AMARILLO, TX – The government has taken the position that if a facility originally received Medicare certification for participation as a SNF, then that singular event prohibits a DME supplier from billing Part B for products delivered to custodial patients residing in the facility. On February 24, 2015, a Louisiana federal court ruled against the government’s position.

The ruling arose out of a “whistleblower” lawsuit filed by a former employee of Dynasplint Systems, Inc. against Dynasplint. The Department of Justice intervened and alleged that Dynasplint violated the federal False Claims Act by submitting claims to Part B for DME delivered to custodial residents of Medicare-certified SNFs. Brown & Fortunato (“B&F”) represents Dynasplint in the litigation.

By way of background, Part B pays a DME supplier for DME only when the DME is supplied for use in the beneficiary’s “home.” To receive Part B payment, DME suppliers must submit claims based on the place of service where the beneficiary will use the DME.

A beneficiary’s “home” does not include an institution that meets the statutory definition of an SNF. Medicare defines an SNF as an institution (or distinct part of an institution) which, among other things, is “primarily engaged in providing to residents skilled nursing care and related services….or rehabilitation services.”

In a motion for summary judgment, the DOJ argued that a facility’s initial Medicare SNF certification is, by itself, sufficient to trigger the statutory prohibition against Part B payment for DME supplied to the facility’s custodial resident. The government further argued that the initial SNF certification rendered Dynasplint’s Part B claims categorically false. On behalf of Dynasplint, B&F responded that an SNF certification is not sufficient, by itself, to trigger the Part B prohibition. B&F argued that the statutory prohibition against Part B payment does not specify certification of the beneficiary’s facility as the basis for the prohibition.

To the contrary, B&F contended that the statute only prohibits Part B payment for DME if it is supplied to the resident of a facility that meets the statutory definition of an SNF, which requires the facility to be “primarily engaged” in providing skilled nursing care or rehabilitative services to its residents. B&F argued that, had Congress intended certification to be the determining factor, it would have specified certification as the basis for the prohibition…..as opposed to the type of care provided by the facility.

The court ruled that certification is necessary, but not sufficient, to trigger the prohibition against Part B payment for DME supplied to a custodial resident of an SNF. The court was persuaded by Dynasplint’s assertion that certification only implies that the facility was primarily engaged in providing the requisite SNF services at the time of certification.

On behalf of Dynasplint, B&F pointed out that a facility could fall out of compliance (e.g., no longer be “primarily engaged” in providing the requisite level of SNF services) without automatic termination of its SNF certification. The court stated that SNF certification only creates a rebuttable presumption that it is “primarily engaged” in providing skilled nursing or rehabilitative care. False Claims Act liability can, therefore, be imposed only if Dynasplint is unable to provide evidence that a specific facility was no longer “primarily engaged” in providing SNF services at the time Dynasplint submitted Part B claims. The court rejected Dynasplint’s suggestion that it must come up with the definition of “primarily engaged.”

In a subsequent “clarification order,” the court clarified the following sentence found in the February 24, 2015 order: “[a]s a result, Defendants must be able to present contradictory evidence to show that a particular facility is no longer ‘primarily engaged’ in providing the requisite level of care for this Court to impose False Claims Act liability.”

In the clarification order, the court amended the above sentence to read as follows: “As a result, the Court cannot impose False Claims Act liability and treble damages without first affording Defendants an opportunity to avoid that liability by presenting sufficient contradictory evidence at trial to show that a particular Medicare-certified SNF facility is not longer ‘primarily engaged’ in providing the requisite level of care.”

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents pharmacies, HME companies, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or [email protected].