Life Care pays record $145 million to end U.S. case for of false claims to Medicare from skilled nursing facilities

Life Care Centers of America Inc. (Life Care) has agreed to pay $145 million to settle a government whistleblower lawsuit alleging that Life Care violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare and TRICARE for rehabilitation therapy services that were not reasonable, necessary or skilled, the Department of Justice announced today. Life Care, based in Cleveland, Tennessee, owns and operates more than 220 skilled nursing facilities across the country. The settlement is the largest of its kind regarding therapy provided at snfs the next being RehabCare which settled in January for $125 million.

This settlement resolves allegations that between Jan. 1, 2006 and Feb. 28, 2013, Life Care submitted false claims for rehabilitation therapy by engaging in a systematic effort to increase its Medicare and TRICARE billings. Medicare reimburses skilled nursing facilities at a daily rate that reflects the skilled therapy and nursing needs of their qualifying patients. Œ The greater the skilled therapy and nursing needs of the patient, the higher the level of Medicare reimbursement. The highest level of Medicare reimbursement for skilled nursing facilities is for “Ultra High” patients who require a minimum of 720 minutes of skilled therapy from two therapy disciplines (e.g., physical, occupational, speech), one of which has to be provided five days a week.  Complaint:Œ

The United States alleged in its complaint that Life Care instituted corporate-wide policies and practices designed to place as many beneficiaries in the Ultra High reimbursement level irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy to many beneficiaries. Life Care also sought to keep patients longer than was necessary in order to continue billing for rehabilitation therapy, even after the 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 settlement also resolves allegations brought in a separate lawsuit by the United States that Forrest L. Preston, as the sole shareholder of Life Care, was unjustly enriched by Life Care’s fraudulent scheme.

“Billing federal healthcare programs for medically unnecessary rehabilitation services not only undermines the viability of those programs, it exploits our most vulnerable citizens,” said U.S. Attorney Nancy Stallard Harr for the Eastern District of Tennessee. “We are committed to working with our federal partners to protect both.”

As part of this settlement, 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 (HHS-OIG) that 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.”

The settlement, which was based on the company’s ability to pay, resolves allegations originally brought in lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act by Tammie Taylor and Glenda Martin, former Life Care employees. The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The government may intervene and file its own complaint in such a lawsuit, as it has done in this case. The whistleblower reward in this case will be $29 million.

The two qui tam cases are docketed as United States ex rel. Taylor v. Life Care Centers of America, Inc., No. 1:12-cv-64 (E.D. Tenn) and United States ex rel. Martin v. Life Care Centers of America, Inc., No. 1:08-cv-251 (E.D. Tenn). The case against Forrest L. Preston is captioned United States v. Preston, No. 1:16-cv-113 (E.D. Tenn). The claims resolved by the settlement are allegations only; there has been no determination of liability. See also Government’s Memorandum in Opposition to Motion to Dismiss:Œ

Jeffrey Newman represents whistleblowers in Medicare and Medicaid fraud cases and SEC whistleblower claims. He did not represent the whistleblowers in LifeCare but did represent the two whistleblowers in the RehabCare case which settled in January of this year for $125 million. See RehabCare complaint. In addition, he presently represents whistleblowers in cases against therapy companies in 8 cases in separate states around the country.