U.S. Attorney Announces Permanent, Lifetime Exclusion for Quality of Care Failures

18 June 2008 Publication
Authors: Nathaniel M. Lacktman Lawrence W. Vernaglia Judith A. Waltz

Legal News Alert: Health Care

On June 10, 2008, United States Attorney’s Office for the Eastern District of Pennsylvania entered into a groundbreaking settlement agreement based upon substandard quality of care. Under the settlement, the health care facilities, the management company, and the individual owner, Rosalind S. Lavin agreed never again to own or operate a health care facility and never again to participate in any federally funded health care program. The settlement reflects enforcement authorities’ expanded efforts to investigate and regulate quality of care and a willingness to explore various approaches to enforce quality of care standards, including permanently excluding violators from participation in federal or state health care payment programs and barring them from working in the health care field.

The settlement arose from an investigation of adult residential care facilities, known as personal care homes, in Pennsylvania. Personal care homes house and treat adult residents, many of whom suffer from physical or mental health problems. The government alleged the defendant facilities consistently failed to meet federal standards, and residents received inadequate and dangerous care. Alleged quality of care violations included: Structurally unsafe residences; inadequate security; insufficient nutrition; unsanitary conditions; irregular and limited personal care; inadequate oversight of medications; inadequate and unclean clothing, linens, and bedding; and inadequate activities of daily living. The government also alleged that Lavin diverted residents’ Social Security and Supplemental Security Income benefits for her personal use and failed to provide a proper accounting of those benefits.

“When the [quality of care] criteria set by the government are not met or are ignored, it is incumbent upon us to defend those who cannot defend themselves over shortfalls,” stated U.S. Attorney Patrick L. Meehan in a press release.

Among the settlement terms were the following key provisions:

  • $700,000 payment by the owners/entities
  • The entities and their owners can never again act as representative payees for purposes of receiving federal government benefits
  • The entities and their owners agreed to withdraw from and never again to participate in federally funded health care programs
  • The individual owner agreed to a formal lifetime exclusion that barred her from receiving payment from Medicare, Medicaid, and all other federal health care programs
  • None of the entities/owners can ever own, co-own, operate, consult for, manage, or otherwise serve as an officer, director, or agent for any government-funded or private facility at which health care is provided
  • The parties did not admit liability or wrongdoing

First-of-Its-Kind Settlement Agreement
According to the U.S. Department of Justice, the Lavin settlement is the first of its kind for these adult residential facilities. Other enforcement authorities may elect to pursue this approach when faced with quality of care failures. Unlike cases of isolated fraud or false certification, the government sometimes takes a tougher approach to facilities with demonstrated patterns of chronic, substandard care. Rather than incur the risk and expense of heightened scrutiny and extensive monitoring, enforcement authorities may prefer to remove permanently the offending owners and operators from health care programs by mandating a permanent lifetime exclusion coupled with a prohibition against ever working in the health care industry.

Federal and state authorities continue to explore new and creative ways to improve quality of care. As the Lavin settlement revealed, all health care facilities should carefully consider the impact of these new and far-reaching settlement demands in quality of care actions.


Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals: 

Janice A. Anderson
Chicago, Illinois
312.832.4530
janderson@foley.com

Nathaniel M. Lacktman
Tampa, Florida
813.225.4127
nlacktman@foley.com

Lawrence W. Vernaglia
Boston, Massachusetts
617.342.4079
lvernaglia@foley.com

Cheryl L. Wagonhurst
Los Angeles, California
213.972.4681
cwagonhurst@foley.com

Judith A. Waltz
San Francisco, California
415.438.6412
jwaltz@foley.com

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