In a March 3, 2020, speech by Attorney General Bill Barr, the Department of Justice (DOJ) announced a new nursing home enforcement initiative targeting “grossly-substandard” care of Medicare and Medicaid beneficiaries in nursing homes nationwide. The DOJ, in partnership with the U.S. Department of Health and Human Services, will also seek to enhance enforcement of civil and criminal efforts to more aggressively pursue owners and operators of nursing homes that mistreat residents, with a particular focus on withholding of food or medication, understaffing shifts, the use of physical and chemical restraints, and inadequate infection control practices.

As part of a broader initiative to combat elder fraud and abuse, Barr announced that approximately 30 nursing facilities in nine states are under investigation and cited facilities that were “unfit for living.” Particularly in an election year, this new initiative could lead to a significant expansion of civil fines and criminal penalties to shine a bright light on fraudulent and abusive practices and substandard facilities in the nursing home space. Although this initiative only purportedly covers nursing homes, there is some concern that the initiative could also expand to elder abuse and neglect in the broader long-term care arena, such as assisted living, home health and even skilled facilities in the future.

This announcement also confirms reports from last fall that the DOJ was making a push to more aggressively identify civil and criminal charges to be brought against the nation’s 15,000+ nursing homes and confluence with the expansion of False Claims Act actions in this space as well. In early 2019, a large long-term care system agreed to pay more than $18 million to settle False Claims Act liability related to the submission of claims to government payors for services provided to Medicare and Medicaid beneficiaries, alleging the underlying services were “grossly substandard or worthless.” Particularly, the DOJ alleged, in part, that five nursing facilities “failed to administer medications as prescribed; failed to provide standard infection control, resulting in urinary tract infections and wound infections; failed to provide wound care as ordered; failed to take prophylactic measures to prevent pressure ulcers, such as turning and repositioning; used unnecessary physical restraints on residents; and failed to meet basic nutrition and hygiene requirements of residents.”

This attention by the DOJ on personal liability for substandard services is not new, but represents a greater or reinvigorated focus on issues that continue to plague the industry. Over the better part of the past decade, the DOJ has taken an aggressive stance on enforcement against owners and operators of nursing homes giving poor care and providing improper services. In 2012, a Georgia nursing home operator was sentenced to 20 years in federal prison and ordered to pay more than $7 million in restitution to the government when surveyors found food shortages, poor sanitary conditions, staff shortages and other resident safety concerns in his facility. In 2019, a Miami-based owner of a chain of assisted-living and nursing home facilities was sentenced to 20 years in prison for accepting kickbacks and paying bribes to obtain improper referrals and provide unnecessary services (including mental health and prescription drug services) to Medicare and Medicaid beneficiaries.

Barr emphasized that “[t]he Initiative will bring to justice those owners and operators who put profits before patients, and it will help to ensure that the residents receive the care to which they are entitled.” The 2019 long-term care system settlement referenced above included $250,000 of additional fines brought against the system’s majority owner and former director of operations to further emphasize DOJ’s renewed focus on personal liability.

In addition to providing quality care to their residents, nursing homes and other long-term care facilities should closely scrutinize the areas for improvement the DOJ identified in its recent prosecutions cited above, as well as in its March 3 announcement. Specifically, Barr recounted a number of “horrifying examples” of mistreatment in his speech, where the DOJ and HHS found gaps in facility pest control, infection control and hygienic practices; poor care indicators such as resident pressure ulcers, pain and infections; and physical facility, resident nutrition and insufficient staffing levels. The DOJ may also more closely monitor areas of elder fraud, including manipulation or theft from resident trust accounts.

For lenders, private equity or other investors in this space, it is important to consider conducting robust diligence related to these issues, such as reviewing and understanding where these issues may come to light through the survey process and patient or family complaints, as they have the potential to significantly impact business from both financial and reputational perspectives. For those already invested, in addition to the increased scrutiny and potential for a government investigation in existing portfolio companies, consideration should be given to appropriately tracking and monitoring survey, complaint and potential related litigation matters to better anticipate issues and understand the steps being taken to mitigate the risks.

For questions or assistance on how this new approach may affect your facility, read about and contact McGuireWoods’ healthcare team.