Kentucky District Court rules on motion to dismiss in nursing home care case

by Ben Vernia | January 2nd, 2012

On December 19, U.S. District Judge Danny C. Reeves of the Eastern District of Kentucky largely denied a motion to dismiss filed by the defendants in U.S. v. Villaspring Health Center, a case involving nursing home quality-of-care allegations. The suit began after the Kentucky Attorney General briefed the U.S. Attorney on its findings after investigating an Erlanger, Kentucky, nursing home. The government’s civil suit against the home, its parent corporation, and its CEO alleged, among other causes of action, that the home provided worthless services.

The defendants moved to dismiss on a variety of grounds. Among those rejected by Judge Reeves:

  • Standing – The U.S. had standing to bring the suit.
  • Estoppel – Three arguments by the defendants lacked merit:
    • Government knowledge – The fact that CMS may have had knowledge of deficiencies at the nursing home did not necessarily exonerate the defendants
    • CMS’s inaction – CMS’s failure to bring charges or suspend the nursing home did not constitute a representation on which the home could rely; moreover this conflates the element of scienter with estoppel.
    • Due process – The fact that DOJ was suing on claims for which CMS approved payment did not violate the Due Process Clause; every False Claims Act case involves DOJ suing for claims approved by another agency.
  • Particularity – The government’s complaint, which included descriptions of five representative patients’ claims, was sufficiently particular.
  • Worthless Services – The Court approved the theory of worthless services, noting that although the line dividing such claims from others was blurry, determining which claims met the test was not proper in a motion to dismiss.
  • Implied Certification – After surveying the appellate decisions regarding the necessity of finding a condition of payment (vs. a condition of participation) violated by the defendants’ conduct, and noting that the Sixth Circuit had not yet ruled on the issue, the Court endorsed a broader approach (taken by the 1st and D.C. Circuits), and found that the provider agreement signed by the home’s CEO met this standard.
  • Common law claims – The Court refused to dismiss the government’s claims for common law fraud and unjust enrichment.

The Court did, however, dismiss the government’s claims against the nursing home’s CEO, finding that the complaint failed to identify his role as greater than signing the home’s provider agreement and generally asserting his control over the home.

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