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Skilled Nursing Facility in Record-Breaking $145 Million DOJ Settlement

Posted in Fraud and Abuse, Hospitals and Institutions, Litigation, Medicare and Medicaid, Reimbursement Matters, White Collar

On October 24, the U.S. Department of Justice (DOJ) announced a record-breaking $145 million settlement with Life Care Centers of America Inc. (Life Care), marking the largest settlement with a skilled nursing facility chain in the DOJ’s history. The deal resolves two whistleblower cases alleging that Life Care submitted false claims in violation of the False Claims Act (FCA) by manipulating the rehabilitation programs of patients to maximize Medicare and TRICARE billing.

Included in the whistleblowers’ allegations were charges that Life Care kept patients on rehabilitation longer than clinically necessary and required staff to categorize patients at the highest level of rehabilitation need, irrespective of medical necessity, in an effort to secure the highest level of reimbursement over the longest possible period.

In May 2009, the DOJ and Department of Health and Human Services created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) to combat fraud, waste, and abuse in the Medicare and Medicare programs. Since January 2009, the DOJ has recovered more than $19.2 billion through FCA cases involving federal healthcare fraud.

The Life Care case illustrates the DOJ’s commitment to combatting healthcare fraud through aggressive prosecution and also highlights significant issues that may face defendants seeking to dispute FCA liability moving forward. Leading up to the settlement, a federal judge endorsed the government’s ability to employ statistical sampling to establish FCA liability, which allowed the government to review records for a random sample of 400 patients and then extrapolate to allege that nearly 155,000 claims were false. While the government has long focused on aggressively pursuing potential fraud, the Life Care case has introduced a powerful new tool for pursuing these cases.

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