7th Circuit Defines "Worthless Services" Under the False Claims Act

04 September 2014 Wisconsin Appellate Law Blog

“Services that are ‘worth less’ are not ‘worthless.’”

* * * * *

That’s the upshot from U.S. ex rel. Absher v. Momence Meadows Nursing Center, Nos. 13-1886 & 13-1936 (Aug. 20, 2014), a recent decision from the Seventh Circuit (authored by Judge Manion) that addressed the worthless-services theory of liability under the False Claims Act.

The worthless-services theory is the idea that a qui tam relator could prove a violation of the False Claims Act if the defendant was reimbursed for products or services that had a value equal to zero. To obtain reimbursement for providing something truly worthless would seem to be the essence of a “false claim.” The theory has been adopted by the U.S. Courts of Appeals for the Second, Sixth, Eighth, and Ninth Circuits. But it hasn’t been adopted by the Seventh Circuit, though the court considered it at length in Absher. Ultimately it was Absher‘s facts that caused the Seventh Circuit to stop short. 

Vanessa Absher and Lynda Mitchell were nurses at Momence Meadows Nursing Center, a 140-bed long-term care facility in Kankakee County, Illinois. The nurses (no longer employed at Momence and disgruntled about their time there) brought suit under the False Claims Act, alleging that the facility had violated the act by knowingly submitting “thousands of false claims to the Medicare and Medicaid programs.” At the crux of the allegations was that Momence provided substandard care. A jury awarded substantial damages, including $3 million to the United States to compensate it for the reimbursements (ultimately trebled to $9 million under the act) and $19 million in fines for the qui tam claims. The district court struck the fines, however, finding them excessive under the Eighth Amendment.

The Seventh Circuit vacated the judgment and remanded to the district court with instructions to enter judgment for Momence. The problem was that Absher and Mitchell argued to the jury that Momence had provided substandard services worth less than their reimbursement value, but not that Momence had provided completely worthless services. The district court even instructed the jury that “[s]ervices can be worthless, and the claims for those services can, for that reason be false, even if the nursing facility in fact provided some services to the patient. To find worthless services, you do not need to find that the patient received no services at all.”

That was wrong. “It is not enough,” the Seventh Circuit wrote, “to offer evidence that the defendant provided services that are worth some amount less than the services paid for. That is, a ‘diminished value’ of services theory does not satisfy this standard. Services that are ‘worth less’ are not ‘worthless.’”

The Seventh Circuit declined the opportunity to adopt the worthless-services theory, but it noted that, under existing case law in the circuit, worthless services could be “evidence that a claim for reimbursement is false or fraudulent (under a false certification theory of liability).”

Momence, at any rate, was off the hook.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services

Insights

A Review of Recent Whistleblower Developments
19 July 2019
Legal News: Whistleblower Developments
Cloud security inadequate for Cyber threats, are you surprised?
19 July 2019
Internet, IT & e-Discovery Blog
Blockchain: A Tool With a Future in Healthcare
18 July 2019
Health Care Law Today
Do You Know What IMMEX Stands For?
16 July 2019
Dashboard Insights
Review of 2020 Medicare Changes for Telehealth
11 December 2019
Member Call
2019 NDI Executive Exchange
14-15 November 2019
Chicago, IL
MAGI’s Clinical Research Conference
29 October 2019
Las Vegas, NV
Association for Corporate Counsel Annual Meeting 2019
27-30 October 2019
Phoenix, AZ