DOJ increases scrutiny of nursing home industry

On March 3, 2020, as the coronavirus disease (COVID-19) pandemic was already causing deaths in nursing homes throughout the country, the Department of Justice (DOJ) announced the establishment of the National Nursing Home Initiative (NNHI) to investigate and prosecute nursing homes that provide “grossly substandard” care to their residents. In announcing the NNHI, the DOJ indicated that it was dedicating significant resources to partner with the US Department of Health and Human Services and local and state prosecutors to respond to systemic, life-threatening quality of care issues in the nursing home industry.  

In its announcement, the DOJ revealed that the NNHI already has 30 active investigations across 9 states under way. The DOJ advised that the NNHI is focused on identifying, investigating, and prosecuting the most problematic nursing homes, including those that (i) consistently fail to provide adequate nursing staff to care for their residents; (ii) fail to adhere to basic protocols of hygiene and infection control; (iii) fail to provide their residents with enough food to east so that they become emaciated and weak; (iv) withhold pain medication; or (v) use physical or chemical restraints to restrain or otherwise sedate their residents.

Federal regulators and law enforcement authorities have long had authority to develop and enforce quality of care standards for nursing homes. However, state regulators traditionally played the leading role in investigating and prosecuting substandard quality of care violations. As it pertains to the nursing home industry, the DOJ historically has focused on fraud. Specifically, the DOJ has been committed to prosecuting claims under the False Claims Act (FCA) related to the annual multibillion-dollar federal spend on nursing home care for Medicare and Medicaid beneficiaries.

Part of the impetus to launch the NNHI may likely be due to the DOJ’s recent difficulties in prosecuting FCA claims against nursing homes. For example, in 2018, a jury in the Middle District of Florida returned a $350 million verdict against a large nursing home operator in Florida. The jury determined that the nursing home operator failed to create, maintain, and follow comprehensive care plans for its Medicare and Medicaid residents, in violation of the FCA. The court threw out the jury’s verdict, concluding that the government failed to establish that the nursing home’s abidance by those regulations was material to the government’s decision to reimburse the nursing home for its Medicare and Medicaid claims.

The FCA aside, the NNHI is also part of a broader commitment by the DOJ to combat elder fraud and abuse. In 2016, the DOJ established the Elder Justice Initiative (EJI), which will coordinate the NNHI. The EJI is a taskforce dedicated to coordinating prosecution of elder abuse, including physical abuse, financial fraud, scams and exploitation, caregiver neglect and abandonment, psychological abuse, and sexual abuse.

Time will tell whether the DOJ will ramp up FCA enforcement or opt for enforcement under other statutory regimes. However, given the heightened attention of resident casualties due to the COVID-19 outbreak, additional federal civil and criminal investigations under the NNHI’s ambit are expected to be forthcoming. And even though the NNHI nominally focuses on addressing quality of care issues in nursing homes, the taskforce’s investigations and prosecutions will likely expand to elder abuse and neglect in the broader long-term care industry, including in assisted living, home health, and skilled nursing facilities.

The NNHI’s founding makes clear that the DOJ is doubling down on its commitment to investigate and prosecute allegations of elder abuse and of substandard quality of care. These entities are reminded to take care to meet state and federal regulatory requirements. Entities are encouraged to consider: (i) reviewing all surveys over the past 5 years and addressing citations of substandard quality of care; (ii) ensuring that external and internal complaints and concerns are appropriately addressed; and (iii) ensuring that the entity has a robust compliance program that timely flags and escalates any complaints or concerns and ensures that they are properly handled. Similarly, in their due diligence procedures, industry investors are urged to include a robust assessment of any complaints or legal actions taken against operators and what responsive or remedial actions were undertaken.

With the DOJ’s increased scrutiny, operators of and investors in nursing homes, assisted living facilities, and other skilled nursing facilities are encouraged to discuss quality of care standards and concerns with counsel to assess risk and mitigation strategies.

For more information about these topics, please contact your DLA Piper relationship partner or a member of the DLA Piper White Collar team. 

Please also visit our Coronavirus Resource Center and subscribe to our mailing list to receive alerts, webinar invitations and other publications to help you navigate this challenging time.