The increased scrutiny facing nursing home providers since the COVID-19 pandemic includes “overall increased and increasingly sort of hostile approach by surveyors in the quality-of-care area,” according to Foley & Lardner partner Matt Krueger. His comment came Tuesday during a fireside chat with Evans Senior Investments President and founder Jason Stroiman and CEO and founder Jeremy Stroiman.

“Another area that I think we continue to see a lot of attention are the financial relationships between facilities and other providers,” Krueger said.

The attorney referenced, for example, the November settlement in the Paksn Inc. case, where the operator of six skilled nursing facilities in California was fined $45 million and “where the government alleged that the payments to physicians that were supposed to be for administrative services [and] the government alleged that they were actually payments to induce the physicians to refer to admission to the SNF.”

Providers, Krueger said, “have to be very careful with how you structure your financial relationships with any physicians, in particular, or hospitals or anywhere that could be the source of residents to facilities, and that is going to continue to be a hot area of focus for the government.”

Recently, two Pennsylvania SNFs owned by Comprehensive Healthcare Management Services were found guilty of healthcare fraud and other counts, Foley & Lardner partner Matt Jassak noted. 

In addition to the facility entities, five executives also were brought up on criminal fraud charges based on allegedly falsifying records related to staffing to meet state and federal guidelines, he said. 

“There were some allegations of creating ghost employees, clocking people in and out who were not even there, that mandates to cut costs associated with employees would be pursued, and focusing on just simply satisfying minimum requirements by falsifying records would result in bad outcomes,” Jassak said. “And in that case, the companies were found guilty of fraud; however, the executives did escape with not-guilty results.”

Krueger noted that the Pennsylvania case was decided even without federally mandated minimum staffing requirements for SNFs coming down the pike. A federal lawsuit filed last month by the American Health Care Association, the Texas Health Care Association and three SNFs seeks to throw out the national nursing home staffing mandate, charging that it exceeds the authority of the Centers for Medicare & Medicaid Services and that it “creates impossible-to-meet standards that will harm thousands of nursing homes and the vulnerable Americans they serve.”

“I think when facilities face so much pressure because there is such labor shortage and there is a need to provide quality care, that there can … [be] the temptation down at the facility level to be inflating or misrepresenting its staffing levels, and that can be a big, big risk area that will continue even if the new rule doesn’t go into effect,” Krueger said.

Navigating government enforcement

Regarding legal compliance and risks, Krueger ranked the issues on what he called a “spectrum of seriousness.”

At the lowest level, he said, operators risk civil monetary penalties imposed by CMS, often in partnership with the state, and usually related to quality of care issues.

“Not to say those aren’t serious, but those will be handled merely at an administrative level. You won’t have to interact with the Department of Justice,” Krueger said.

At the next level of seriousness, according to the attorney, are allegations made under the False Claims Act, “where the Department of Justice gets involved, and where those suits can come also from whistleblowers.” Such allegations could be made by disgruntled employees or other insiders “who think that there’s care that’s so substandard that it amounts to the claims to Medicare or Medicaid being false or where they think financial relationships were inappropriate,” Krueger added.

Allegations under the False Claims Act can be “incredibly expensive and a huge risk area,” he said.

Krueger said that states are becoming more active in their scrutiny of SNFs, not only in seeking monetary damages but also in “setting up interventions in your company, like an independent monitor.”

At the top level of risks, he said, are criminal charges that can be brought against operators.

“There’s actual risk of incarceration that [is] going to present for some of the more egregious cases,” Krueger said.

A best approach for providers is to be proactive at the beginning, when a problem presents itself , according to the attorney.

“One of just the simplest things you can do is try to really put resources towards responding to complaints effectively, quickly,” he said, advising providers, for instance, to “tell the family how you acted to remedy it” and “to be very responsive” to surveys triggered by complaints.

Regardless of the outcome of the November election, Jassaks said, “there will continue to be a lot of government scrutiny on this industry, partly because care for senior folks is going to be a bipartisan issue.”

Whatever the results of the election, he said, the industry can expect to see “an increased scrutiny of the corporate structure, ownership, and relationships among nursing home facilities.”

And then there are regulations that apply to several types of businesses, not just nursing homes.

“The Biden Department of Labor has really ramped up how it is enforcing wage and hour standards,” for instance, Jassaks said in reference to the joint employer rule.

The attorney said that, in his opinion, if Donald Trump wins the election, “we’re likely to see the wage and hour enforcement ramp back to levels that it was before the current administration” — that is, back to levels under the Trump administration.

Additionally, Jassaks said, the current administration has been aggressive in pursuing antitrust regulations.

“I think that’s another area where we’re likely to see scaling back to sort of pre-Biden levels of engagement” if Trump becomes president again, he said.