Florida’s largest nursing home provider is again facing a quarter-billion-dollar judgment for fraud that company leaders have said could cause its “immediate economic extinction.”
An appeals court last week affirmed part of a jury’s finding that Consulate Health Care, which operates a tenth of all Florida nursing homes, systematically defrauded the government by providing medically unnecessary treatments to patients.
While calling the judgment “huge,” one industry watcher predicted that Consulate homes will continue operating, even if the company continues to appeal the ruling or files for bankruptcy.
But a union that covers health care workers said patient care could suffer and workers could be left without sufficient protective gear as COVID-19 ravages long-term care facilities nationwide.
“If they actually have to pay this, that’s a scary thought. I don’t know where the money comes from,” said Toby Edelman, senior policy attorney for the Center for Medicare Advocacy in Washington, D.C. “Are they going to take it out of the CEO’s salary? Probably not.”
Consulate, based in Maitland, a suburb of Orlando, owns about 70 of Florida’s 693 nursing homes, and operates in every metro area. In all, the privately held company owns and controls about 150 nursing homes and assisted living facilities, mostly in the Southeast and the Mid-Atlantic states.
On its website, Consulate calls itself the nation’s sixth-largest provider of senior health care services.
Consulate spokeswoman Jennifer Trapp did not respond to requests for comment.
Consulate leaders previously laid out the company’s “precarious” financial condition in court documents, arguing that the company was bleeding cash and that a massive legal judgment could trigger a financial collapse that could lead to the “immediate economic extinction” of all Consulate homes.
Brian Lee, former head of Florida’s Long-Term Care Ombudsman program, called the $255 million judgment that was reinstated on June 25 “a very serious penalty.”
“Consulate got caught with their hand in the cookie jar, and the government spanked them with a two-by-four,” said Lee, who now heads the nonprofit Families for Better Care. “This fine is huge.”
Lee said he suspects Consulate’s nursing homes will remain open, but if the judgment sticks he worries people who live and work in the facilities will “feel the pinch of this down the line.”
A 2018 USA TODAY Network – Florida investigation found that a majority of Consulate nursing homes in the state received below-average ratings from federal regulators.
“We already know that Consulate has a pretty troubling track record. It could get a lot worse,” Lee said.
The whistleblower suit
The whistleblower lawsuit against Consulate was filed in 2011 by Angela Ruckh, a nurse who worked at two North Florida nursing homes that are part of the chain that purchased Consulate and took its name.
In the lawsuit, she accused the company of upcoding patients on Medicare to make them look as if they needed more care and services than they actually did. They then provided patients with unnecessary and sometimes harmful therapies so the company could bill the government more.
Medicare, the federal health insurance program for people 65 and older, at the time allowed nursing homes to bill separately for certain services and therapy, making those patients valuable. The Centers for Medicare & Medicaid Services has since changed how nursing homes are paid.
Ruckh also claimed that Consulate nursing homes denied treatment and services to patients on Medicaid, a federal and state program for the poor that pays providers a flat, daily rate.
After a 22-day trial, a jury issued a $347.8 million judgment against Consulate in 2017. But a year later, a federal judge in Tampa overturned the jury’s verdict, citing lack of evidence of a corporate scheme and noting that state and federal regulators appeared to view the disputed practices with “leniency or tolerance or indifference, or perhaps with resignation.”
A three-judge panel with the Eleventh Circuit Court of Appeals in Atlanta partially reversed the Tampa judge on June 25, upholding the jury’s verdict in the Medicare claims and reinstating part of the judgment, $255 million, against Consulate. The panel upheld the Tampa judge’s ruling that overturned the jury’s verdict in the Medicaid claims.
Derek Ho, lead appellate counsel for Ruckh, said in a statement that the appeals court’s ruling will “ensure one of the nation’s largest providers of senior services is held accountable for committing fraud against American taxpayers.”
More of our coverage: Even when staffs cause patient deaths, Florida nursing homes face few penalties
The $255 million judgment dwarfs recent settlements elder care companies have agreed to pay to resolve allegations they violated the federal False Claims Act, a Civil War era-law which imposes liability on companies that defraud governmental programs.
In 2017, Pennsylvania-based Genesis Healthcare, the country’s largest nursing home provider, agreed to pay the federal government $53.6 million to resolve False Claims Act allegations. In 2018, Signature HealthCARE of Kentucky agreed to pay $30 million to resolve similar allegations.
In 2016, Kentucky-based Kindred/Rehabcare, the nation’s largest nursing home therapy provider, agreed to pay $125 million to resolve a lawsuit alleging the company filed false Medicare claims.
Bill Dean, a former Miami-Dade prosecutor who now specializes in suing nursing homes, said there is “no doubt” the reinstated judgment will have a “catastrophic impact” on Consulate’s bottom line.
“I think they have to be seriously considering bankruptcy,” he said.
If Consulate were to file for bankruptcy, he said, the company’s nursing homes would most likely remain open, residents would still be cared for and employees would still be paid.
But the status quo isn’t good enough, said Dale Ewart, regional director for the 1199 SEIU healthcare workers union in Miami. He said the union has had long-running concerns about Consulate’s labor practices, including “generally the low pay” and “the very small number of employees that get health insurance.”
Earlier this year the union filed complaints with state and federal regulators, arguing that Consulate hasn’t provided its workers with appropriate personal protective equipment to avoid COVID-19 infections.
“I just want to make sure the judgment isn’t paid out of any funds that divert from staffing or personal protective equipment that folks have, or for quality care,” Ewart said.
He said it is a “nightmare” when nursing home companies file for bankruptcy.
“It makes it difficult to make decisions. It makes it difficult to assess responsibility,” he said. “Getting mired in bankruptcy is not an ideal situation for anyone.”
Edelman, the Center for Medicare Advocacy attorney, said Consulate likely still has some legal options.
Consulate lawyers could ask for a rehearing in front of the full panel of Eleventh Circuit Court judges, she said. They also could petition the Supreme Court, or file new motions with the district court in Tampa.
Charlene Harrington, a nursing professor and researcher at the University of California, San Francisco called the judgment against Consulate “the cost of doing business.”
“It will be interesting to see what Consulate does,” Harrington said. “If they are in financial trouble, then it really could knock them for a loop.”
Consulate reported operating revenues of $1.7 billion in 2016, according to the American Health Care Association. The chain is owned by Atlanta-based private equity firm Formation Capital.
Harrington said she wishes judgments against nursing home companies like Consulate were generally bigger to discourage investors who are only in the nursing home business to make money.
“We shouldn’t be condoning this type of business model,” she said. “I think it’s good when the court says that this is not acceptable.”
Lee, the former long-term care ombudsman, said he suspects Consulate will survive the judgment and could emerge with more industry clout.
“Consulate is not going anywhere,” he said. “I don’t see this killing them. I just don’t see it.”
Ryan Mills is an investigative reporter with the Naples Daily News and The News-Press. Connect with him at [email protected], at facebook.com/ndnryan.mills or on Twitter @NDN_RMills.
Read or Share this story: https://www.naplesnews.com/story/news/local/florida/2020/07/02/consulate-health-care-florida-fraud-reinstated-judgment-255-million/3278365001/