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Nursing Homes to Receive $4.9 Billion. Is Fraud Inevitable?

In the wake of COVID-19, the Center for Medicare & Medicaid Services (CMS) has provided billions of dollars in emergency federal funding for nursing homes. The CARES Act recently allotted $4.9 billion to help with the added cost of personal protective equipment (PPE) and other equipment necessary to meet the demands of the public health emergency. With this increase in funding, however, comes an increased opportunity for fraud.

A Washington Post article from August reported on nursing homes facing accusations of Medicare fraud, e.g., billing for medical services that patients never received, following the availability of federal “no strings attached” COVID-19 relief funds. (Troublingly, the same article also reported that the initial round of COVID-19 relief from government agency Health and Human Services did not provide hazard pay for nurses, nor did it include requirements for the nursing home staff to wear PPE.) More than a dozen skilled nursing facilities have settled civil lawsuits, which so far have repaid $260 million.

On August 27, 2020, Health and Human Services (HHS) announced that $2.5 billion of the approximately $5 billion will cover upfront funding for testing kits, increased staff, and more PPE. In order to get the funding, nursing homes must demonstrate that they’re following staff testing protocols. According to Alex Azar, the Secretary of HHS, linking the money to nursing home performance provides “powerful incentives for nursing homes to better protect their residents from the virus.”

How Nursing Homes Defraud the Government (and Mistreat Patients)

Too often, the healthcare industry seemingly hasn’t had the incentive it needs, and nursing home fraud has cost the government billions of dollars in recent years. In 2019, an FBI-led Medicare Fraud Strike Force team uncovered an alleged $1 billion worth of healthcare fraud. The investigation led to an indictment that charged Phillip Esformes, the owner of over 30 skilled nursing homes and assisted living facilities, with providing residents with medically unnecessary services. The indictment alleges that Esformes received payment in kickbacks from the providers, and billed Medicare and Medicaid for high-priced drugs that patients did not receive.

This year has seen a continuation of a probe into nursing home fraud in Indianapolis, where an investigation by the IndyStar found that the CEO of Health & Hospital Corp, Matthew Gutwein, had allegedly taken “advantage of loose Medicaid rules to legally divert more than $1 billion in federal nursing home funds,” all while “vulnerable nursing home residents suffered from inadequate care.” This allegedly resulted in more than 80 wrongful death and injury claims. Gutwein’s alleged scheme is the latest on a list of another two dozen schemes in Indiana that resulted in $35 million worth of fraud, of which only $15.5 million has been recovered so far.

What is the Government Doing to Prevent Fraud?

Now, with more funding earmarked for equipment and extra staff, the government has good reason to take precautions to prevent fraud. In the midst of the crisis, CMS has loosened its requirements around updating medical records, in an effort to make sure that patients get the bedside care they needed as quickly as possible. The center also waived several other restrictions around medical record-keeping, which will presumably make an audit of a skilled nursing facility more difficult.

What can the government do to counteract potential fraud?

  • In the new mandates, CMS limits the number of COVID-19 tests that can be ordered without an order from a physician or a non-physician practitioner. This is called the “one test” rule.
  • Due to the huge amounts of data, CMS is turning to artificial intelligence (AI) to combat fraud and look for patterns that don’t add up. AI can examine the records to see if a patient actually received the medicine that a nursing home billed to Medicaid.

States Protect Themselves from COVID-19 Lawsuits

The federal government is ramping up their assistance as states move to protect their nursing homes from COVID-19-related medical lawsuits. Some states have already taken steps to protect themselves from legal action in the event that their lack of proper equipment leads to death or injury. In Connecticut, an executive order protects nursing home staff and hospitals from lawsuits in the event of injury or death that results from “acts or omissions undertaken because of a lack of resources, attributable to the COVID-19 pandemic.” Over 3,000 nursing home residents have died in Connecticut nursing homes from COVID-19, making it one of hardest-hits states in the U.S.

Unfortunately, this order also protects nursing homes from having to provide information about their patients in the days leading up to their death from COVID-19. This is especially disturbing given that many nursing homes have prohibited visitors to help slow the virus’s spread, making it easier for neglect to go unnoticed. A total of 21 states have already made similar decrees to protect nursing home management and staff from COVID-19-related lawsuits.

(Related: Inside the Secret Campaign to Shield Nursing Homes from Coronavirus Lawsuits.)

We can’t assume that the CARES Act and federal oversight is going to take care of our elderly. History has shown that without active steps to prevent misallocation of funds, some unscrupulous nursing homes will find ways to exploit the extra money. It’s up to savvy individuals (and nursing home abuse attorneys) to be their watchdogs, and make sure their elderly nursing home residents are receiving the full benefit of CMS’s initiatives designed to combat the spread of COVID-19.