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Thanks to whistleblowers and the False Claims Act, in the past 36 months
the government has settled two major cases against skilled nursing homes
that it says provided worthless services to patients. A third case against
a Tennessee SNF chain is pending.

Perhaps the most heartbreaking kind of medical fraud is when a medical
provider gives “care” that is so bad that it is worthless
— or even harmful. In every medical fraud case, Medicare and Medicaid
are getting ripped off. But in a “worthless services” case,
patients are also being deprived of medical care they need.

Extendicare and ProStep – Skilled Nursing Facility Chain

In 2014 skilled nursing facility owner Extendicare Health Services, Inc.,
and its subsidiary, Progressive Step Corporation (“ProStep”),
paid the government $38 million to resolve allegations that they provided
worthless services to patients being treated in their skilled nursing
facilities. The settlement resolved two lawsuits that were initially brought
by whistleblowers (known as relators). For their work in bringing the
case, the two relators were paid more than $2 million.

In announcing the
Extendicare/ProStep settlement, the Department of Justice said the companies were being accused of billing
“Medicare and Medicaid for materially substandard nursing services
that were so deficient that they were effectively worthless.” According
to DOJ, the skilled nursing facilities had failed to provide adequate
catheter care to patients, had failed to follow protocols to prevent residents
from getting pressure sores, and had failed to take fall precautions to
protect patients. The chain also was accused of billing for “medically
unreasonable and unnecessary rehabilitation therapy services.”

The first legal suit was brought under the False Claims Act (FCA) by whistleblower
Donald Gallick, who was the son of an Extendicare patient. Gallick alleged
that ProStep provided nursing care that was so substandard and worthless
that Medicare should not have had to pay for it. According to the False
Claim Act complaint filed by the whistleblower, Extendicare did not have
enough skilled nursing staff to adequately care for patients such as his
mother. The problems stretched into 33 different SNF facilities in eight
states: Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, Washington
and Wisconsin.

The second whistleblower, Tracy Lovvorn, was the area rehabilitation director
at Extendicare. In her FCA case, she accused ProStep of providing unnecessary
therapy to inpatients who were receiving care covered by Medicare Part
A. Lovvorn said that the company increased therapy during the assessment
reference period, so that it could push the patient into the highest possible
daily rate.

$32.3 million of the settlement went to the federal government to reimburse
Medicare and the federal portion of Medicaid; $5.7 million went to various
state programs that had helped foot the bill for Medicaid patients. Lovvorn
received more than $1.8 million, and Gallick was paid more than $250,000.

Daybreak Partners, LLC

In October 2016, Daybreak Partners, LLC, agreed to pay the Government $5.3
million in the face of allegations that Daybreak had provided “materially
substandard nursing services” to residents at four skilled nursing
facilities in Texas.

The Government accused the SNFs of failing to follow protocols to prevent
falls, pressure ulcers and infections in patients. The government said
the company also failed to property administer medications, resulting
in medication errors. For some residents, the SNF staff did not follow
the orders from the doctor. The SNFs also failed to provide mental health
treatment that some residents needed. When patients hit the call buttons,
said the Government, the staff did not respond promptly. The Government
said the Daybreak SNFs also “failed to provide a habitable living
environment, adequate equipment and needed capital expenditures.”
When serious incidents occurred, the company did not investigate them
or report them to authorities, according to the allegations in the lawsuit.

Ongoing Suit Against Vanguard Healthcare

In 2016, the Government announced that it has filed suit against Vanguard
Healthcare and several of its skilled nursing facilities. According to
the lawsuit, the SNFs submitted claims for “services that were either
non-existent or grossly substandard.”

The Government accused Vanguard of being chronically short on staff and
medical supplies, and said the shortage of staff and supplies led to poor
patient care. For example, the Government alleged that Vanguard did not
provide patients with standard infection control and did not adequately
manage residents’ pain. Vanguard’s SNFs also failed to administer
the medications they were supposed to give patients, and failed to provide
wound care. Finally, the suit accused Vanguard of providing “unnecessary
and excessive psychotropic medications” and using unnecessary physical
restraints. The suit explained that the poor care created an atmosphere
of neglect, and that patients wound up falling, getting pressure sores,
and becoming dehydrated and malnourished.

Ironically, the suit follows closely on the heels of a 2015 settlement
of claims that Vanguard was upcoding as well as “knowingly paying
certain physicians salaries and bonuses that were above fair market value
and in violation of the Stark Law and the Anti-Kickback Statute.”
The company paid $2.9 million to resolve that lawsuit.

Both cases were filed in the Middle District of Tennessee, where Vanguard
is headquartered.