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Thanks to two whistleblowers, in October 2016 a skilled nursing facility company
paid $145 million to the federal government to settle claims that it had cheated Medicare and TRICARE. The whistleblowers
sued Life Care Centers, a nationwide chain headquartered in Cleveland,
Tennessee, under the False Claims Act. According to the two, both former
employees, Life Care inflated its bills to Medicare by providing rehabilitation
therapy that was not reasonable, necessary or skilled. The False Claims
Act rewards whistleblowers with part of the recovery they help procure,
so the whistleblowers split $29 million.

Breathtaking as the $145 million settlement number may be, apparently the
damage to public coffers was actually much higher. DOJ explained that
it had to accept a lower settlement number that “was based on the
company’s ability to pay.” In other words, the fraud was so
big that DOJ thought the company would go under if it had to pay back
all of the money it raked in due to its fraud, so taxpayers got permanently
stuck with part of the tab.

Life Care Centers’ owner, Forrest L. Preston, had to pick up part
of the settlement amount personally, although DOJ was not specific as
to how much he paid.

The Life Care Investigation

Life Care is a gigantic medical corporation that runs 200 skilled nursing
facilities (SNFs) around the country. The government’s investigation
into the whistleblowers’ claims spanned seven years and ultimately
drew on resources in Florida, Colorado, South Carolina, and the District
of Columbia, as well as in Tennessee where the company is headquartered.

Skilled nursing facilities, or SNFs, are paid based on the amount of services
they provide to patients. For inpatient services, Medicare sorts patients
into Resource Utilization Groups (RUG). RUG levels are sorted even further
into five subcategories that are based on the number of minutes of service
provided to the patient, ranging from Rehab Low (RL) for patients receiving
45-149 minutes of therapy per week to Rehab Ultra High (RU) for patients
receiving 720 minutes of therapy per week. The more minutes of therapy
a patient needs, the more Medicare pays the SNF.

According to the Department of Justice and the whistleblowers, Life Care
was manipulating the RUG rate by pressuring its therapists to add therapy
minutes in order to shove patients into the next higher reimbursement
level. Extra therapy minutes got tacked on even when patients did not
need the extra therapy. According to the Complaint, sometimes Life Care
even counted minutes of “therapy” that did not qualify under
Medicare’s rules about what counts as “skilled therapy.”

Will the Fraud Stop?

Life Care agreed to a Corporate Integrity Agreement that will enfold its
entire chain and will last for five years. Under the Corporate Integrity
Agreement, or CIA, Life Care agrees to take steps designed to prevent
fraud in the future, and OIG agrees that — for now — it will
not try to exclude Life Care from the Medicare program entirely.

The settlement only covered the time frame from January 1, 2006 to February
1, 2013. If Life Care Centers continues to defraud the federal government
after that period, it will once again be liable under the False Claims Act.