Third Circuit Recognizes Federal Civil Rights Action for Death Caused by Substandard Nursing Home Care

[Ed. note: Today's post comes from Danielle Y. Alvarez. She is a Seton Hall Law student and a graduate of NYU, where she majored in Political Science. Ms. Alvarez is a research assistant to Dean Kathleen M. Boozang, and a former legal assistant to the Augulius Law firm.]

State and federal legislatures won’t fix the health care system by themselves, which is why a recent Third Circuit decision is a welcome tool to fight substandard long-term residential care.  A few enforcement officials have been aggressively creative in using false claims act theories to pursue providers of substandard health care (See here and here).  In short, the government claims that the submission of a bill to Medicare for services that were so bad they were the equivalent of no care at all is a false claim for which the government should be reimbursed and recover penalties.  And now the Third Circuit has recognized that the provision of such substandard care violates an individual’s civil rights.

In Grammer v. Kane, a nursing home resident’s child sued the nursing home, operated by Allegheny County in Pittsburgh, Pennsylvania, alleging the home’s failure to provide adequate care caused her mother to develop ulcers, become malnourished and develop sepsis, from which she died. Plaintiff invoked  42 U.S.C. §1983 to argue that the nursing home had violated decedent’s civil rights by breaching a duty to provide the standards of care delineated by the Federal Nursing Home Reform Amendments (FNRA), contained in the Omnibus Budget Reconciliation Act of 1987 (OBRA). The district court granted the nursing home’s  motion to dismiss, finding that FNRA merely sets forth requirements for nursing homes to comply with but does not grant the deceased rights that are enforceable under §1983. The United States Court of Appeals for the Third Circuit reversed and remanded, concluding that FNRA grants Medicaid recipients like the deceased rights whose violation can be remedied under §1983.

Congress passed FNRA in 1987 to address the substandard conditions in nursing homes that participated in the Medicare and Medicaid programs. FNRA sets forth various quality and residents’ rights standards to which the nursing homes must adhere in order to be paid by the federal government.  And yet, as everyone knows, the problems persist. And so it should be a welcome outcome that the Third Circuit held that FNRA unambiguously confers federal rights upon Medicaid recipients in nursing homes, which gives rise to an action under §1983 which imposes liability on every person who, under color of state law, deprives another of “rights, privileges, or immunities secured by the Constitution and laws.” 42 U.S.C. §1983 (2009).

To determine that FNRA affords protection under §1983, the court applied a three factor test set forth by the Supreme Court in Blessing: first, the court determined that Congress intended FNRA to protect personal rights of Medicaid beneficiaries and nursing home residents rather than the nursing homes themselves; second, the court found that the rights asserted are not so “vague or amorphous” that their enforcement would strain judicial resources; third, the court concluded that the statutory language is sufficiently mandatory in nature with its repeated use of “must” such as “a nursing facility must provide services and activities to attain or maintain the highest practicable physical, mental and psychosocial well-being of each resident.” See Blessing v. Freestone, 520 U.S. 329 (1997); 42 U.S.C. §1396r(b)(2)(A) (emphasis added). Furthermore, the court found Congressional intent to create a right of action through rights-creating language, legislative history, statutory structure and Congress’ failure to set forth a more comprehensive remedial scheme. Thus, the Third Circuit recognized individual rights conferred by FNRA that are presumably enforceable under §1983.

District Judge Stafford, sitting by designation, wrote a dissenting opinion finding that FNRA is Spending Clause legislation which does not confer upon funding beneficiaries individual rights to sue funding recipients. The dissent highlighted specific statutory language to conclude that FNRA focuses on what nursing homes must do in order to receive federal funds rather than focusing on the individuals who benefit from the federal funds. Absent unambiguous Congressional intent to the contrary, FNRA does not grant nursing home residents individual rights to sue nursing homes under §1983 for alleged violations of FNRA. As such, the dissent argued that the District Court properly granted Appellee’s motion to dismiss.

Synthes Legal Troubles –Again

[Today's Post is by Maansi K. Raswant, a Seton Hall Law student pursuing the Health Law concentration. She is a research assistant to the Center for Health & Pharmaceutical Law & Policy and an intern at the NYC Health and Hospitals Corporation.]

Recently, the Synthes corporation has been garnering a lot of attention, but for all the wrong reasons. A June 17^th indictment comes a little over a month after the New Jersey Attorney General announced that the medical device maker had entered into a settlement agreement for failing to disclose financial conflicts of interests held by physicians conducting clinical trials for its products (see prior post, “Clinical Research: When the Compensation Begs the Answer“). Filed by the United States Attorney for the Eastern District of Pennsylvania, the recent 52-count indictment alleges that from May 2002 to Fall 2004, the Swiss company Norian, and its parent company Synthes, (both based in West Chester, Pennsylvania) conspired to conduct unauthorized clinical trials of Norian XR and Norian SRS, bone cement products used in surgery to treat vertebral compression fractures of the spine. Not only did the trials lack FDA authorization, but the FDA had specifically warned Synthes against using Norian XR for spinal surgery due to safety concerns.

The indictment explains that preliminary studies using human blood in test tubes found that the bone cement products chemically reacted with the blood to create blood clots. In further studies of the prod in a pig, the clots became wedged in the lungs. Despite this knowledge, Synthes continued to market the Norian products for use in spinal surgery, and did not stop doing so until after three patients had died on the operating table.  According to the indictment, rather than recall the products following the patient deaths, the company engaged in a cover up by lying to FDA officers during an official inspection in May and June 2004.

The two recent legal actions against Synthes break new ground, and represent significant inroads by prosecutors in the arena of clinical research. Among other remedies, the settlement with the State of New Jersey required Synthes to disclose all relevant financial interests of its investigators on a public website, and barred the company from compensating investigators with stock, a practice the Attorney General called widespread in the industry. The latest indictment contains not just the usual charges against the corporations, but also criminal charges against four corporate executives charged with shipment of unauthorized devices. If found guilty, each executive faces up to a year in prison.

Crackdown on Fraud and Abuse in Detroit, Miami Signals Health Care Reform as a Priority of the Obama Administration

Federal agents arrested dozens of people in Miami and Detroit yesterday morning for allegedly submitting Medicare claims totaling $50 million for treatments that were unneeded and sometimes never provided, according to The Washington Post.

Later in the day, the Justice Department unsealed criminal indictments against 53 people in connection with the arrests. In Detroit, the indictments focus on costly HIV/AIDS infusion drugs as well as physical and occupational therapy treatments.

According to The Post,

Authorities filed criminal charges against patients, doctors, medical assistants and company owners who allegedly played complicit roles in the fraud schemes. Prosecutors are seeking forfeiture of the criminal proceeds and restitution to the Medicare program.

The action was announced at a news conference held by Attorney General Eric H. Holder Jr., Health and Human Services Director Kathleen Sebelius, and FBI Director Robert S. Mueller III.

We will strike back against those whose fraudulent schemes not only undermine a program upon which 45 million aged and disabled Americans depend, but which also contribute directly to rising health-care costs,

said Attorney General Holder.

Dr. Kuklo and the Larger Lesson: Transparency in Medical Research

[Ed. note: We are very pleased to welcome Valerie Gutmann, J.D. to the blog today. Valerie joined Seton Hall Law School in 2009 as a Faculty Researcher in the Center for Health & Pharmaceutical Law & Policy. She came to Seton Hall from Kirkland & Ellis LLP after having graduated from Harvard Law School, where she served as an author and Editor-in-Chief of the Recent Developments Section of the Journal on Law, Medicine, and Ethics. Prior to law school, Valerie worked at the National Academy of Sciences, the American Association for the Advancement of Science, and the ABA Coordinating Group on Bioethics & the Law. In 2001 she graduated from the Woodrow Wilson School of International Affairs and Public Policy at Princeton University, magna cum laude, where she was co-president of the Princeton Bioethics Forum.]

In a glaring example of the consequences of less-than full disclosure in research and publication, recent reports have shed light on Dr. Timothy R. Kuklo’s study of Infuse.  Dr. Kuklo’s article on the bone-growth protein manufactured by Medtronic Inc. was published by the British Journal of Bone & Joint Surgery in August 2008, and was retracted in March 2009, after an army investigation found that Dr. Kuklo’s study had misleadingly promoted Infuse as “strikingly” better and more efficacious than conventional bone grafts in repairing severely shattered shin bones of Americans injured in Iraq.  Kuklo has been accused of using “falsified information” that did not match with patient records and forging signatures of four doctors at Walter Reed Army Medical Center who he falsely claimed to be co-authors.  Dr. Kuklo also neglected to disclose his relationship with the company.

Dr. Kuklo, a former army surgeon at Walter Reed, is currently on leave from Washington University School of Medicine in St. Louis, where he was associate professor of orthopaedic surgery, specializing in cervical spine, spinal deformity, spinal tumors, and spine trauma.  From August 2006 through May 2009, Dr. Kuklo was a consultant to Medtronic, who recently announced that Dr. Kuklo’s consultancy contract was being suspended (some accounts controvert the alleged timeline, and Medtronic claims that it had no involvement in the study and did not depend on the study for government regulatory approval). While working for the army, Dr. Kuklo was also paid by Medtronic to speak on the company’s behalf at meetings and to train other doctors, and was a recipient of thousands of dollars worth of trips.  Military officials have stated that there are no records that Dr. Kuklo had sought or received permission to accept money to consult for medical product companies.

Last year, Senator Chuck Grassley (R, Iowa) called for an investigation into Dr. Kuklo’s study.  Senator Grassley requested information from Walter Reed, Washington University, Medtronic, and two medical journals.  He has also publically released a list provided by Medtronic of consultants for the Infuse product, on which Dr. Kuklo had suspiciously not been included.  Spokespeople for Medtronic noted that Dr. Kuklo was not on the list because he was a general consultant to the company, rather than specific to Infuse, although he has spoken on behalf of Infuse in the past.

The Kuklo case is further evidence of the implications of incomplete disclosure, which may lead physicians to make medical decisions without all the information that should be available to them.  As we have noted in the past, the Center for Health and Pharmaceutical Law & Policy has vigorously called for such reform in its 2009 whitepaper:

All those engaged in medical research and publication, including medical professionals and institutions, medical journals, and industry, should undertake reforms to ensure the integrity of the medical literature.  Transparency in the relationship of industry and physicians would be a critical tool in this effort.

HHS OIG Report Finds “High Risk” of Medicare Fraud in South Florida

A report released Tuesday by the HHS Office of Inspector General identifies South Florida as “a high risk area for fraudulent billings to Medicare” by suppliers of durable medical equipment. According to the report, South Florida accounts for 17% of Medicare’s total spending on inhalation drugs, but is home to only 2% of the nation’s Medicare beneficiaries.

While warmer climates are known to cause a variety of respiratory problems, that alone does not explain the “aberrant claim patterns” identified in the report.

In 2007, Medicare spent $143 million on claims for costly drugs to treat respiratory ailments in Miami-Dade County.

That’s 20 times more than the amount Medicare spent in the Chicago area, which has twice as many beneficiaries,

reports the Miami Herald.

The Herald explains the root of the alleged abuse is that two-thirds of the patients in South Florida listed on Medicare claims for expensive inhalation drugs did not have office visits with the physician who prescribed the treatment in the previous three years.

Additionally, medical equipment suppliers and pharmacies are alleged to have recycled the offending doctors’ names for ongoing patient billing, and billed far beyond the Medicare guidelines for inhalation drug therapy. As a result, the Herald says,

Medicare has spent five times more per patient on inhalation drugs in South Florida than the rest of the country — $4,400 versus $815 per beneficiary[.]

Read the HHS Office of Inspector General’s full report here (PDF).

Las Vegas Infectious Disease Specialists Accused of Fabricating Medicare Services

The Las Vegas Sun reports that the Nevada Medical Examiners Board is investigating into the falsification of medical records at HealthSouth Tenaya.  Raye Kraft, wife of a patient at this hospital, began to notice “infectious disease specialists Dr. Dhiresh Joshi and his then-employee, Dr. Fadi El Salibi,” writing in Kraft’s husband’s medical charts that they were examining him when they were not.  As her suspicion rose, Ms. Kraft took detailed notes of when the specialists charted activity on her husband, compared these notes with her insurance bill and her own notes of the times they actually examined him, and then sent these notes and comparisons along with a complaint to the Nevada Medical Examiners Board.

The Sun reports:

Her claim: that on an ongoing basis, Joshi and El Salibi were writing in the chart that they had examined her husband when they hadn’t, and then billing for it. One supposed exam was nothing more than the doctor’s friendly wave from the door, she said.

Ms. Kraft’s was not the only person suspicious.  The article notes that another patient “had complained a year earlier to the medical board of similar experiences.”  Additionally, nurses at MountainView Hospital Medical Center also filed complaints  “about El Salibi’s fly-by visits.”

In addition, the number of patients Dr. Joshi has claimed to have examined in the course of  a day has been deemed further cause for suspicion. According to the Sun, Elizabeth Neubauer, Dr. El Salibi’s former billing manager, “said that Joshi himself routinely billed for 70 patients a day. Other infectious diseases doctors say that’s double the number they could reasonably see in a long day of hospital rounds.”

The Sun also reports:

Indeed, a 2004 Medicare audit showed that in a single day, Joshi billed for an impossibly high number of patients - 104, according to Neubauer’s recollection. Joshi said it was 81 Medicare patients, and 20 of them were seen by medical residents under his supervision.

One might have thought that the audit would have served as a red flag for further examination for fraud and abuse at that time.  An  “impossibly high number of patients” is, after all, impossible– and therefore seemingly either the result of either inadvertence or knowing falsehood. If a pattern of such “impossible” billing emerges, “inadvertence” begins to seem less likely– especially when coupled with independent allegations of “overbilling.”

The articles reports that “[a]llegations about doctors fraudulently billing Medicare and insurance companies are whispered throughout the Las Vegas medical community . . . .” One might hope that the numerical evidence derived from audits in cases such as this would do more than whisper– and would occasion heightened scrutiny.

Read more

Florida Senators Move to Pass Bill to Prevent Medicaid Fraud

Kaiser Family Foundation reports that Florida Senators will likely pass legislation aimed to prevent Medicaid fraud.

KFF states:

Florida Senate Health Regulation Committee Chair Don Gaetz (R) and state Senate Health and Human Services Appropriations Committee Chair Durell Peaden (R) at a news conference on Wednesday “expressed confidence” that lawmakers will pass legislation (SB 1986) aiming to prevent and detect Medicaid fraud, the Tallahassee Democrat reports. Medicaid fraud has become a considerable issue in Southeast Florida, where home health care clinics open quickly and operate with little to no regulation or accountability, according to Gaetz and Peaden. Miami alone has twice as many home health providers than all of California, they noted.

Florida is susceptible to heightened Medicaid abuse given its relatively large Medicaid enrollment and the concomitant funds devoted to Medicaid.  In 2005, Medicaid enrollment in Florida was almost 3 million people.  In Florida, Medicaid home health participants have increased by approximately 50% between 1999 and 2005 (from 14,793 in 1999 to 21,192 in 2005). In 2006, Florida spent approximately $12.7 Billion on Medicaid.  Approximately $1.5 billion of the $12.7 billion was spent on home health and personal care.  In 2007, Florida Medicaid expenditures increased to over $14 Billion.

In addition to other fraud prevention and detection measures, the bill would also create greater incentives for whistleblowers.  KFF states:

The bill also would increase to 25% the share of recovered money that whistleblowers would be eligible to receive. Peaden said money recovered from fraud would be redirected by his panel “into health care for the truly needy.”

Further, KFF reports:

The bill also would target companies’ recruiting of patients and the practices of filing claims for non-existent patients and ordering unneeded devices and treatments. Gaetz said Florida would work with federal and local agencies to create a database that would prevent operators of fraudulent companies from re-incorporating new clinics or home services and allow regulators to prevent fraudulent companies from renewing their operating licenses. Peaden said a companion bill is being worked out in the state House (Cotterell, Tallahassee Democrat, 3/26).

As we noted recently, a Florida case (Federal Court) which would fall rather squarely within the intended aim of the proposed legislation took 10 years to discover and prosecute.  The Florida legislation is similar in purpose to the Federal Civil False Claims Act, which members of  the U.S Senate have proposed to amend to strengthen a whistleblower’s action as well.

Family-Run Medical Equipment And Billing Companies Enterprise Lead To Prison Time

The Miami Herald reports that Laura and David Hernandez, as well as other family members, were sentenced by U.S. District Judge Adalberto Jordan for running a fraudulent Medicare operation.

The Herald states:

Over the past decade, the family-run enterprise of medical equipment and billing companies submitted more than $17 million in false claims to Medicare, they admitted in court.

Their total take: about $6 million.

The family-run enterprise started as a sole medical equipment company and later transformed into “a string of equipment businesses in Miami-Dade.”  David Hernandez, a Cuban immigrant who is said to have completed formal schooling up to only the ninth grade, was the mastermind of the conspiracy:

David Hernandez, in the lead role, recruited four people to register as the official owners of four equipment-supply companies to conceal his participation in the scam, according to the court statement. Those ”nominee” owners, members of another family, were charged in a separate Medicare fraud indictment.

Read more

« Previous Page