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Whistleblower suits spawn record $145M FCA settlement with skilled nursing facility chain

The Justice Department announced on October 24 that Life Care Centers of America Inc. and its owner will pay a record-breaking $145 million to resolve allegations that the company violated the False Claims Act by knowingly causing skilled nursing facilities to submit false claims to Medicare and TRICARE for rehabilitation therapy services that were not reasonable, necessary or skilled. Cleveland, Tennessee-based Life Care owns and operates more than 220 skilled nursing facilities across the country. The settlement is the DOJ’s largest to date with a skilled nursing facility chain, according to a department release.

The reimbursement scheme. Between January 1, 2006, and February 28, 2013, Life Care purportedly submitted false claims for rehabilitation therapy by engaging in a systematic effort to increase its Medicare and TRICARE billings. Medicare reimbursements to skilled nursing facilities are made at a daily rate that reflects the skilled therapy and nursing needs of their qualifying patients, with greater skilled therapy and nursing needs being reimbursed at higher levels. The highest level of Medicare reimbursement is for “Ultra High” patients who require a minimum of 720 minutes of skilled therapy from two therapy disciplines, one of which has to be provided five days a week.

Life Care instituted corporate-wide policies and practices aimed at placing as many beneficiaries in the Ultra High reimbursement irrespective of the clinical needs of the patients, resulting in it providing unreasonable and unnecessary therapy to many beneficiaries, according to the federal government’s complaint. The company also allegedly tried to keep patients longer than necessary in order to continue billing for rehabilitation therapy, even after treating therapists felt that therapy should be discontinued. Life Care carefully tracked the minutes of therapy provided to each patient and number of days in therapy to ensure that as many patients as possible were at the highest level of reimbursement for the longest possible period, the Justice Department said.

The settlement also resolves allegations brought in a separate lawsuit by the United States asserting that the sole shareholder of Life Care was unjustly enriched by the company’s fraudulent scheme.

Corporate integrity agreement. Life Care has also entered into a five-year chain-wide Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General. That agreement requires an independent review organization to annually assess the medical necessity and appropriateness of therapy services billed to Medicare.

“Therapy provided in skilled nursing facilities must be medically reasonable and necessary, and we will continue to vigorously investigate companies that subject their residents to needless and unreasonable therapy,” said HHS Inspector General Daniel R. Levinson. “The corporate integrity agreement with Life Care is designed to ensure that it only provides therapy based on the individual needs of each resident.”

Whistleblowers suits. The DOJ noted that the settlement was based Life Care’s ability to pay. It resolves allegations originally brought in lawsuits filed under False Claims Act whistleblower provisions by two former Life Care employees. The whistleblower reward in this case will be $29 million.

The two qui tam cases, United States ex rel. Taylor v. Life Care Centers of America, Inc. and United States ex rel. Martin v. Life Care Centers of America, Inc., were filed in the Eastern District of Tennessee; they are case Nos. 1:12-cv-6 and No. 1:08-cv-251, respectively.

The case against Life Care’s owner, United States v. Preston, was also filed in the Eastern District of Tennessee; that case is No. 1:16-cv-113.