JACKSON v. DEPAUL HEALTH SYSTEM

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

United States of America, : CIVIL ACTION

ex rel. Terry Jackson : NO. 15-020

:

Plaintiff, :

v. :

:

DePaul Health System, et al., :

:

Defendants. :

M E M O R A N D U M

EDUARDO C. ROBRENO, J. April 15, 2020

I. INTRODUCTION

Terry Jackson brings a qui tam action against Baker’s Bay

Nursing Home Associates, LP, and DePaul Healthcare, LP, for

violating the False Claims Act by allegedly providing worthless

services to its nursing home residents and submitting falsified

forms to the government. Before the Court are Defendants’

motion in limine and motion for summary judgment.

Jackson’s evidence of regulatory noncompliance does not

show the level of malfeasance required to prove a factually

false claim based on a worthless services theory. On the other

hand, Jackson does point to enough evidence of the submission of

inaccurate forms to raise a genuine issue of material fact about

the submission of a legally false claim based on an express

certification theory.

1

Therefore, for the reasons set forth below, the motions

will be granted in part and denied in part.

II. FACTUAL BACKGROUND

Defendants operate River’s Edge, a 120-bed nursing facility

that provides short- and long-term care to between 60 and 120

residents. To provide care to these residents, it employs

Certified Nursing Assistants (“CNA”), Licensed Practical Nurses

(“LPN”), Registered Nurses (“RN”), and Primary Care Physicians.

Patient care and regulatory compliance is overseen by a Director

of Nursing (“Director”). River’s Edge receives payment for the

services it provides to its residents through private pay,

commercial insurance, and Medicaid and Medicare.

A. River’s Edge’s Regulatory Compliance

As a recipient of Medicare and Medicaid funds, River’s Edge

is required to submit to the federal government Minimum Data Set

(“MDS”) forms for each resident annually, quarterly, and if

there is a significant change in a resident’s condition.1 MDS

forms contain resident information, such as whether a resident

fell or experienced excess weight loss. But the MDS forms do

not contain all the data from a resident’s file. Instead, the

1 This information is collected by Centers for Medicare & Medicaid

Services (“CMS”), which is an agency in the Department of Health and Human

Services. See 42 C.F.R. §§ 483.20, 483.315.

2

Director collects data from Activities of Daily Living (“ADL”)

forms, which are filled out by CNAs, and translates this

information into the MDS forms. MDS forms also include a

certification that the information contained in the form is

accurate and that the payment of federal funds is conditioned on

the accuracy of the form. River’s Edge is then paid per

resident per day based on the information contained in each

resident’s MDS form.

River’s Edge is also required to comply with a Pennsylvania

regulation requiring a minimum of 2.7 hours of care per patient

per day (“PPD”). 28 Pa. Code § 211.12. Compliance with this

regulation is based on the total actual hours worked by staff in

a 24-hour day divided by the number of residents. And

compliance is tracked by a staffing coordinator and monitored by

the Director. River’s Edge creates a four-to-six-week schedule

and a projected PPD based on this schedule. Then, it creates a

daily staff assignment sheet based on the schedule and the

number of residents for each day. Last, the actual PPD is

calculated by looking at the payroll records and the daily

assignments.

River’s Edge’s operations are audited by the Pennsylvania

Department of Health through unannounced visits. At these

visits, which last several days, the Department of Health

3

announces to the residents that they should share with the

Department their complaints about the facility. Despite these

unannounced visits, between 2012 and 2017 the Department of

Health did not find any aspect of River’s Edge operation to be

“immediate jeopardy” deficient,2 and River’s Edge was never

ordered to shut down. That said, the Department of Health

issued two statements of deficiencies for River’s Edge in 2015:

(1) failure to accurately complete seven MDS forms and (2)

failure to properly submit Electronic Event Reports3 for a

scabies outbreak for twelve residents.

In addition to the unannounced regulatory audits, River’s

Edge independently ensures regulatory compliance. To ensure

compliance with standard of care regulations, the Director

performs daily rounds and conducts monthly resident council

meetings. And to ensure compliance with the PPD regulations,

River’s Edge schedules its staff to work more than the minimum

required hours, such that there is a surplus in excess of the

required 2.7 PPD, to account for staff call outs and no shows.

2 The Department of Health inspects various departments, e.g., nursing,

and provides the facility with a list of deficiencies ranging from D, which

is paper noncompliance, to IJ or immediate jeopardy, which is widespread

danger.

3 Under Pennsylvania regulations, nursing homes are required to report

various events, e.g., a scabies outbreak, through Electronic Event Reports.

28 Pa. Code § 211.1.

4

B. Terry Jackson

Terry Jackson, the plaintiff or relator in this case,

worked at River’s Edge part-time as a CNA from 1999 to 2014. As

a CNA, her job was to assist nurses in caring for patients and

to fill out ADL forms. Jackson was never involved with (1)

billing Medicaid or Medicare, (2) scheduling or calculating PPD,

(3) procurement of supplies, or (4) Department of Health

inspections. Nonetheless, Jackson alleges that during her time

at River’s Edge, the facility was understaffed, provided

substandard care to its residents, and must have submitted

fraudulent compliance forms to the federal government.

Jackson alleges that River’s Edge was so understaffed that

nurses could not respond to residents’ call-bells and could not

provide adequate care. According to Jackson, while each nursing

staff member should have been assigned 12 residents to comply

with the PPD regulation, they were typically each assigned

between 14 and 16 residents. She was present for three

Department of Health inspections in her 15 years at River’s

Edge, and she claims that the facility changed staff schedules

during inspections to ensure that there was enough staff during

the inspections. She also alleges that bed-ridden residents

were left in unsanitary conditions, including being left in

soiled sheets without being bathed, due to staffing shortages.

5

And she alleges that LPNs performed tasks that only RNs were

certified to perform. Further, Jackson describes a lack of

proper equipment, such as clean towels and linens. But at the

same time as she makes all of these allegations, she

acknowledges that the care she provided was fair, good, or

excellent.

Jackson claims there were fraudulent representations in the

MDS forms submitted for Medicare and Medicaid reimbursement

because the ADL forms that she completed contained errors.

Jackson completed ADL forms weeks after giving the care being

documented due to her having insufficient time to complete the

forms at the same time as rendering the care. So, although she

was never told to falsify ADL forms, she asserts that the delay

in completing the forms inevitably led to errors, which in turn

necessarily caused false representations in the MDS forms

because the MDS forms are prepared based on information in the

ADL forms. Jackson also alleges that some services recorded in

River’s Edge’s MDS forms never actually occurred. But she does

not point to any specific error in an ADL form or

misrepresentation in an MDS form.

C. D.F., W.M., and C.D.

Jackson provides four examples—three specific and one non-

specific—of low-quality care at River’s Edge. Most of Jackson’s

6

allegations of substandard care are devoid of specifics. Her

assertion that a resident had a maggot-infested wound does not

include the resident’s name or the time frame of this incident.

But Jackson does point to, as representative examples of poor

care, circumstances allegedly constituting substandard care to

three residents.

First, D.F. had scabies, a highly contagious skin

condition, which was treated for two weeks with a cream to

relieve symptoms. Jackson contends that D.F.’s treatment should

have been more than just application of symptom-relief cream.

But she does not present evidence of a more appropriate

treatment, and River’s Edge contends that the treatment provided

was adequate. D.F. was also not quarantined, which led to an

outbreak of scabies. River’s Edge did not report the outbreak,

but it has subsequently implemented procedures to ensure the

reporting of infection outbreaks in the future.

Second, W.M. suffered from bedsores and was not always

turned every two hours, as required for bedsore treatment,

because of a lack of staffing. According to Jackson, the extent

of the substandard care was that she sometimes failed to turn

W.M. every two hours. And W.M. was treated by a wound care

specialist.

7

Last, C.D., a ninety-year-old resident in a wheelchair, was

left unattended and suffered a fall that resulted in severe

injuries. C.D. was on the ground for twenty minutes after the

fall because River’s Edge staff chose not to move her given the

extent of the injuries and the risk of exacerbating the

injuries. They called an ambulance instead. As a result of the

fall, C.D. lost the mobility that she had prior to the fall.

D. Procedural History

Jackson’s complaint consists of two counts: (1) False

Claims Act and (2) retaliation. Upon investigation of Jackson’s

allegations, the United States declined to intervene in the

action. Defendants moved to dismiss for failure to state a

claim. And the Court granted Defendants’ motion in part,

dismissing Jackson’s retaliation count but allowing her False

Claims Act count to proceed on both a worthless services theory

and a false certification theory.

Now, Defendants move for summary judgment, arguing that the

record shows the services provided were not worthless and that

Jackson fails to point to evidence of a false material

certification. Together with the motion for summary judgment,

Defendants move to exclude the testimony of Jackson’s expert.

8

III. LEGAL STANDARD

Summary judgment is appropriate if there is no genuine

dispute as to any material fact and the moving party is entitled

to judgment as a matter of law. Fed. R. Civ. P. 56(a). “A

motion for summary judgment will not be defeated by ‘the mere

existence’ of some disputed facts, but will be denied when there

is a genuine issue of material fact.” Am. Eagle Outfitters v.

Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009) (quoting

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986)). A

fact is “material” if proof of its existence or nonexistence

might affect the outcome of the litigation, and a dispute is

“genuine” if “the evidence is such that a reasonable jury could

return a verdict for the nonmoving party.” Anderson, 477 U.S.

at 248.

The Court views the facts in the light most favorable to

the nonmoving party. “After making all reasonable inferences in

the nonmoving party’s favor, there is a genuine issue of

material fact if a reasonable jury could find for the nonmoving

party.” Pignataro v. Port Auth., 593 F.3d 265, 268 (3d Cir.

2010). While the moving party bears the initial burden of

showing the absence of a genuine issue of material fact, meeting

this obligation shifts the burden to the nonmoving party who

must “set forth specific facts showing that there is a genuine

9

issue for trial.” Anderson, 477 U.S. at 250 (quoting Fed. R.

Civ. P. 56).

IV. DISCUSSION

The motions before the Court will both be granted in part.

Defendants’ motion in limine will be granted in part and denied

in part because Jackson’s expert only uses reliable methods for

one of his conclusions. Defendants’ motion for summary judgment

will be granted in part and denied in part because Jackson only

presents sufficient evidence of a genuine dispute of material

fact about River’s Edge’s submission of a legally false claim in

its submission of inaccurate forms.

A. Motion in Limine

Defendants’ motion in limine will be granted except to the

extent it seeks to exclude testimony that River’s Edge’s

submission of inaccurate MDS forms constitutes a false claim.

Jackson offers an expert report by Craig Ratner, Esq., who holds

a J.D., is certified in healthcare compliance, and was a

compliance officer for Abington Jefferson Health. He spent

three hours reviewing the thousands of pages of materials in

this case before forming his opinions contained in the expert

report.

Ratner opines that River’s Edge submitted false claims to

the government by (1) providing worthless services through

10

substandard care and (2) submitting false and inaccurate forms

to the government. Ratner concludes that River’s Edge provided

worthless services because it failed to maintain adequate

staffing, keep adequate supplies, and refer residents to

specialists. And he concludes that River’s Edge submitted false

forms because the Pennsylvania Department of Health found

River’s Edge failed to submit accurate MDS forms and Jackson

testified about errors in the ADL forms.

An expert’s opinion is admissible if the expert’s knowledge

will help the jury understand evidence or determine a fact, the

opinion is based on sufficient facts, the opinion is based on

reliable principles and methods, and the principles and methods

were reliably applied to the facts. Fed. R. Evid. 702. Ratner

is qualified to testify as an expert on healthcare regulation

compliance due to his experience and credentials in healthcare

regulation compliance. His opinion will help the jury determine

whether River’s Edge complied with regulations, and his methods

are reliably applied to the facts when he uses reliable methods.

Although the three hours he spent reviewing materials appear to

be barely adequate to review the voluminous record, he did

collect sufficient data, and where his methodology is reliable,

the opinion is based on sufficient facts. Thus, the analysis

focuses on the reliability of his methodologies.

11

Whether an opinion is based on reliable principles and

methods depends on a flexible inquiry into the principles and

methods utilized. In re Paoli R.R. Yard PCB Litig., 35 F.3d

717, 742 (3d Cir. 1994). To determine the reliability of

methods the Court “consider[s] multiple factors, including the

testability of the hypothesis, whether it has been peer reviewed

or published, the error rate, whether standards controlling the

technique’s operation exist, and whether the methodology is

generally accepted.” In re Zoloft (Sertraline Hydrochloride)

Prods. Liab. Litig., 858 F.3d 787, 792 (3d Cir. 2017).4 These

factors must show good grounds for the opinion; an opinion based

on speculation or an educated guess is inadmissible. Ruggiero

v. Yamaha Motor Corp., 778 F. App'x 88, 93 (3d Cir. 2019)

(nonprecedential). And a failure to attempt a calculation that

can be performed to verify the conclusion is sufficient to find

that the opinion is merely speculation. See Oddi v. Ford Motor

Co., 234 F.3d 136, 158 (3d Cir. 2000) (excluding an expert

opinion where “[n]ot only did [the expert] not test his

4 See also In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 742 n.8 (3d

Cir. 1994) (“[The relevant factors include](1) whether a method consists of a

testable hypothesis; (2) whether the method has been subject to peer review;

(3) the known or potential rate of error; (4) the existence and maintenance

of standards controlling the technique's operation; (5) whether the method is

generally accepted; (6) the relationship of the technique to methods which

have been established to be reliable; (7) the qualifications of the expert

witness testifying based on the methodology; and (8) the non-judicial uses to

which the method has been put.”).

12

hypotheses, he did not even attempt to calculate” the relevant

measurements to support his conclusions).

1. Substandard and Worthless Services

Ratner’s opinion that River’s Edge provided substandard

care and worthless services in that it did not comply with the

2.7 hours PPD regulation will be excluded because his

methodology is unreliable. In reaching the conclusion that

River’s Edge failed to comply with the PPD regulation, Ratner

relies on the disparity between scheduled hours and payroll

hours for one employee over a two-week period.5 Between January

6, 2013, and January 20, 2013, one CNA was scheduled to work 90

hours, but the payroll reflected that she worked 77.5 hours.

Based on this data, Ratner concludes that River’s Edge could not

have complied with the PPD regulation. Jackson fails to show

how reviewing evidence that one employee did not work 12.5 hours

scheduled over a two-week period is a reliable method to

determine facility-wide compliance with PPD regulations.

This conclusion is inadmissible because Ratner did not make

any calculation of the actual hours per patient based on the

payroll records. Compliance with the PPD regulation is

5 Although Ratner testifies that he reviewed materials for three

employees, at his deposition he could only recall the details pertaining to

one.

13

determined based on a calculation of actual hours worked as

reflected in the payroll. Thus, the method of comparing the

schedule to the payroll for a few employees over a short time is

not reliable. Ratner needed to calculate the actual PPD based

on the payroll for at least some period of time for his opinion

to be reliable.6 Ratner’s opinion is based merely on speculation

that because some workers sometimes called out or did not show

up to work the facility was not in compliance with the PPD

regulation. Thus, Ratner’s opinion regarding worthless services

is inadmissible.

2. Submission of Falsified and Fraudulent Documents

Ratner’s opinion that River’s Edge submitted falsified

forms to the government is admissible because Pennsylvania

Department of Health documents show that River’s Edge submitted

seven MDS forms with inaccuracies to the government. In forming

this opinion, Ratner considered Jackson’s testimony and

Pennsylvania state records showing that River’s Edge submitted

seven MDS forms with inaccuracies to the government.7 Given his

6 Cf. Total Control, Inc. v. Danaher Corp., 338 F. Supp. 2d 566, 570

(E.D. Pa. 2004) (“Multiplication, of course, cannot be considered an

unreliable method.”).

7 The Pennsylvania Department of Health documents also show that there

were 12 cases of scabies not reported through the Electronic Event Reports

required by Pennsylvania regulations. But because, as discussed below, there

is no evidence that the accurate submission of these reports is material,

these inaccurate submissions are irrelevant to liability such that Ratner’s

14

expertise in healthcare compliance, Ratner’s review of the

documents showing the submission of inaccurate forms

sufficiently supports his conclusion that the submissions of

these forms constitute fraudulent or falsified submissions.8

But an opinion quantifying the number of inaccurate forms

submitted is inadmissible to support a conclusion that the

Defendants submitted other inaccurate forms beyond the seven

forms identified by the Department of Health. Jackson testified

that the ADL forms, which were used to create the MDS forms that

went to the government, sometimes contained inaccuracies. From

his review of this evidence, Ratner opines that Defendants

submitted additional false and fraudulent forms to the

government. But Ratner does not identify the methodology used

to determine how many or whether there were any false MDS forms

submitted as a result of ADL inaccuracies. Again, Ratner fails

to perform any calculations, such as sampling or other

statistical techniques, from which he could reliably extrapolate

that the seven inaccurate forms reflected a greater number of

testimony regarding these submissions would not be helpful to the jury. See

infra Section IV.B.2.b.

8 See In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 741 (3d Cir. 1994)

(“[T]he level of expertise may affect the reliability of the expert's

opinion.”).

15

inaccurate forms from the larger universe of forms submitted.9

Thus, to the extent Ratner opines that there were more than

seven false forms submitted, his opinion is inadmissible because

he provides no reliable method used to reach this conclusion.

B. Motion for Summary Judgment

Defendants’ motion for summary judgment will be granted

except to the extent Jackson claims the submission of inaccurate

forms constitutes the submission of a false claim. There is no

genuine dispute that the services provided by River’s Edge are

not sufficiently substandard to constitute a factually false

claim. But there is a genuine dispute about whether the

inaccurate forms submitted to the government constitute a

legally false claim.

The False Claims Act (FCA) allows suits by individuals,

called relators, for frauds perpetuated on the United States.

31 U.S.C. § 3730(b), (d). The FCA holds liable any person who

knowingly submits a false claim to the United States for

payment. 31 U.S.C. §§ 3729–3730. To prevail on a False Claims

Act claim, the plaintiff must establish that the defendant “(A)

knowingly presents, or causes to be presented, a false or

9 See U.S. ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764

F.3d 699, 714 (7th Cir. 2014) (noting that statistical evidence may be used

to prove the number of false MDS forms submitted).

16

fraudulent claim for payment or approval; [or] (B) knowingly

makes, uses, or causes to be made or used, a false record or

statement material to a false or fraudulent claim.” United

States ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d

89, 94 (3d Cir. 2018) (alteration in original) (quoting 31

U.S.C. § 3729(a)(1)). Accordingly, the plaintiff must prove

causation, falsity, scienter, and—at least where liability is

based on a false certification—materiality. United States ex

rel. Bookwalter v. UPMC, 946 F.3d 162, 175 (3d Cir. 2019);

Greenfield, 880 F.3d at 94.10

The motion for summary judgment only contests two elements:

falsity and materiality.

The falsity element “asks whether the claim submitted to

the government as reimbursable was in fact reimbursable, based

on the conditions for payment set by the government.” United

States ex rel. Druding v. Care Alts., 952 F.3d 89, 97 (3d Cir.

2020). Claims under the False Claims Act may be either

factually false or legally false. United States ex rel. Wilkins

v. United Health Grp., Inc., 659 F.3d 295, 305 (3d Cir. 2011),

10 See also United States ex rel. Petratos v. Genentech Inc., 855 F.3d

481, 487 (3d Cir. 2017) (noting when discussing liability for a false

certification that “[a] False Claims Act violation includes four elements:

falsity, causation, knowledge, and materiality.”); United States ex rel.

Campie v. Gilead Scis., Inc., 862 F.3d 890, 902 (9th Cir. 2017) (noting that

materiality is an element under a “factually false certification” theory).

17

abrogated on other grounds by Universal Health Servs., Inc. v.

United States ex rel. Escobar, 136 S. Ct. 1989 (2016). A

factually false claim “misrepresents what goods or services

[were] provided to the Government,” and a legally false claim

“falsely certifies that [the claimant] has complied with a

statute or regulation the compliance with which is a condition

for Government payment.” Id.

The materiality element asks “whether [the false

certification] affected [the government’s] payment decision.”

United States ex rel. Petratos v. Genentech Inc., 855 F.3d 481,

492 (3d Cir. 2017). Materiality is an element of liability for

a legally false claim. Greenfield, 880 F.3d at 94. And while

materiality may also apply to factually false claims,11 the Court

does not address this issue because there is no genuine dispute

of material fact about falsity for the factually false claims

here.

1. Factually False and Worthless Services

The evidence Jackson has produced does not raise a genuine

issue of fact that the services provided by River’s Edge were

11 See United States ex rel. Morgan v. Champion Fitness, Inc., No. 13-

cv-1593, 2018 WL 5114124, at *8 (C.D. Ill. Oct. 19, 2018) (“The materiality

standard may or may not apply in cases where factually false claims are

alleged.”); United States ex rel. Coffman v. City of Leavenworth, 303 F.

Supp. 3d 1101, 1117 (D. Kan. 2018) (“Materiality is a requisite element for

factually false claims under 31 U.S.C. § 3729(a)(1)(B) and false

certification claims.”), aff'd, 770 F. App'x 417 (10th Cir. 2019).

18

sufficiently substandard to constitute a factually false claim

under the theory of worthless services. A claim is factually

false when the service the government was billed for was not

provided.12 Wilkins, 659 F.3d at 305.13 This includes when the

service billed for was worthless in that it was so substandard

that it was “tantamount to no service at all.” In re Genesis

Health Ventures, Inc., 112 F. App’x 140, 143 (3d Cir. 2004)

(nonprecedential).14 And a claim is factually false due to the

provision of worthless services where a defendant sought

“federal reimbursement for a procedure with no medical value.”

United States ex rel. Mikes v. Straus, 274 F.3d 687, 702 (2d

Cir. 2001), abrogated on other grounds by Universal Health

12 Jackson argues that there is a dispute of fact about whether River’s

Edge submitted claims for services that were not provided at all. This

argument fails because Jackson does not point to a single claim submitted

where the service was not provided at all. It is insufficient to provide

evidence of arguably deficient operations and argue that there must have been

a claim that was submitted where no services were rendered. See U.S. ex rel.

Quinn v. Omnicare Inc., 382 F.3d 432, 440 (3d Cir. 2004) (“[Plaintiff’s]

theory that the claims ‘must have been’ submitted cannot survive a motion for

summary judgment.”).

13 See also United States ex rel. Schimelpfenig v. Dr. Reddy's Labs.

Ltd., No. 11-cv-4607, 2017 WL 1133956, at *3 (E.D. Pa. Mar. 27, 2017) (“In a

run-of-the-mill factually false case . . . [a] relator must generally show

that the [G]overnment payee has submitted an incorrect description of goods

or services provided or a request for reimbursement for goods or services

never provided.” (quoting United States ex rel. Connor v. Salina Reg'l Health

Ctr., Inc., 543 F.3d 1211, 1217 (10th Cir. 2008) (alterations in original)).

14 See also U.S. ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048,

1053 (9th Cir. 2001) (“In an appropriate case, knowingly billing for

worthless services or recklessly doing so with deliberate ignorance may be

actionable under § 3729, regardless of any false certification conduct.”).

19

Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989

(2016).

It is true that, under certain circumstances, under the

theory of worthless services a claim can be maintained against a

defendant that fails to comply with regulations that are

intended to ensure that the services provided to the government

have value. Under this theory, a defendant may be liable for

noncompliance with a regulation that aims to prevent “Medicare

waste, fraud, and abuse, i.e. paying out on claims that should

not be paid.” United States ex rel. Spay v. CVS Caremark Corp.,

913 F. Supp. 2d 125, 158, 160, 166 (E.D. Pa. 2012). And a

failure to comply with a regulation that informs the quality or

the level of the service at issue can be the basis for a claim

under a worthless services theory because “seriously deficient”

service is akin to “a product that does not work.” United

States ex rel. Scharber v. Golden Gate Nat'l Senior Care LLC,

135 F. Supp. 3d 944, 965 (D. Minn. 2015).15

15 See also Claire M. Sylvia, The False Claims Act: Fraud Against the

Government § 4:34 (“A good or service that does not conform to a material

contractual requirement may also be described as ‘factually false’ because

the good or service delivered is not the product that was purchased.”); cf.

United States ex rel. Polansky v. Exec. Health Res., Inc., 196 F. Supp. 3d

477, 498–99 (E.D. Pa. 2016) (finding that the plaintiff did not adequately

state a factually false claim where the falsity was based on a violation of a

regulation that did not affect “the level, quality or scope of care.”).

20

Under the standard of care provided by federal statutes and

regulations, nursing homes “must care for its residents in such

a manner and in such an environment as will promote maintenance

or enhancement of the quality of life of each resident.” 42

U.S.C. § 1396r(b)(1)(A); accord 42 C.F.R. § 483.10(a)(1). They

are required to “provide the necessary care and services to

attain or maintain the highest practicable physical, mental, and

psychosocial well-being, consistent with the resident's

comprehensive assessment and plan of care.” 42 C.F.R. § 483.24.

So, in general and under certain circumstances, a nursing home

that does not care for its residents in a way that promotes

their quality of life may be liable under a worthless services

theory.

That having been said, more than mere regulatory

noncompliance is required for liability to attach; the

noncompliance must be so great that effectively no services were

provided. It is insufficient “that the defendant provided

services that are worth some amount less than the services paid

for” because “a ‘diminished value’ of services theory” does not

exist. United States ex rel. Absher v. Momence Meadows Nursing

Ctr., Inc., 764 F.3d 699, 710 (7th Cir. 2014). Instead, the

provision of the services must be “so substandard as to be

tantamount to no service at all.” In re Genesis Health

21

Ventures, Inc., 112 F. App’x 140 at 143.16 This heightened

degree of noncompliance is required because the FCA is not “a

vehicle for punishing garden-variety breaches of contract or

regulatory violations.” Escobar, 136 S. Ct. at 2003.17

And a defendant provides effectively no services when it

provides services that are grossly negligent with respect to the

regulatory standard of care. There is a “proverbial line in the

sand for purposes of determining when clearly substandard

services become ‘worthless.’” 18 United States v. Houser, 754

F.3d 1335, 1344 (11th Cir. 2014). And while no court of appeals

has opined on where this line is drawn, the Court agrees with a

number of district courts that have held that the line beyond

16 See Mikes, 274 F.3d at 703 (“In a worthless services claim, the

performance of the service is so deficient that for all practical purposes it

is the equivalent of no performance at all.”).

17 See Wilkins, 659 F.3d at 310 (“[W]e question the wisdom of regarding

every violation of a Medicare regulation as a basis for a qui tam suit.”);

Chesbrough v. VPA, P.C., 655 F.3d 461, 468 (6th Cir. 2011) (“Quality-of-care

issues were better monitored by state and local agencies and medical boards

and societies than qui tam relators and the federal government.”).

18 The level at which services become worthless is a question of

falsity, not scienter or materiality, because the question is not about the

defendant’s state of mind or the government’s payment decision. See United

States ex rel. Petratos v. Genentech Inc., 855 F.3d 481, 491 (3d Cir. 2017)

(noting the impropriety of conflating elements). The level of care deemed

worthless is quintessentially a falsity issue because the inquiry is whether

the service had no value to the government—i.e., the question is whether the

claim was reimbursable. See United States ex rel. Druding v. Care Alts., 952

F.3d 89, 97 (3d Cir. 2020) (“[F]alsity simply asks whether the claim

submitted to the government as reimbursable was in fact reimbursable, based

on the conditions for payment set by the government.”); United States ex rel.

Campie v. Gilead Scis., Inc., 862 F.3d 890, 900 (9th Cir. 2017) (“The value

of the goods at issue is dispositive under the [worthless services

theory.]”).

22

which substandard services become worthless services is defined

by gross negligence19 in complying with standard of care

regulations. See United States ex rel. Spay v. CVS Caremark

Corp., No. 09-cv-4672, 2015 WL 5582553, at *63 (E.D. Pa. Sept.

22, 2015), aff'd on other grounds sub nom. United States ex rel.

Spay v. CVS Caremark Corp., 875 F.3d 746 (3d Cir. 2017).20 In

other words, services provided without ordinary care will have

some value to the government, but services provided without even

slight care will have no value to the government.21

19 Gross negligence in general is the “lack of even slight diligence or

care”; it is carelessness to a greater degree than ordinary negligence.

Gross Negligence, Black's Law Dictionary (11th ed. 2019); see Dan B. Dobbs et

al., The Law of Torts § 140 (2d ed. 2019) (“The term gross negligence can be

used to mean what it says—a high, though unspecified degree of negligence, or

as courts sometimes say, the failure to use even slight care.”).

20 See also United States ex rel. Acad. Health Ctr., Inc. v. Hyperion

Found., Inc., No. 10-cv-552, 2014 WL 3385189, at *45 (S.D. Miss. July 9,

2014) (holding that “grossly deficient care” can form the basis for liability

under the worthless services theory), report and recommendation adopted, 2017

WL 3260134 (S.D. Miss. July 31, 2017); United States ex rel. Spay v. CVS

Caremark Corp., 913 F. Supp. 2d 125, 166 (E.D. Pa. 2012) (“A gross failure to

perform such services, combined with continued collection of funds for such

services from the government through the Part D sponsor, could constitute a

false claim.”); United States ex rel. Davis v. Prince, No. 08–cv–1244, 2011

WL 2749188, at *7 (E.D. Va. July 13, 2011) (explaining that the plaintiff

would need to show that the defendant “‘utterly failed’ to perform [its]

contractual duties” to succeed on a worthless services claim), aff'd sub nom.

U.S. ex rel. Davis v. U.S. Training Ctr. Inc., 498 F. App’x 308 (4th

Cir.2012) (nonprecedential); United States ex rel. Sanchez-Smith v. AHS Tulsa

Reg'l Med. Ctr., 754 F. Supp. 2d 1270, 1287 (N.D. Okla. 2010) (“The Court

holds that, in order to reach a jury on a factual falsity theory [the

plaintiff must point to evidence of at least] the provision of grossly

negligent services with regard to a particular standard of care or regulatory

requirement.” (citation omitted)).

21 Services provided without ordinary care “creat[e] non-cost justified—

wasteful or wealth-reducing—risks.” Richard A. Posner, The Economics of

Justice 84 (1983). It follows that services may be provided with such a lack

of care—i.e., without even slight care—that the wasteful risks eclipse any

benefit that may be conferred by the services. See Archie v. City of Racine,

847 F.2d 1211, 1219 (7th Cir. 1988) (“[G]rossly negligent[] mean[s] that the

23

The Seventh Circuit addressed the worthless services theory

in the nursing home context in Absher, where it reversed a

jury’s verdict that awarded about $9 million to the plaintiffs.

764 F.3d at 705, 716. The plaintiffs presented evidence at

trial that the defendant nursing home failed to prevent

infections, control pests, manage pressure sores, provide

correct medications, prevent accidents, and prevent staff abuse

of residents. Id. at 705. But the defendant was never shut

down despite state oversight, and one of the plaintiffs

testified that a family member at the facility received good

care. Id. at 710. The Seventh Circuit held that the defendant

was entitled to judgment as a matter of law on the worthless

services theory claim. Id. It reasoned that where the facility

was allowed to continue to operate and one of the plaintiffs

testified that a family member received good care, no reasonable

jury could find that the defendant was providing worthless

services. Id.22

In this case there is evidence of insufficient supplies,

staffing shortages, and four negative incidents involving

cost of taking precautions was substantially less than the expected

benefits.”).

22 Cf. Acad. Health Ctr., Inc., 2014 WL 3385189, at *4, *43–45 (finding

a plausible claim was stated under a worthless services theory where the

state Department of Health found various “immediate jeopardy” deficiencies

and the complaint alleged “heinous examples of grossly deficient care

suffered by the seven representative residents”).

24

River’s Edge’s residents. Although River’s Edge received

regular shipments of linens, Jackson claims that the linen

supply was so insufficient that residents needed to be dried

with pillow cases. And despite River’s Edge’s scheduling of

staff to provide surplus hours, Jackson testifies that River’s

Edge was often short staffed such that each patient did not

receive adequate care. She provides anecdotes about incidents

with four residents—D.F., W.M., C.D., and an unidentified

resident—as examples.

But, even in the light most favorable to Jackson, these

incidents do not rise to the grossly negligent or significantly

substandard care required to prove a claim under the worthless

services theory. She claims that the care to each of these four

residents was so poor that it constitutes worthless services.

But no reasonable jury could conclude that the care to each of

these residents was grossly negligent: D.F. was treated for

scabies, W.M. was usually turned every two hours, C.D. was given

emergency room treatment when she fell, and the patient with

maggots in his wound had the maggots cleaned out. This

treatment constitutes at least slight care to the promotion of

quality of life, which precludes a finding of gross negligence.23

23 Cf. Williams v. Terrace, No. 2856 EDA 2012, 2014 WL 10896964, at *7

(Pa. Super. Ct. July 31, 2014) (nonprecedential) (upholding a jury’s finding

25

On an individual basis, each of the incidents described by

Jackson at most rises to the level of negligence, i.e., failure

to exercise ordinary care. Even assuming that the care was

negligently given, this is not sufficient to allow a reasonable

inference that there was a factually false claim through the

provision of worthless services.24 If an FCA claim could proceed

on the basis of care rendered with ordinary negligence amounting

to the provision of substandard care—as opposed to grossly

negligent care amounting to significantly substandard care—the

FCA would turn into a tool for ensuring regulatory compliance.

But the Supreme Court has instructed that the FCA is not such a

tool.25 Therefore, the care which Jackson has identified as

having been provided by River’s Edge cannot form the basis for a

factually false claim under the FCA.

Additionally, even if viewed cumulatively, and assuming

that these incidents are representative of what is a more

widespread problem at River’s Edge regarding inadequate

supplies, infection treatment and control, pressure sore

that a nursing home’s care was beyond grossly negligent where its “facilities

were chronically and continuously understaffed,” its resident suffering from

bedsores was “routinely not repositioned” and died due to the bedsores, and

there was “pervasive and routine[] failure[s] at [its] facilities”).

24 Indeed, Jackson herself describes the care she provided to these

residents as fair, good, or excellent.

25 See Escobar, 136 S. Ct. at 2004 (“We emphasize, however, that the

False Claims Act is not a means of imposing treble damages and other

penalties for insignificant regulatory or contractual violations.”).

26

treatment and control, and accident prevention, River’s Edge’s

conduct does not rise to gross negligence. There is no evidence

that these incidents were so pervasive that a reasonable

inference of significantly substandard care can be drawn.

River’s Edge’s processes for ensuring sufficient staffing,

procuring supplies, and obtaining resident feedback all strongly

point to finding that River’s Edge is not grossly negligent in

the care it provided to its residents. And like in Absher, the

state Department of Health did not find any “immediate jeopardy”

deficiencies that warranted disqualification in this case.26

2. Legally False

Summary judgment is appropriate on the implied

certification theory but not on the express certification theory

because Jackson only presents evidence of certifications in the

form of inaccurate MDS forms. And even if Jackson did present

other false certifications, she only points to evidence

indicating that MDS forms are material.

26 To the extent Jackson argues that the state authorities never found

River’s Edge’s deficiencies because River’s Edge moved staff around to ensure

an adequate number of staff whenever there was a state inspection, this

argument is belied by the Department of Health’s inspections being

unannounced. Further, an increase in staff during inspections does not

account for the opportunity for residents to raise complaints with the

Department of Health as a mechanism for the state agency to detect River’s

Edge’s deficiencies.

27

A legally false claim is based on the defendant’s false

certification; i.e., it is where the defendant “lies about its

compliance with a statutory, regulatory, or contractual

requirement.” United States ex rel. Greenfield v. Medco Health

Sols., Inc., 880 F.3d 89, 94 (3d Cir. 2018). And for liability

to attach, the defendant’s false certification “about its

compliance with a legal requirement [must be] ‘material to the

Government's payment decision.’” Id. (quoting Universal Health

Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989,

1996 (2016)).

a. False Certifications

A plaintiff may show a false certification through either

an express certification or an implied certification. The false

certification may be express in that the claimant affirmatively

represents compliance with a statute or regulation with which it

did not comply. United States ex rel. Wilkins v. United Health

Grp., Inc., 659 F.3d 295, 305 (3d Cir. 2011), abrogated on other

grounds by Universal Health Servs., Inc. v. United States ex

rel. Escobar, 136 S. Ct. 1989 (2016). Or the certification may

be implied in that the claimant seeks payment without disclosing

that it violated statutes or regulations. Id.

28

i. Express Certification

A reasonable jury could find that River’s Edge submitted

seven express false certifications because the Pennsylvania

Department of Health found that River’s Edge submitted seven

inaccurate MDS forms. The submission of a false or inaccurate

MDS form constitutes an express false certification because

nursing home facilities must complete these documents and

certify that they are accurate. United States ex rel. Absher v.

Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 713 (7th Cir.

2014) (citing 42 C.F.R. § 483.20).

But a plaintiff must come forth with evidence that the

defendant actually submitted a false claim. It is not enough to

allege that, based on the scheme described, “claims requesting

illegal payments must have been submitted, were likely

submitted[,] or should have been submitted to the Government.”

Greenfield, 880 F.3d at 98 (alteration in original) (quoting

United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d

1301, 1311 (11th Cir. 2002)). So, while the submission of an

inaccurate MDS form constitutes an express false claim, there

must be evidence that a false MDS form was submitted. See

Absher, 764 F.3d at 714 (“Rather, the relators have failed to

offer evidence establishing that even a roughly approximate

number of forms contained false certifications.”).

29

A plaintiff cannot prevail on an express certification

theory based on inaccurate MDS forms if it cannot show how many

inaccurate MDS forms were submitted. In Absher, the plaintiffs

produced evidence that there was a scabies outbreak and that not

all residents were treated or diagnosed, that there were some

months with no pressure ulcers reported and other months with

many pressure ulcers reported, and that the defendant failed to

track the development of rashes among residents. Id. at 713–14.

They argued that from this evidence a jury could infer that

there were inaccurate MDS forms submitted. Id. The Seventh

Circuit held that this evidence failed as a matter of law

because the plaintiff has the burden of proving how many claims

were false. Id. at 714. It reasoned that a failure to offer

evidence of at least a “roughly approximate” number of MDS forms

containing false certifications constitutes a “fatal lack of

evidence.” Id. at 713-14.

Here, there is evidence of at least seven false claims in

that seven MDS forms were submitted with inaccuracies. This

evidence consists of the Pennsylvania Department of Health’s

conclusion that 7 of 22 MDS forms it reviewed were inaccurate.

Although this evidence is sufficient to support a claim as to

these seven MDS forms, it is insufficient to support an

inference that some (or all) of the other forms submitted were

30

also inaccurate. Following Absher, Jackson’s testimony that ADL

forms were completed sometimes weeks after the care was given is

not sufficient to show false claims were actually submitted.

Therefore, the evidence is sufficient as to the seven inaccurate

forms but not as to any of the other submitted forms. See

Greenfield, 880 F.3d at 99 (“Our sister circuits have applied

the same analysis, holding that plaintiffs must provide evidence

of at least one false claim to prevail on summary judgment.”).27

ii. Implied Certification

No reasonable jury could find that River’s Edge submitted

an implied false certification because Jackson does not point to

any evidence showing that River’s Edge made specific

representations. An implied certification consists of (1)

“specific representations about the goods or services provided”

and (2) “failure to disclose noncompliance with material

statutory, regulatory, or contractual requirements.” United

27 To the extent Jackson argues that Medicare and Medicaid enrollment

forms—specifically CMS Form 855A and CMS Form 1561—contained certifications

that River’s Edge would comply with all regulations, these promises cannot

constitute false certifications unless there is some evidence that River’s

Edge knew it would not comply with the regulations when it made the promises.

See United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764

F.3d 699, 712 n.14 (7th Cir. 2014) (“A statement about one's present intent

to perform some act in the future can be false. But the mere fact that the

promised act is not subsequently performed does not necessarily mean that the

promisor did not intend to perform the act at the time of making the

promise.”). However, Jackson does not point to evidence of such fraudulent

inducement. Thus, based on the record, no reasonable jury could find that

these certifications were fraudulent when made.

31

States v. Eastwick Coll., 657 F. App'x 89, 94 (3d Cir. 2016)

(nonprecedential) (quoting Universal Health Servs. v. United

States ex rel. Escobar, 136 S. Ct. 1989, 2001 (2016)).

Jackson argues that no specific representations are needed

for an implied certification and that instead a submission for

payment together with noncompliance with regulations constitutes

an implied certification. While it is true that the Supreme

Court in Escobar, 136 S. Ct. at 2000, left open the question of

whether specific representations were always required for an

implied false certification, the Third Circuit in Eastwick

Coll., 657 F. App'x at 94, albeit in a nonprecedential opinion,

suggested that an implied false representation “require[s]

specific representations.” United States ex rel. Schimelpfenig

v. Dr. Reddy's Labs. Ltd., No. 11-cv-4607, 2017 WL 1133956, at

*6 (E.D. Pa. Mar. 27, 2017).28 And to the extent there is some

doubt about the availability of an implied-certification-

without-representation theory, the Third Circuit has found in a

28 But see United States ex rel. Wood v. Allergan, Inc., 246 F. Supp. 3d

772, 811 (S.D.N.Y. 2017) (“[F]alsity may arise from the defendant's

submission of a claim for payment that does not include a specific

representation about the goods or services provided, coupled with

noncompliance with a material payment requirement.”), rev'd on other grounds,

899 F.3d 163 (2d Cir. 2018).

32

different situation that expansion of the implied certification

theory is especially not appropriate in the healthcare context.29

b. Materiality

Finally, Jackson must also show that there is a genuine

dispute of material fact that any false certifications were also

material. Even if River’s Edge had made false certifications

regarding compliance with federal or state regulations, Jackson

has not provided sufficient evidence to raise a genuine dispute

of material fact that these certifications are material. On the

other hand, there is a genuine dispute of material fact about

whether a false certification based on an inaccurate MDS form is

material.

Whether a false certification is express or implied, it

must be “material to the Government's payment decision” for

liability to attach. United States ex rel. Greenfield v. Medco

Health Sols., Inc., 880 F.3d 89, 94 (3d Cir. 2018) (quoting

Universal Health Servs., Inc. v. United States ex rel. Escobar,

136 S. Ct. 1989, 1996 (2016)). The materiality “requirement

helps ensure that the False Claims Act does not become ‘an all-

29 See United States ex rel. Wilkins v. United Health Grp., Inc., 659

F.3d 295, 307 (3d Cir. 2011) (“As several courts of appeals have held,

however, the implied certification theory of liability should not be applied

expansively, particularly when advanced on the basis of FCA allegations

arising from the Government's payment of claims under federally funded health

care programs.”), abrogated on other grounds by Universal Health Servs., Inc.

v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).

33

purpose antifraud statute or a vehicle for punishing garden-

variety breaches of contract.’” United States ex rel. Petratos

v. Genentech Inc., 855 F.3d 481, 489 (3d Cir. 2017) (quoting

Escobar, 136 S. Ct. at 2003).

Under the FCA “the term ‘material’ means having a natural

tendency to influence, or be capable of influencing, the payment

or receipt of money or property.” 31 U.S.C. § 3729(b)(4). A

false certification is material only if (1) “a reasonable man

would attach importance to [it]” or (2) “the defendant knew or

had reason to know that the recipient of the representation

attaches importance to the specific matter ‘in determining his

choice of action,’ even though a reasonable person would not.”

Escobar, 136 S. Ct. at 2002–03 (quoting Restatement (Second) of

Torts § 538 (1976)).

The materiality inquiry is holistic in that it considers

all of the facts to determine “the effect on the likely or

actual behavior of the recipient of the alleged

misrepresentation.” Id. at 2002 (quoting 26 R. Lord, Williston

on Contracts § 69:12 (4th ed. 2003)). Proof of materiality

includes, but is not limited to, (1) evidence that the provision

is expressly labeled a condition of payment and (2) evidence

that the government consistently refuses to pay claims in cases

34

where the claimant did not comply with the provision. Id. at

2003.

Jackson argues that River’s Edge made false certifications

of compliance with four regulations: (1) Pennsylvania’s PPD

regulation, (2) Pennsylvania’s Electronic Event Reports

regulation, (3) federal standard of care regulations, and (4)

federal MDS regulations. Jackson does not advance the

materiality argument for each alleged false certification

independently. Instead of disentangling the four alleged

certifications and pointing to evidence of materiality for each,

Jackson argues that the care provided was so poor and the

regulations at issue so central to the public health program,

that all of the alleged false certifications must be material.

As to the first three, no reasonable jury could find,

looking at the evidence in the light most favorable to Jackson,

that compliance with either Pennsylvania’s PPD regulation,

Pennsylvania’s Electronic Event Reports regulation, or federal

standard of care regulations is material. It is true that “[a]

certificate of compliance with federal health care law is a

prerequisite to eligibility under the Medicare program.” United

States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 243 (3d

35

Cir. 2004).30 But Jackson has not provided any evidence that

compliance with the federal standard of care or state

regulations is a condition of payment, nor has she provided any

evidence that the government has declined payment for failure to

comply with these regulations.31 And Jackson does not point to

any other evidence indicating that these regulations are

material.

That said, as to the fourth, Jackson does present evidence

that accurate MDS forms are material in that the accuracy of MDS

forms is an express condition of payment. MDS forms

“specifically affirm that reimbursement is ‘conditioned on the

accuracy and truthfulness of [the] information’ contained in the

forms.” U.S. ex rel. Absher v. Momence Meadows Nursing Ctr.,

Inc., 764 F.3d 699, 713 (7th Cir. 2014) (alteration in

original). And payment per patient is based on the information

contained in the MDS forms. So, a reasonable jury could find

that submitting inaccurate MDS forms is material.

30 Indeed, the regulations require an annual certification saying the

following: “I further certify that I am familiar with the laws and

regulations regarding the provision of health care services, and that the

services identified in this cost report were provided in compliance with such

laws and regulations.” 42 C.F.R. § 413.24(f)(4)(iv)(B).

31 It is also relevant that the United States decided not to intervene

in this action after having investigated it; this indicates that the

violations alleged here are not material. Polansky v. Exec. Health Res.,

Inc., 422 F. Supp. 3d 916, 938 (E.D. Pa. 2019) (“Post-Escobar, numerous

federal courts have found insufficient FCA materiality where the government

investigated a relator's allegations but chose not to intervene or otherwise

address the defendant's allegedly improper behavior.”).

36

Thus, except for the MDS forms, Jackson has failed to raise

a genuine dispute of fact that River’s Edge’s lack of compliance

with federal or state requirements was material to the

government’s payment decision.

V. CONCLUSION

For the reasons set forth above, Defendants’ motion in

limine will be granted in part and denied in part and their

motion for summary judgment will be granted in part and denied

in part. An appropriate Order follows.

37