On January 11, 2018, a Florida Federal court vacated a $350 million jury verdict against Salus Rehabilitation—an operator of specialized nursing facilities—in a non-intervened case under the Federal False Claims Act (FCA) and analogous Florida version of the FCA, concluding that the relator failed as a matter of law to establish that the Defendants’ alleged failure to maintain a “comprehensive care plan” and other asserted paperwork defects such as unsigned and undated documents were material to payment decisions by the United States or the State of Florida.
Salus owns and operates 53 specialized nursing facilities in Florida. Whistleblower nurse Angela Ruckh alleged that Salus Rehabilitation Inc. and affiliated entities (collectively “Salus”) failed to maintain comprehensive care plans for each patient and failed to properly sign and date documents as required by the Medicaid program. U.S. ex rel. Ruckh v. Salus Rehabilitation, LLC, No. 8:11-CV-1303-T-23TBM, 2018 WL 375720, at *1 [1-2] (M.D. Fla. Jan. 11, 2018).
The court concluded that the relator failed to offer the evidence of materiality required under Universal Health Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016, which the court noted is “the unquestionably controlling and guiding authority on materiality and scienter under the False Claims Act.” Ruckh, 2018 WL 375720 at *2 [4]. Under Escobar, an FCA claim on an implied false certification theory fails “if the non-compliance is disclosed to, or discovered by, the United States; and if the United States pays notwithstanding the disclosed or discovered non-compliance.” Id. Thus, for a relator to prevail on an FCA claim, the defendant must know, or reasonably should know, that its non-compliance was material when it sought payment, and the defendant’s misrepresentation must be material to the government’s decision to pay. Id. at *2, *5 [5, 12].
The court found the record “effectively barren of evidence on how the [Federal and State] governments might have addressed the disputed practices and, as the parties were notified timely by the trial judge, the dearth of evidence left the jurors to guess” and concluded that the resulting verdicts’ effect “unwarranted, unjustified, unconscionable, and probably unconstitutional forfeiture . . . .” Id. at *5 [13]. According to the court, “both governments were — and are — aware of the defendants’ disputed practices, aware of this action, aware of the allegations, aware of the evidence, and aware of the judgments for the relator — but neither government has ceased to pay or even threatened to stop paying the defendants for the services provided to patients throughout Florida continuously since long before this action began in 2011.” Id. at *1 [2].
The court noted that the controlling question in these types of cases is whether Federal or State government would refuse to pay a provider on a large scale “because of a dispute about the method or accuracy of payment after the governments have permitted the practice to remain in place for years without complaint or inquiry.” Id. at *8 [19]. The court added, “[e]very day that the government continues to pay for a good or service, notwithstanding some known or unknown non-compliance and, consequently, the greater the proposed repayment times three in the event of a successful False Claims Act action, the greater the practical impediment to proof of materiality.” Id.
The court’s order granted Salus’s motion for judgment as a matter of law, conditionally granted Salus’s motion for a new trial, vacated the judgments, and directed the clerk to enter judgment for Salus on all claims and to close the case.
