False Claims Act Dangers on Display in Ruckh

by Bass, Berry & Sims PLC
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Bass, Berry & Sims PLC

A recent jury verdict in an FCA lawsuit pending in the United States District Court for the Middle District of Florida resulted in a not-so-subtle reminder of just how high the stakes can be in such litigation.  On February 15, 2017, in U.S. ex rel. Ruckh v. Genoa Healthcare, LLC, a case in which both the United States and the state of Florida declined to intervene, the jury returned a verdict finding that the operators of 53 skilled nursing facilities (SNFs) had committed FCA violations resulting in more than $115 million in damages.  The FCA violations resulted from the submission of false claims to Medicare and Medicaid stemming from the inflation and upcoding of Resource Utility Group (RUG) levels for patients and false certifications that the SNFs had created timely and adequate patient care plans.

The jury’s verdict represented only actual damages.  On March 1, 2017, the district court assessed a statutory penalty of $5,500 per claim to 446 false claims and trebled the jury’s damages number, the result being a staggering judgment of almost $348 million.  This dwarfs even the largest of the long-term care settlements that have preceded it.

In addition to the sheer magnitude of the damages, two additional aspects of the case are noteworthy.  First, as discussed in a prior post, the relator—a former employee at two facilities—utilized statistical sampling to prove her case.  The relator proactively filed a motion in limine seeking permission to introduce statistical sampling evidence to prove both the number of false claims and the corresponding damages.  Though it did not intervene, the United States filed a motion in support of relator’s request.  Relying in part on U.S. ex rel. Martin v. Life Care Centers of America, the district court granted relator’s motion, explaining that “it would be impracticable for the Court to review each claim individually” and this “would consume an unacceptable portion of the Court’s limited resources.”  The district court held there was no universal ban on expert testimony based on statistical sampling in qui tam actions, but it left open the possibility of a Daubert attack on such testimony.  In the end, however, the district court allowed the relator to introduce statistical sampling evidence at trial, and it was enough to convince the jury of FCA liability as to the universe of claims at issue.

Second, the district court excluded some 31,000 pages of medical records that defendants had claimed supported their defense.  Despite producing over one million pages of medical records, defendants inadvertently failed to produce thousands of minimum data set (MDS) assessments during discovery.  They produced these documents, along with some additional records from patient files, after discovery had closed and in conjunction with their rebuttal expert reports.  (As it would turn out, the documents were produced almost a year before trial.)  The district court excluded the documents, finding the late production, even if not willful, showed a “careless disregard for the discovery process.”  This, too, should give FCA defendants pause.  In cases that often call for the production of millions of pages of documents, even the slightest slip-up can result in significant consequences.

For now, Ruckh reiterates what is already known – that much is at stake in FCA litigation given the trebling of damages, imposition of statutory penalties, and sweeping theories of liability that potentially implicate a vast universe of claims.  As of yet, no appeal has been filed, but practitioners will no doubt watch this case closely.

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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