Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality

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A court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.

The relator alleged that, during the course of her employment with defendant Comhar, she either witnessed or heard of numerous instances of substandard care that resulted in Comhar submitting claims for services that “either did not occur or were of such ‘substandard quality that . . . [they] ceased to be compensable by Medicare and Medicaid.’” The claim of falsity was based on both a “worthless services” theory and an implied certification theory. The court rejected both, suggesting that the allegations were “more suggestive of negligence than worthless services” and that the relator had failed to establish materiality.

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