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False Claims Act Statistics, News & Analysis

  • 22
  • November
  • 2017

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DOJ Heads for the Hills after Judge Rips FCA Case as a "House of Cards"

On October 27, 2017, Magistrate Judge Theresa Carroll Buchanan in the Eastern District of Virginia gave the government a brutal reality check on the viability of its case in United States of America ex rel. Ribik v. HCR ManorCare Inc., et al. when she plainly informed them at a hearing on defendants’ motion for sanctions: “I don’t think this case should have ever been brought.” DOJ has responded to this reproof by filing a motion to voluntarily dismiss the entire case with prejudice.

The case originated as three separate qui tam actions by former occupational therapist employees affiliated with the defendant company HCR ManorCare, a nationwide nursing home provider. The cases were consolidated in 2014, and the United States intervened in 2015. The government alleged that HCR ManorCare and certain of its subsidiaries, in their operation of Skilled Nursing Facilities (“SNFs”), engaged in a scheme to submit false or fraudulent claims for payment to Medicare and TRICARE for rehab therapy services from 2006 to 2012. The government claimed that the defendants did so by billing for more skilled rehabilitation therapy (and thus higher reimbursement rates) than what was medically necessary for patients.

The government’s key witness regarding these practices was Dr. Rebecca Clearwater, a contractor leading program integrity reviews for the Center for Medicare and Medicaid Services. After Clearwater’s expert deposition earlier this fall, the defendants moved to exclude her testimony, arguing that her opinions were unreliable given her lack of qualification, along with numerous errors, omissions, and contradictions in her testimony regarding her review practices.

The most recent drama began on October 15, when the government, five days before the Daubert hearing, suddenly produced 5,000 pages of handwritten notes related to Clearwater’s and her nurse reviewers’ assessments of SNF patient therapy protocols. Clearwater had previously denied the existence of any such notes. The defendants then moved for sanctions, arguing that the government had engaged in a pattern of discovery abuses and deprived defendants of their right to challenge Clearwater’s opinions by producing the notes after the close of discovery.

At the October 27 sanctions motion hearing, Judge Buchanan took no mercy on the government or their witness. She found that the produced notes showed significant differences of opinion between Clearwater and her team of nurse reviewers regarding the necessity of patients’ therapies that were not reflected in Clearwater’s expert report, and that her lack of memory of the notes at her deposition was “inconceivable and incredible,” making her an untruthful witness. She also placed blame squarely on DOJ for failing to question Clearwater adequately about the existence of notes and taking so long to produce them (a whopping five weeks with no advance warning to defendants about their large volume). DOJ’s delay was even less excusable given that the production came after the parties had fully briefed motions for summary judgment and motions in limine. Ruling from the bench, Judge Buchanan struck Clearwater’s entire report and excluded her from testifying given her “utter lack of credibility.”

But Judge Buchanan did not stop there, going on to state that she was “appalled,” “embarrassed,” and “ashamed” that the government “would rely on this kind of nonsense” (i.e., center its case around Clearwater’s opinions when her own notes showed the billed therapies may have actually been necessary) “…to get involved in a qui tam case and cost these defendants millions of dollars in legal fees.” She awarded costs for the motion for sanctions to defendants, and said that defendants should be entitled to costs involved in the deposition itself, should a procedural vehicle for such an award be presented.

After the Court’s ruling, DOJ seemed to see the writing on the wall and the potential for greater losses, and started making moves to have the case dismissed. On November 8, DOJ and the defendants jointly moved to stay consideration of the pending motions for summary judgment so that the government could instead move to dismiss with prejudice by November 17. That motion noted also that defendants would not seek any fees or expenses in connection with the matter.

Meanwhile, the original relator was not pleased to learn her case would be dismissed. On November 8, she filed a motion to preclude the government and defendants from dismissing the case until a settlement is approved by the Court. On November 13, she filed a motion for leave to file an interlocutory appeal under 28 U.S.C. §1292(b) of the Court’s November 9 stay of the summary judgment motions. However, it seems she ultimately gave up the fight, as the government’s motion to dismiss filed on November 17 noted that the relators had stipulated to dismissal with prejudice along with defendants.

The dismissal of this case will be a welcome result for our defense bar readers of LLB who may themselves have been involved in FCA cases that, to borrow a line from Judge Buchanan, “should [never] have been brought.”


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