Last Thursday, a judge in the Middle District of Florida threw out a $350M jury verdict against a nursing home provider. The basis of the decision was a stringent interpretation of the FCA’s materiality element. The ruling heavily relied upon the 2016 Supreme Court decision in Universal Health Services v. Escobar. This is the latest example of that ruling being hashed out in lower courts.
The case, U.S. ex rel. Ruckh v. CMC II LLC et al., was brought by a former nurse employed by two of the nursing homes, alleged record-keeping violations at over 50 nursing homes. The relator further argued that the record keeping “discrepancies” lead to more treatment than Medicaid and Medicare would have paid for, and thus, fraudulently high reimbursements. The government continued to pay for services rendered at the nursing homes throughout the time of the fraud. Last February, a jury returned a roughly $115M verdict, which was trebled to roughly $350M.
In his strongly-worded opinion dismissing the verdict the judge mitigated the seriousness of the allegations and showed understanding towards the inability of healthcare providers to bill with perfect accuracy. He noted that publicly funded healthcare programs treat such discrepancies with “leniency or tolerance” and concluded that the violations were immaterial, concluding that the government would not have declined payment had it been aware of the alleged billing violations. The Department of Justice had not intervened in this action.
To date, this is the second largest verdict tossed due to Escobar’s materiality standard, only behind a $600M ruling in favor of guardrail manufacturer Trinity Industries.
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