Nursing Home Operator Loses Challenge to ‘Worthless Services’ Conviction

July 7th, 2014 by Qui Tam

The Eleventh Circuit has turned back an appeal from a nursing-home operator convicted of healthcare fraud after he billed government programs while his residents went without food, diapers and medication.

The case, United States v. Houser, is notable for its treatment of the so-called “worthless services” theory, commonly used by whistleblowers alleging fraud against the government under the False Claims Act.

Houser, the nursing-home operator, ran three facilities in Rome, Georgia.  The facilities lacked working heating, air conditioning, diapers and food.  Staff had to borrow medications from some residents and give them to others because Houser failed to pay his pharmacy bill.

Houser was charged with and convicted of conspiracy to commit healthcare fraud based on his submission of claims for the virtually nonexistent services he provided to his residents.  On appeal, Houser argued that his conviction was impermissibly based on a “worthless services” theory, which, he contended, could be applied only in civil suits.  Under a worthless services theory, a contractor can be held liable for defrauding the government if, in performing a contract, it provides products or services that are so deficient as to be of no value to the government.

Houser contended that the worthless-services concept was too vague to be imported into criminal law.  The Eleventh Circuit rebuffed his argument, concluding that his conviction rested on his failure to provide certain services at all, not just the lack of value for services he did provide.

“We do not believe that Mr. Houser’s conviction requires us to draw the proverbial line in the sand for purposes of determining when clearly substandard services become ‘worthless,’” the court wrote.

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