Washington, DC - Post Acute Medical, LLC, a Pennsylvania-based operator of long‑term care and rehabilitation hospitals across the country, and certain affiliated entities through which the company operates its facilities (collectively, “PAM”), have agreed to pay the United States, Texas, and Louisiana a total of $13,168,000 to resolve claims that they violated the False Claims Act, and the Texas and Louisiana false claims statutes, by knowingly submitting claims to the Medicare and Medicaid programs that resulted from violations of the Anti‑Kickback Statute and the Physician Self‑Referral Law, the Justice Department announced Wednesday.

The Anti-Kickback Statute, in relevant part, prohibits offering or paying anything of value to encourage the referral, or to encourage recommending or arranging for the referral, of items or services covered by Medicare, Medicaid, and other federally funded programs.  The Physician Self‑Referral Law, commonly known as the Stark Law, prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper financial relationship.  Both the Anti-Kickback Statute and the Stark Law are intended to ensure that medical decision-making is not compromised by improper financial incentives and is instead based on the best interests of the patient.

Since it was founded in 2006, PAM entered into numerous physician-services contracts on behalf of its hospitals.  Although the purpose of these contracts was ostensibly to retain physicians as medical directors or in other administrative or medical roles, the United States alleged that in reality the company’s payments under these contracts were intended to induce the physicians to refer patients to PAM’s facilities.  The company allegedly violated the AKS further by entering into what it called “reciprocal referral relationships” with unaffiliated healthcare providers such as home health companies.  In the course of those arrangements, PAM allegedly referred patients to those other providers with the understanding that those providers would refer other patients to PAM’s facilities.

“Kickbacks undermine the independence of physician and patient decision-making, and raise healthcare costs,” said Acting Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division.  “The Department of Justice is committed to preventing illegal financial relationships that undermine the integrity of our public health programs.”

“Medicare and Medicaid beneficiaries depend on their healthcare providers to make decisions based on sound medical judgment,” said U.S. Attorney David J. Freed.  “Our office will take decisive action to address allegations that medical providers are paying or receiving improper financial benefits that could influence medical decision-making.”

“PAM’s alleged kickbacks and improper physician relationships threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid,” said Special Agent in Charge C.J. Porter for the U.S. Department of Health and Human Services Office of Inspector General.  “Our agency will continue to investigate companies who step over the line to maximize their profits at the expense of federal health care programs.”

PAM’s conduct allegedly resulted in false claims to Medicare as well as certain Medicaid programs.  The latter are jointly funded by both the federal and state governments.  Under the settlement, PAM will pay $13,031,502 to the United States, $114,016 to Texas, and $22,482 to Louisiana.

The settlement resolves allegations originally brought by Douglas Johnson in a lawsuit filed under the whistleblower provisions of the False Claims Act, which allow private parties to bring suit on behalf of the federal government and to share in any recovery.  The whistleblower will receive $2,345,670 as his share of the federal government’s recovery in this case.

In addition to resolving its False Claims Act liability, PAM has entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General which includes, among other compliance obligations, an arrangements review to be conducted by an Independent Review Organization.

This matter was handled on behalf of the government by the Justice Department’s Civil Division, the U.S. Attorney’s Offices for the Middle District of Pennsylvania and Southern District of Texas, and the Department of Health and Human Services Office of the Inspector General.  

The case is captioned United States ex rel. Johnson v. Post Acute Medical, LLC et al., Civil Action No. 17-cv-1269 (M.D. Pa.).  The claims resolved by this settlement are allegations only and there has been no determination of liability.