The False Claims Act is the primary federal tool the Department of Justice uses against skilled nursing facilities that bill Medicare and Medicaid for care the record cannot support. Three theories recur: therapy billed above what the clinical documentation justifies, care billed as delivered when it had no medical value, and services billed for staffing the facility did not actually have on the floor. In September 2026, a Massachusetts operator and two executives paid $1 million over inflated therapy billing. In June 2025, an Ohio-based nonprofit and three affiliated nursing homes paid $3.61 million after the government alleged grossly substandard care tied to understaffing and failed infection control.
Therapy Upcoding and the Ultra-High RUG Problem
RegalCare Management Group and RegalCare Management 2.0, with owner Eliyahu Mirlis and executive Hector Caraballo, agreed in September 2026 to pay $1 million to resolve a qui tam suit alleging the company billed Medicare and Massachusetts Medicaid for skilled nursing rehabilitation therapy that was medically unreasonable and unnecessary. As part of the settlement, RegalCare, Mirlis, and Caraballo admitted that at various times between 2018 and 2023, Caraballo modified SNF records to support Ultra High Resource Utilization Group (RUG) claims without assessing or speaking to patients, and that Mirlis directed the billing company to submit claims before patients' assessment forms were finalized. The whistleblower received $165,000 of the settlement. Auditors look for exactly this pattern: a billing level the documentation does not support, entered by someone other than the clinician who should have made the assessment.
The Worthless-Services Theory
A separate theory sets the billing level aside entirely and asks whether the care itself had any medical value. Federal courts, including the Second Circuit, have addressed worthless services as a basis for False Claims Act liability in cases such as United States ex rel. Mikes v. Straus. How a circuit applies and limits that theory varies, so a facility facing a worthless-services claim should have counsel confirm the current law in its circuit. Under the Act's knowledge standard, the government still has to show the facility knew the care fell below the line that makes a claim false.
Understaffing as the Evidence Behind a Worthless-Services Claim
The American Health Foundation settlement shows how understaffing supplies that proof. The government alleged that AHF and three affiliated facilities, Cheltenham Nursing & Rehabilitation Center in Philadelphia, The Sanctuary at Wilmington Place in Dayton, and Samaritan Care Center and Villa in Medina, billed Medicare and Medicaid for grossly substandard skilled nursing services between 2016 and 2018, citing failed infection control protocols and inadequate staffing. At Cheltenham, the government also alleged a pest-infested building, unnecessary medications, verbal abuse, and failure to safeguard residents' belongings. AHF paid $3.61 million and entered a five-year, chain-wide corporate integrity agreement with HHS-OIG, which runs alongside the payment, not in place of it.
What the Government Still Has to Prove
None of these theories relaxes the False Claims Act's knowledge requirement. Under 31 U.S.C. 3729(b)(1), knowing means actual knowledge, deliberate ignorance, or reckless disregard of the truth; ordinary negligence or a good-faith documentation lapse does not meet that standard on its own. The False Claims Act: What the Government Must Prove Against a Provider walks through each element the government has to establish, and The FCA Knowledge Standard After SuperValu covers how courts have applied that scienter requirement since the 2023 decision. A biller repeating the same good-faith coding choice is a different case than an executive altering assessment records after the fact. Executives named individually in these settlements also face OIG exclusion from federal healthcare programs, a separate remedy from the civil payment.
A bill for therapy the record cannot support and a bill for care that was never delivered are different facts resting on the same statute.
Why Early Legal Counsel Is Critical
It is critical that skilled nursing facilities promptly retain experienced healthcare defense counsel upon receiving a civil investigative demand, a subpoena, a qui tam complaint, or any other sign of a government inquiry into therapy billing, care quality, or staffing levels. Early legal intervention can protect the facility's rights, ensure accurate responses to government requests, avoid inadvertent admissions during an inspection or interview, and preserve defenses that are only available before a complaint is unsealed or a demand letter is answered. Delaying legal representation can significantly affect the outcome of a matter and expose the facility, and the people who run it, to unnecessary risk.
How Health Law Alliance Can Help
Health Law Alliance's skilled nursing facility audit defense attorneys represent nursing homes against False Claims Act investigations built on therapy billing and staffing-driven quality-of-care theories. Health Law Alliance's attorneys have overseen 2,000+ audits and handled 5,000+ matters, with 25+ years of experience. If your facility has received a civil investigative demand, a qui tam complaint, or a request tied to a Corporate Integrity Agreement, contact Health Law Alliance's skilled nursing facility audit defense attorneys for a free, confidential consultation.
