Eleventh Circuit Affirms Conviction Against Nursing Home Owner Brought Under Worthless-Services Theory

In United States v. Houser, No. 12-14302, June 24, 2014, the 11th U.S. Circuit Court of Appeals affirmed the conviction of a nursing home operator for conspiring with his wife to defraud the Medicare and Medicaid programs by billing for criminally worthless services, as well as for payroll tax fraud and failure to pay personal tax returns.

The trial court’s order of conviction states that the government proved beyond a reasonable doubt that three nursing facilities operated by the defendant submitted or caused to be submitted false or fraudulent claims to the Medicare and Medicaid programs for worthless services because the services were not provided, were deficient, inadequate, substandard, did not promote the maintenance or enhancement of the residents’ quality of health, and were of a quality that failed to meet professionally recognized standards of health care. The 11th Circuit adopted the trial court’s description of the nursing homes’ conditions as “barbaric” and “uncivilized.” According to the Department of Justice, this was the first conviction following a trial in federal court for submitting claims for worthless services.

On appeal, the 11th Circuit rejected the defendant’s argument that attaching the worthless-services concept used in civil actions on to the federal health care fraud statute makes the statute unconstitutionally vague because it is not possible to determine at what point health care services have crossed the line from bad to criminally worthless. While the appeals court did not endorse or adopt the worthless-services theory, it upheld the conviction because certain required services were not provided to residents at all.

This decision is noteworthy because it shows that the government will go to great lengths to prosecute quality of care cases, including developing new ways to prosecute health care fraud. This trend will likely continue, especially in light of the Department of Health & Human Services (HHS) Office of Inspector General (OIG) 2013 report identifying problems with the quality of care in nursing homes. OIG, “Skilled Nursing Facilities Often Fail to Meet Care Planning and Discharge Planning Requirements,” Feb. 2013.