Judge Partially Dismisses Whistleblower Case Against Kindred Healthcare

On Friday, the court issued an opinion in a case brought on behalf of the government against Kindred Healthcare, Inc. et al. The opinion, issued on Friday, was filed in the Eastern District of Pennsylvania and dealt with a motion to dismiss the False Claims Act case brought by Timothy Sirls, who served as the Director of Nursing Services for two moths at one of the facilities operated by the defendant. The plaintiff brought federal and state false claims and fraud claims involving the billing of Skilled Nursing Facility (SNF) charges to Medicare and state Medicaid payors; the judge dismissed part of the claims.

The opinion explined that Kindred provides SNF care for Medicare and Medicaid patients. As a part of billing these patients, Kindred assigns the patient to a Resource Utilization Group (RUG) which indicates the level of care provided to the patient for medical treatment. The action alleged that Kindred actively sought out higher levels of care, and at times falsely certified patient’s status to place them into that higher-level group, then provided a lower level of RUG.

The plaintiff, through his original and two amended claims, alleged that the practice had resulted in over-billing federal and state payors as a result of false certification of Form 1500 doctors bills, false RUG submissions for SNF bills, false Minimum Data set forms, and general fraud as regards the level of staffing providing the care under the False claims act.

The defendants filed a motion to dismiss, stating that the plaintiff had failed to allege that the falsified forms were material to payment by the entities, the plaintiff had failed to allege that the staffing levels were material to payment by the entities, and claiming that there was a public bar against the plaintiff in this action.

The court, while noting that the public disclosure bar was typically a jurisdictional bar to bringing the action, noted that the plaintiff fits the definition of an original source, who had direct access to the materials and brought that information in a timely manner to the authorities, and therefore did not bar this action from proceeding. The court also noted that filing of claims, RUGs and Minimum Data set forms are instrumental to the process of an SNF being paid by any medicare or Medicaid entity, and therefore any false statements in those documents are by definition instrumental to the payment process. However, the court noted that while statements and actions regarding the staffing levels at an SNF might be material to the facility being licensed to offer those services, the plaintiff had failed to sufficiently allege that it was material to the payment process, and dismissed the complaints related to those claims.

The plaintiff is represented by Shepherd Finkelman Miller & Shah. The defendant is represented by Arnall Golden Gregory, Hooper Lundy & Bookman, and Burns White.