Washington, DC - Contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and their parent, Kindred Healthcare Inc., have agreed to pay $125 million to resolve a government lawsuit alleging that they violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred, the Department of Justice announced today.

RehabCare Group Inc. and RehabCare Group East Inc. were purchased by the Louisville, Kentucky-based Kindred Healthcare Inc. in 2011 and they now operate under the name RehabCare as a division of Kindred.  RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in 44 states to provide rehabilitation therapy to their patients.

“Medicare beneficiaries are entitled to receive care that is dictated by their clinical needs rather than the fiscal interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “All providers, whether contractors or direct billers of taxpayer-funded federal healthcare programs, will be held accountable when their actions cause false claims for unnecessary services.”

The government’s complaint alleged that RehabCare’s policies and practices, including setting unrealistic financial goals and scheduling therapy to achieve the highest reimbursement level regardless of the clinical needs of its patients, resulted in Rehabcare providing unreasonable and unnecessary services to Medicare patients and led its SNF customers to submit artificially and improperly inflated bills to Medicare that included those services.  Specifically, the government’s complaint alleged that RehabCare’s schemes included the following:

• Presumptively placing patients in the highest therapy reimbursement level, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
• During the period prior to Oct. 1, 2011, boosting the amount of reported therapy during “assessment reference periods,” thereby causing and enabling SNFs to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods, when the SNFs were not required to report to Medicare the amount of therapy RehabCare was providing to their patients (a practice known as “ramping”);
• Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy;
• Arbitrarily shifting the number of minutes of planned therapy among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
• Especially after Oct. 1, 2011 and continuing through Sept. 30, 2013, providing significantly higher amounts of therapy at the very end of a therapy measurement period not due to medical necessity but rather to reach the minimum time threshold for the highest therapy reimbursement level, to enable SNFs to bill for the care of their Medicare patients accordingly, even though the patients were receiving materially less therapy on preceding days;
• Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation time;
• Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care); and
• Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.

“This False Claim Act settlement addresses allegations that RehabCare and its nursing facility customers engaged in a systematic and broad-ranging scheme to increase profits by delivering, or purporting to deliver, therapy in a manner that was focused on increasing Medicare reimbursement rather than on the clinical needs of patients,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs.”

“Health providers seeking to increase Medicare profits, rather than providing suitable, high-quality care, will be investigated and prosecuted,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services (HHS).  “Under our robust compliance agreement, an outside review organization will scrutinize a random sample of medical records annually to assess the medical necessity and reasonableness of therapy services provided by RehabCare.”

In addition to RehabCare, the Department of Justice also announced settlements today with four SNFs for their role in submitting claims to Medicare that were false because they were based in part on therapy provided by RehabCare that was not reasonable, necessary and skilled, or that did not occur.  These settlements include:  A $3.9 million settlement with Wingate Healthcare Inc. and 16 of its facilities in Massachusetts and New York; A $2.2 million settlement with THI of Pennsylvania at Broomall LLC and THI of Texas at Fort Worth LLC; A $1.375 million settlement with Essex Group Management and two of its Massachusetts facilities, Brandon Woods of Dartmouth and Blaire House of Milford and a $750,000 settlement with Frederick County, Maryland, which formerly operated the Citizens Care skilled nursing facility.  The department had previously reached settlements with a number of other SNFs for similar conduct.  See http://www.justice.gov/opa/pr/two-companies-pay-375-million-allegedly-causing-submission-claims-unreasonable-or-unnecessary; http://www.justice.gov/opa/pr/episcopal-ministries-aging-inc-pay-13-million-allegedly-causing-submission-claims; http://www.justice.gov/usao-ma/pr/new-york-catholic-nursing-chain-pay-35-million-resolve-allegations-concerning-claims; http://www.justice.gov/usao-ma/pr/maine-nursing-home-pay-12-million-resolve-allegations-concerning-rehabilitation-therapy. 

The settlement with RehabCare resolves allegations originally brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare.  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 whistleblowers will receive nearly $24 million as their share of the recovery from RehabCare.

The settlements announced today illustrate the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, including the conduct described in the United States’ complaint, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Massachusetts; HHS Office of Inspector General and the FBI.

The case is captioned United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS (D. Mass.).

The claims settled are allegations only, and there has been no determination of liability