pages of handwritten notes and thousands of pages of comments when she was explicitly asked about the existence of such notes by government and defense lawyers.  The Magistrate Judge also found the government’s month-long delay in producing the notes to ManorCare following its discovery of their existence “inexcusable.”  As a result of the government expert’s “utter lack of credibility” and the government’s unwarranted delay in producing the notes, the Magistrate Judge concluded that the government expert’s entire expert report would be stricken and the expert would not be permitted to testify.

In An Unexpected Move, the Government Moved to Dismiss the Case

The government initially signaled that it would appeal the Magistrate Judge’s decision.  But, after the District Court granted ManorCare’s motion in limine on November 6, 2017, ruling that the government’s expert does not possess the required expertise to testify as to the reasonableness and necessity of the treatment received by ManorCare’s patients, the government has seemingly admitted defeat.

On November 17, 2017, the government filed a motion to dismiss the case with prejudice.  Before that motion was filed, the relator filed a motion seeking interlocutory appeal of the District Court’s order excluding the government’s expert and noting relator’s objection to the government’s proposed dismissal.  ManorCare filed a response in opposition, noting, among other things, that the government also opposed the relator’s motion.  As of now, the District Court has yet to rule on relator’s motion or dismiss the case.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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