United States v. Am. Health Found.

1

UNITED STATES OF AMERICA, v. AMERICAN HEALTH FOUNDATION INC.; AHF MANAGEMENT CORPORATION; AHF MONTGOMERY, INC. d/b/a CHELTENHAM NURSING AND REHABILITATION CENTER; AND AHF OHIO, INC. d/b/a THE SANCTUARY AT WILMINGTON PLACE and d/b/a SAMARITAN CARE CENTER AND VILLA

Civil Action No. 22-02344

United States District Court, E.D. Pennsylvania

March 31, 2023

MEMORANDUM

R BARCLAY SURRICK, J.

Presently before the Court is Defendants' Motion to Dismiss First Amended Complaint (ECF No. 19), the Government's response in opposition thereto (ECF No. 23), and Defendants' reply to the Government's response (ECF No. 26.) For the following reasons, Defendants' Motion will be denied.

The Government alleges that Defendants submitted claims for Medicare and Medicaid reimbursements in which they falsely claimed compliance with the Nursing Home Reform Act (NHRA) and its implementing regulations, thereby violating the False Claims Act (FCA). The Government also brings common law claims of unjust enrichment and payment by mistake based on these allegedly false representations. Defendants move to dismiss the Government's FCA claim on the grounds that the Medicare and Medicaid reimbursement requests that they submitted were not “false” under the worthless services doctrine and not material absent proof that the Government routinely denies reimbursements based on similar misrepresentations. Defendants also move to dismiss the Government's common law claims on the basis that they too require proof of materiality.

This Motion will be denied as to the FCA claim because the allegations against Defendants rise to the level of gross-negligence necessary to deem their services worthless and, regardless, Defendants' requested reimbursements for these services contained impliedly false certifications. In addition, these alleged misrepresentations materially affected the Government's decision to reimburse Defendants' claims. The Motion will also be denied as to the common law claims given precedent that payment by mistake and unjust enrichment are adequately pled where the allegations state a claim for fraud under the FCA.

I. BACKGROUND

This matter stems from allegations of abuse and neglect at three nursing homes: Cheltenham Nursing and Rehabilitation Center in Pennsylvania, The Sanctuary at Wilmington Place in Ohio and Samaritan Care Center and Villa in Ohio. Defendant American Health Foundation, Inc. (AHF) owns and directs these nursing homes through its subsidiaries and fellow defendants AHF Management Corporation, AHF Montgomery, and AHF Ohio. The Government alleges that Defendants had knowledge of the following substandard care at each of these three nursing homes.

A. Cheltenham Nursing and Rehabilitation Center

The Government contends that from 2016 through 2018, residents at Cheltenham Nursing and Rehabilitation Center (Cheltenham) were subjected to pervasive general care deficiencies, inadequate infection control, negligent psychiatric and mental health services, an unsafe and unsanitary physical environment, and an undersized and untrained staff.

According to the Amended Complaint, Cheltenham failed to provide its residents with sufficient medical care. Specifically, the facility allegedly failed to follow physician orders for follow-up medical treatment, including dental care, medication administration, oxygen provision, wound dressing, cardiac monitoring, and dialysis. (Am. Compl. ¶¶ 130, 142, 147, 157; ECF No. 5.) Moreover, Cheltenham failed to generate accurate assessments or comprehensive care plans for any of its residents. (Id. at ¶¶ 136, 141, 156.) This led to lapses in care such as failing to: abide by a resident's liquid diet restriction (id. at ¶ 135); set up care conferences for wound development, weight loss, and behavior management (id. at ¶ 138); or provide residents with necessary diet supplements (id. at ¶ 139). Residents also frequently did not receive their prescribed medications until a day after they were supposed to be taken. (Id. at ¶¶ 280-83.)

In addition to these lapses in medical care, the Amended Complaint asserts that Cheltenham staff frequently left residents unattended (id. at ¶ 131), forgot to feed them (id. at ¶ 132), did not provide them with showers (id. at ¶ 136), and did not change their clothing or bed sheets, leaving residents sitting in their own urine (id. at ¶¶ 132, 140). On one occasion, protective services contacted the facility because a resident had long and dirty fingernails and was generally unkept. (Id. at ¶ 149.) On another occasion, a resident's family member found him dressed inappropriately and sitting in a wheelchair filled with urine. (Id. at ¶ 150.)

As for the relationship between residents and staff, the Government alleges that resident clothing and personal items were often lost and not returned to them. (Id. at ¶¶ 242-50.) Moreover, Cheltenham staff mocked or were openly hostile to residents and entered their rooms without knocking. (Id. at ¶¶ 251-54.) Staff members had to be reminded that residents had the right to get out of their beds whenever they wanted because the staff had been refusing resident requests to do so. (Id. at ¶¶ 243.) In addition, the home lacked activities to keep residents occupied; Pennsylvania health inspectors observed residents sitting in the common area with their heads on the table and nothing to do. (Id. at ¶¶ 255, 261.)

The Government further contends that residents at Cheltenham were frequently injured or in danger of becoming injured either due to neglect or allegedly intentional abuse. On February 9, 2018, nurse Colleen Johnson^[1] reported to AHF management that Cheltenham managers were “getting good” at writing abuse allegation reports due to their frequency. (Id. at ¶ 151.) In a survey completed on July 20, 2017, Pennsylvania health officials found that Cheltenham had restrained a resident's wrists without any documentation to indicate that it was necessary to do so. (Id. at ¶ 146). Moreover, facility staff had to be reminded that it was unsafe to leave residents unattended (id. at ¶ 131), and on March 16, 2018, a confused resident was left alone on a different floor without supervision (id. at ¶ 152).

The Government alleges that this lack of supervision resulted in several resident falls. On November 28, 2016, a resident fell and broke her femur. (Id. at ¶ 172.) This resident was supposed to be under one-to-one supervision because she had bruises from an unknown origin, but that level of supervision was not provided. (Id.) The Government also identifies five specific Medicare and Medicaid beneficiaries who suffered from numerous falls during the relevant time period. (Id. at ¶¶ 177-181.) For many of these beneficiaries, Cheltenham had been warned repeatedly by a pharmacy that they were taking medications that could contribute to falls. (Id. at ¶¶ 177, 179-81.) In addition to failing to heed those warnings, Cheltenham allegedly failed to consistently investigate the cause of resident falls in order to intervene. (Id. at ¶¶ 171.) However, when they did investigate in December of 2016, Cheltenham managers and staff reported that falls increased during staff shift changes, that high-risk residents were not identified, and that the facility was not prepared for new high-risk admissions. (Id. at ¶ 174.)

In addition to falls, many Cheltenham residents suffered from pressure ulcers. On February 5, 2016, a survey by Pennsylvania health inspectors determined that the facility failed to implement proper interventions to combat this problem. (Id. at ¶ 166.) In one specific example, a resident's pressure ulcer was left untreated and grew over three months. (Id.) A performance improvement exercise found that residents at high risk for pressure ulcers were not always turned and repositioned as needed or provided with adequate food and liquid, staff were not following resident care plans, fresh linens and pillows were not available, and risk assessments for pressure ulcers were not being completed timely and accurately. (Id. at ¶ 167.) Subsequent internal and external reviews in June of 2017 and June of 2019 found that Cheltenham had not corrected its pressure ulcer problem. (Id. at ¶¶ 169-70.)

The Government also points to Cheltenham's lack of infection control. The Amended Complaint cites a state health department citation indicating that Cheltenham failed to follow infection control protocols during wound treatments, failed to safely dispose of bloody wound dressings, and that the facility contained open and overflowing biohazard bins and trash cans. (Id. at ¶ 158.) In addition, both internal and external sources reported that staff were not following proper hand hygiene in the kitchen or when treating residents. (Id. at ¶¶ 159-60.) The facility did not have any bleach wipes to disinfect surfaces or an infection control nurse, despite this being deemed a “critical position.” (Id. at ¶¶ 161, 164.)

As for Cheltenham's psychiatric services, the Government alleges that the facility consistently failed to document and monitor its residents' mental health conditions and, even when it did so, failed to ensure that the residents were seen by mental health specialists. (Id. at ¶ 184.) The Government's most poignant example involves a resident who was admitted to Cheltenham after being hospitalized for wrapping a cord around his neck while living in a prior nursing home. That resident's care plan at Cheltenham made no mention of his prior suicide attempt. Cheltenham staff observed that the resident appeared depressed and angry, but there is no evidence that a mental health evaluation occurred. (Id. at 190-91.) Eventually, the resident attempted to slash his wrists. (Id. at ¶¶ 190-91.) Following a hospital stay, the resident returned to Cheltenham and...