The Legal Costs of Missed Credential Renewals in Nursing Homes

Operating a nursing home involves adhering to stringent regulations, including the requirement that all healthcare professionals maintain up-to-date licenses and certifications. When nursing homes fail to maintain updated staff credentials, they not only risk compromising patient care but also open themselves up to significant legal and financial penalties. The consequences for employing unlicensed professionals extend far beyond fines; they can involve repayment obligations, federal and state penalties, and even exposure to criminal charges. This article will explore some of the risks nursing homes face when credentials lapse and offer insights into how nursing facilities can mitigate these challenges.

Unlicensed Work and Repayment Obligations

Healthcare providers, including nursing homes, that receive payments from federal or private payers for services provided by unlicensed staff may be required to return those funds. Payments made by Medicare, Medicaid, and private insurers are contingent upon the provision of services by licensed, certified professionals. Any billing for services rendered by unlicensed personnel is considered invalid, and providers must consider repaying those amounts. To assess whether self-disclosure is necessary, facilities should consult applicable guidelines, such as those discussed in previous articles or regulatory advisories and their healthcare legal counsel.

Federal Statutes and Regulations

A. False Claims Act (FCA)

The False Claims Act (FCA) is a primary tool the government uses to combat healthcare fraud. Under the FCA, it is illegal to submit claims for reimbursement for services provided by unlicensed staff. When a nursing home knowingly or unknowingly bills Medicare or Medicaid for services rendered by unlicensed individuals, it may face FCA charges.

One of the most powerful aspects of the FCA is the “qui tam” provision, which allows whistleblowers to file lawsuits on behalf of the government. This can lead to substantial penalties, including treble damages (three times the original claim amount) and civil penalties. 

B. Medicare Conditions of Participation

The Medicare Conditions of Participation outline specific standards nursing homes must meet to qualify for Medicare payments. Employing unlicensed staff directly violates these conditions, which, in extreme circumstances, could lead to termination of the nursing home’s Medicare contract and/or exclusion of the nursing home from Medicare/Medicaid services. This is particularly concerning for facilities reliant on Medicare as a primary funding source.

C. Federal Criminal Healthcare Offenses

There are several federal criminal statutes that nursing homes could violate by employing unlicensed professionals:

1. Health Care Fraud (18 USC § 1347) – Criminal charges may be brought against facilities that attempt to defraud any healthcare benefit program.
2. False Statements Relating to Health Care Matters (18 USC § 1035) – Making false statements or concealing information in connection with health care matters is a federal offense.
3. Mail and Wire Fraud (18 USC §§ 1341 and 1343) – Using mail or wire communications to execute or attempt a healthcare fraud scheme can lead to criminal penalties.
4. Theft or Embezzlement in Connection with Health Care (18 USC § 669) – Facilities found embezzling or misappropriating healthcare funds face severe repercussions.
5. Eliminating Kickbacks in Recovery Act (EKRA, 18 USC § 220) – EKRA prohibits kickbacks and other forms of patient brokering, which may be relevant in cases involving improper certification renewals if these lead to fraudulent billing practices.

State Statutes That Apply

In addition to federal laws, most states have their own statutes related to healthcare fraud and credentialing compliance.

• Insurance Fraud and False Healthcare Claims – State laws often require repayment and impose penalties on nursing homes that file false claims for services provided by uncertified staff.
• Anti-Kickback and Fee-Splitting Laws – Many states enforce laws prohibiting fee-splitting and kickbacks, which could intersect with non-compliance in credentialing if it leads to deceptive financial practices.
• Consumer Protection, Unfair Trade Practices, and Competition Laws – Using uncertified staff could be seen as an unfair business practice, exposing facilities to consumer protection lawsuits and significant fines.
• State Licensure Laws – States mandate specific licensing for healthcare professionals. When nursing homes employ uncertified personnel, they may face penalties or even lose their operating licenses.

Common Law Claims

In addition to statutory claims, nursing homes may face civil suits based on common law, including:

• Breach of Contract – If the nursing home has contracts with payers that specify staff must be licensed, a breach could lead to claims for damages.
• Unjust Enrichment and Restitution – Nursing homes may be required to return funds received for services rendered by unlicensed staff.
• Common Law Fraud and Misrepresentation – If a facility misrepresents staff credentials to payers or patients, it may face fraud charges.
• Negligent Misrepresentation and Intentional Interference with Contractual Relationships – Employing unlicensed staff and billing for their services could interfere with patient contracts and relationships, leading to legal claims.

Nursing homes that utilize uncertified practitioners may also discover that their professional liability insurance excludes coverage for acts committed by unlicensed staff, leading to increased costs for legal defense and damage awards.

Mitigation Strategies for Nursing Homes

To avoid these significant penalties, nursing homes should adopt proactive measures to ensure staff credentials remain current. Here are some practical ways to reduce risks:

1. Maintain Thorough Documentation

Accurate and comprehensive documentation of patient care, including staff credentials, is essential. Keeping detailed records helps nursing homes demonstrate compliance and respond to any credential-related inquiries from regulators or payers.

2. Establish a Corporate Compliance Plan

A well-defined compliance plan that addresses credentialing and certification requirements can help facilities avoid unintentional lapses. Compliance plans should include periodic audits, staff education, and protocols for addressing credentialing lapses swiftly.

3. Avoid Fraudulent Activities

It’s crucial for nursing homes to steer clear of any fraudulent offers or activities. Facilities should only employ certified staff, refrain from misleading billing practices, and comply with payer and government regulations.

4. Understand State Laws and Payer Contracts

Since state laws vary, nursing homes should ensure they understand the specific requirements in their jurisdictions. This includes adhering to state anti-kickback statutes, insurance regulations, and other healthcare-related laws. Payer contracts should also be reviewed carefully to ensure compliance with credentialing clauses.

5. Document Communications with Payers

When communicating with payers about billing and credentialing issues, it’s best practice to document these exchanges. Confirming discussions in writing and maintaining email records can protect facilities if any questions arise regarding compliance.

Criminal and Civil Penalties: A Summary

Below is a summary of the potential penalties nursing homes may face for failing to renew certifications:

• False Claims Act Violations – Treble damages, civil penalties, and potential criminal charges.
• Medicare Participation Violations – Termination of Medicare contracts and loss of payments.
• State Law Violations – Penalties for false claims, anti-kickback infractions, and possible license revocation.
• Common Law Claims – Financial damages related to breach of contract, fraud, and unjust enrichment.

Ensuring that staff credentials are current is essential for maintaining a compliant, trustworthy facility. The legal risks associated with employing unlicensed personnel are too great to ignore. By proactively managing credentialing compliance, nursing homes not only protect their reputation but also safeguard themselves against significant legal and financial repercussions.

‍Disclaimer: This article is for educational and informational purposes only. It is not intended as legal advice. Each self-disclosure case is unique, and nursing homes should consult with qualified legal counsel to address the specific complexities and risks involved in their situation. Engaging legal professionals ensures that appropriate steps are taken and that compliance with all relevant laws and regulations is maintained.