Jury Awards $115 Million in False Claims Case Against Nursing Home Facility

It’s rare for a whistleblower to win a False Claims Act case when the government doesn’t intervene.

It’s even more rare for a whistleblower to take such a case to trial and win a major verdict.

James Webster Kellogg Huber Washington, D.C.

James Webster
Kellogg Huber
Washington, D.C.


But that’s what happened last month when a federal jury in Tampa, Florida ruled in favor of a nurse who worked at a nursing home facility and alleged that her employer ripped off the federal government to the tune of $115 million.

The nurse, Angela Ruckh, filed the False Claims Act lawsuit in 2011 alleging that her employer (LaVie Management and later CMC II) engaged in a fraudulent scheme that “was encouraged by senior officers who established target reimbursement rates, offered employees financial bonuses for exceeding those rates, and actively encouraged employees to falsify statements and claims submitted” to the federal government.

The company was represented by Terence Lynam and Bob Salcido of Akin Gump in Washington, D.C.

Ruckh was represented by James Webster, a partner at Kellogg Huber in Washington, D.C.

“The relator Angela Ruckh is a lifelong nurse at a skilled nursing facility,” Webster told Corporate Crime Reporter in an interview last week. “She wanted to do that ever since she was a little girl. Her next door neighbor was a nurse. She looked up to her. She had worked primarily in non profit nursing facilities throughout her career. She wanted to do some part time work, do something different. She took a very short time job at Lavie Rehab in February 2011.  She lived outside Jacksonville. The first facility was a few hours away from her home. She worked there for a short time. She was shocked by what she saw. She concluded that they were engaged in fraud.”

“She wanted it to be investigated. She went on the internet and googled how to report Medicare fraud. The first thing that popped up was a web site for a lawyer named Rory Delaney, who is our co-counsel in the case. And she talked with him. And she entered a retainer agreement with Rory. And then Rory contacted my partners.”

Who is the defendant in the case?

“There are five defendants. Two individual facilities — Governor’s Creek and Marshall — and the management company — LaVie Management Company. And then there was the rehab company — LaVie Rehab. It was called Salus Rehab for a time. And then a fifth defendant — the new corporate owner of those companies — CMC II.”

What was Angela Ruckh’s work at these facilities?

“She was brought in to help train minimum data set (MDS) coordinators. They are the nurses that fill out the forms that generate the bills to Medicare and Medicaid. The MDS form generates a code that determines how much Medicare pays a facility.”

You said she was shocked by what she saw. What did she see?

“Every place she had worked before, it was all about caring for the patient. At LaVie, it was all about maximizing profits. It was a totally different culture. She had been at facilities throughout her career which hopefully are the more common — with dedicated healthcare professionals who are doing their best to provide the best care possible to residents. At LaVie, that was totally turned on its head.”

“There was a disparity of treatment depending on what your insurance was. Medicare and Medicaid were treated differently. Medicare is a fee for service system. The more treatment you give people, the more money you get.”

“Medicaid is a flat fee. The way LaVie treated that was — you don’t have a payer source if you are on Medicaid. They treated you as if you were there to occupy a bed. Two patients with the exact same conditions would get different treatments depending on whether they were on Medicare or Medicaid.”

The case was filed under seal five years ago. What did the Justice Department do?

“They decided not to intervene — they would let us handle the case. I was not involved at the time.”

You were in trial in Tampa, Florida. What did you prove at trial?

“We proved that LaVie had a culture that was obsessed with money. That culture led to false claims at 53 facilities throughout the state of Florida over a four year period from January 2008 to January 2012. There were different kinds of false claims. But in general, they were upcoding these scores that were generating the bills to Medicare. They basically claimed that they provided nursing, more therapy care to residents than they had actually provided.”

“The Medicare claims were based on upcoding. And the other thing they would do is they would ramp up the therapy. They would take 88 to 92 year old people with multiple major health problems — heart problems, dementia, kidney failure, some of whom were on hospice care at the end of life — and they were giving them the highest amount of therapy under the Medicare guidelines — people who could only sit up straight for two minutes without passing out — they were subjecting them to 720 minutes — 12 hours of therapy a week. It was literally true but it was crazy. It was all about the money.”

“We did a statistical sample. We hired a statistician to determine a random sample for Medicare and Medicaid patients. He determined the appropriate sample was 300 patients under Medicare and Medicaid. He did a random sample. And we had another expert — Shirley Bradley, a registered nurse and auditor. She reviewed the sample and made findings of claims — the upcoding and ramping.”

“The Medicaid patients were generally ignored. They weren’t treated properly. They didn’t create care plans for the Medicaid patients because that would have been a road map to show that they weren’t providing the care needed. It made no sense to them to produce a plan that would show the care that they were not providing. It would have been a road map showing the disregard for the patient.”

“Our statistician selected the sample. Shirley Bradley reviewed it and made findings. And based on those findings, we had another expert calculate the amount of the overpayment. The statisticians extrapolated those estimates out to all the patients at all of the 53 facilities over the four years and made a calculation.”

What were you asking for in damages?

“About $220 million.”

And what did the jury award?

“They awarded $115 million. They have determined the number of false claims. And each false claim is subject to a monetary penalty of between $5,500 and $11,000.”

“And the $115 million automatically trebled. Plus penalties.”

This case seems to be a numbers case, a statistician’s case. Were you worried at all about the complexity of it and whether the jury would get it?

“Yes. You definitely worry about how a jury reacts to extrapolating out damages from a small sample. But our statistician did a great job. And my partner Joseph Hull did a fantastic job presenting this evidence in a way that jurors could grasp — with a lot of common sense analogies. His testimony was very effective.”

Who was your expert?

‘ “Constantine Panis. He’s known as Stan Panis.”

How long did the trial last?

“We started January 17 and the verdict was returned on February 15. It was a simple case in some ways. There were basic simple changes of a letter or a number on a bureaucratic form day after day, resident after resident, year after year. And those changes cost the government anywhere from $20, $50, $100. But when you do it over and over again, day after day, facility after facility, it ended up being over $100 million in overpayments by the government. And it was very easy to do. It was a simple concept. But when it comes down to calculating damages, that becomes quite complex, especially because determining when they upcoded required you to dig through medical files. And that was thousands of pages for each resident. There was no other way to do this beside statistical sampling. If you had looked at 14,000 resident medical files at these facilities over four years, that would take years to review it. And if you were going to present a trial for each resident, that would take over a year of trial time.”

“I don’t even know how long it would take.”

Instead, your expert did what?

“We did a statistical sampling. Instead of looking at 14,000 files, our expert looked at 800 files. And even in those 800 files, our expert looked at 800 files on a specific day and in a specific billing period. Even if a resident had been in a facility for eight months, our expert would look at just a short period of time. And based on that intense but narrow focus, she made findings. And over 60 percent of the Medicare files she looked at had false claims. About 20 percent of the Medicaid files. Those are rough percentages. Based on that review, you extrapolate out to the universe of patients and files.”

[For the complete q/a format Interview with James Webster, see 31 Corporate Crime Reporter 10 (13), Monday March 6, 2017, print edition only.]

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