DOJ Finalizes Largest Settlement in History Against Nursing Facility

Seyfarth Synopsis:   Senior providers who submit claims for Medicare and other federally funded programs should take note that the DOJ reaffirmed its commitment to aggressively pursue those who submit false claims to unlawfully gain funds from federal healthcare programs.  

The Department of Justice announced that it reached a $145 million settlement with Life Care Centers of America Inc., which owns or operates over 200 nursing facilities, and its owner in resolution of lawsuits alleging that Life Care violated the False Claims Act.  The lawsuits and investigation began after two former Life Care employees filed suit against Life Care under the qui tam, or whistleblower, provisions of the False Claims Act.  The United States government subsequently intervened in both the suits and brought its own action against Life Care’s owner. 

The complaints against Life Care alleged that between 2006 and 2013, Life Care engaged in a systematic effort to overbill for Medicare and TRICARE reimbursements by submitting false claims for rehabilitation and therapy services that were not reasonable, necessary or skilled.  Medicare reimburses skilled nursing facilities at a higher rate for skilled therapy and nursing needs. The DOJ alleged that Life Care billed at the highest level of Medicare reimbursement by providing unreasonable and unnecessary therapy to many patients and also kept patients longer than was necessary. 

The DOJ issued a press release stating that the settlement with Life Care “demonstrates the commitment of the U.S. Attorney’s Office to aggressively pursue providers who utilize fraudulent practices to knowingly put their own financial self-interest over a duty to patients.”  The U.S. Attorney’s Office also stated that it is committed to protecting both the viability of federal healthcare programs and “our most vulnerable citizens.”  A full version of the DOJ press release can be found here.  The full Settlement Agreement can be found here.  As a part of the settlement, the two whistleblower’s will receive $29 million.

The Life Care litigation was also significant in that in 2014, the Court ruled that the government can extrapolate under the False Claims Act.  The Court issued an Order stating that the government could randomly sample 400 patient admissions and then extend its findings of alleged false billing to over 50,000 additional patient admissions, resulting in over 150,000 total claims.  This ruling relieved the government of having to prove each individual false claim by conducting a claim-by-claim review.  This case has paved the way for the use of statistical sampling in other False Claims Act cases.