Please ensure Javascript is enabled for purposes of website accessibility

Anticipate scrutiny of value-based program data

A recent lawsuit alleged that a Kansas hospital violated the False Claims Act (FCA) by manipulating data submitted to the Centers for Medicare and Medicaid Services (CMS) as part of a value-based program.

Alexandria K. Montanio

Alexandria K. Montanio

Though the U.S. District Court for the District of Kansas, in U.S. ex rel. Duffy v. Lawrence Mem’l Hospital, ultimately concluded that the alleged manipulation was not sufficient to support an FCA claim in this particular case, under the materiality test articulated by the U.S. Supreme Court in Universal Health Services v. Escobar, the opinion provides insight about how quality metrics could be used to impose liability on providers in other scenarios.

The facts

A former nurse at Lawrence Memorial Hospital alleged that the hospital manipulated data reflecting the arrival time of patients to improve reporting to CMS value-based programs, such as the Inpatient Quality Reporting Program (IQRP), Outpatient Quality Reporting Program (OQRP) and Hospital Value Based Purchasing (HVBP).

CMS sets a payment rate in advance for procedures at hospitals outside of Maryland, but those rates can be improved by submitting data to the value-based programs.  These programs encourage hospitals to focus on the quality of care they provide to patients, not just the quantity of services.

The value-based programs track a variety of measures to evaluate the quality of patient care, and arrival time is one component of some of those measures. It enables CMS to track how long patients wait to receive care after arrival, which can affect patient outcomes — for example, when a patient presents with chest pains.

The nurse alleged that the hospital would perform an ECG prior to registering patients with chest pains, so that this test was the earliest documented event in the medical record for the encounter, artificially decreasing the time it appeared patients were waiting for care and improving the hospital’s metrics on some elements of the value-based programs.

The decision

The FCA prohibits providers from submitting fraudulent claims for payment to the government for services.  Crucially, liability under the FCA only occurs when a statement is both knowingly and materially false.  The court held that the hospital’s way of documenting arrival times was not material, that is, the inaccuracy was not sufficiently critical so that CMS would modify its payment if it had known about it.

The court observed that even though CMS generally requires accurate data, the law does not require perfect reporting to avoid FCA liability. Further, the nurse failed to identify a specific provision that required accuracy of reporting of this type of metric in the value-based programs, even though the hospital submitted annual certifications attesting to the accuracy of its data.

Moreover, the court found that a general and broad certification that a participant is going to comply with applicable laws and regulations cannot be the basis for proving that a particular false claim is material.

Further, for years after CMS was made aware of the arrival time issue while the lawsuit was pending, it continued to pay claims to the hospital based on the same type of data, suggesting that CMS did not view this inaccuracy to be a material issue.

After considering these factors, the court ruled in favor of the hospital, though the nurse has appealed the decision.


The analysis in this case is factually specific, and another court could hold that other potentially manipulative methods of collecting data to support quality metrics are material in an FCA case. As the importance and prevalence of value-based programs continues to grow, providers should anticipate increased scrutiny from CMS and have a compliance program in place to avoid questions of data manipulation or inaccuracy.

Barry F. Rosen, chairman of Gordon Feinblatt’s Health Care Practice Group, can be reached at 410-576-4224 or [email protected]. Alexandria K. Montanio, an associate in Gordon Feinblatt’s Litigation and Health Care Practice Groups, can be reached at 410-576-4278 or [email protected] 







Barry F. Rosen is chairman and CEO of Gordon Feinblatt LLC and heads the firm’s Health Care Practice Group. He can be reached at 410-576-4224 or [email protected]