A former employee of a nursing home brought a qui tam action against Catholic Health System of Long Island (“CHS”) alleging that CHS and certain of its affiliates falsely certified their compliance with federal law in violation of the federal False Claims Act and in violation of New York law when they submitted Medicare and Medicaid reimbursement claims without disclosing their ongoing violations of 42 U.S.C. § 1320a-7b(a)(4) (the “Benefits Conversion Statute”).
The former employee (“Relator”) alleged a “fraudulent scheme” by the defendants to divert Medicare and Medicaid funds – reimbursement payments that the nursing home had received – from the nursing home to CHS and the Medical Center. To divert the funds, CHS and the Medical Center allegedly charged the nursing home for “certain utility expenses, payroll expenses[,] and other ancillary medical and laboratory services that either were not incurred at all or that were grossly inflated.” Every year, these charges allegedly drained the nursing home of “hundreds of thousands of dollars . . . that should have been applied to the care of nursing home residents.” Some of the misappropriated funds included monies from a one-time $4.5 million “remediation payment” that the nursing home received from the New York State Department of Health to offset a retroactive reduction of its reimbursement rate.
Relator argued that the nursing home had an obligation to use the Medicare and Medicaid reimbursement and remediation funds to provide additional services to the same or similar residents of the Nursing Home.
Benefits Conversion Statute
Under the Benefits Conversion Statute, criminal penalties attach only if a person, “having made application to receive [a federal health care program] benefit or payment for the use and benefit of another and having received it, knowingly and willfully converts such benefit or payment or any part thereof to a use other than for the use and benefit of such person.” 42 U.S.C. § 1320a-7b(a)(4). By its plain terms, the Benefits Conversion Statute is violated only if three conditions are met: (1) a person applies to receive a benefit or payment for “the use and benefit of another”; (2) the applicant receives such benefit or payment; and (3) after receiving such benefit or payment, the applicant knowingly and willfully converts the benefit or payment to a use other than for such other person. (emphasis added). In other words, if the government makes a payment that is not “for the use and benefit of another” – i.e. , a payment for the use and benefit of the payee — the statute does not apply.
The United States Court of Appeals for the Second Circuit held in its October 16, 2023 decision: “The conduct at issue here could not have violated the Benefits Conversion Statute. Simply put, the Medicare and Medicaid payments reimbursed Nursing Home for past services already rendered, without any requirement that the funds be used to confer a future benefit upon any person. Accordingly, the funds were not “for the use and benefit of another,” and the Benefits Conversion Statute is inapplicable. 42 U.S.C. § 1320a-7b(a)(4) … Because we now hold that the Benefits Conversion Statute is not violated where, as here, the recipient of a reimbursement payment is under no obligation to utilize the funds in any particular way, Relator has failed to plead an FCA or NYFCA claim. Accordingly, we reverse the orders of the district court and remand with instructions to dismiss Relator’s section 1320a-7b(a)(4)-based claims.”
Source U.S. ex rel. Quartararo v. Cath. Health Sys. of Long Island Inc., Docket No, 21-01534).
If you have information regarding false claims having been submitted to Medicare, Medicaid, TRICARE, other federal health care programs, or to other federal agencies/programs, and the information is not publicly known and no actions have been taken by the government with regard to recovering the false claims, you should promptly consult with a False Claims Act attorney (also known as qui tam attorneys) in your U.S. state who may investigate the basis of your False Claims Act allegations and who may also assist you in bringing a qui tam lawsuit on behalf of the United States, if appropriate, for which you may be entitled to receive a portion of the recovery received by the U.S. government.
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