September 22, 2019

September 20, 2019

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RehabCare Settles False Claims Act Allegations for $125 Million

RehabCare, the nation’s largest provider of nursing home rehabilitation services, agreed to pay $125 million on January 12 to settle claims under the False Claims Act (FCA) in connection with allegations that it caused its skilled nursing facility customers to submit false claims to Medicare for therapy services. In connection with the settlement, RehabCare entered into a corporate integrity agreement (CIA) with the Office of Inspector General (OIG). The provider’s companies, RehabCare Group, Inc. and RehabCare Group East, Inc. (RehabCare), have been subsidiaries of Kindred Healthcare, Inc. (Kindred) since their merger in 2011 with a Kindred subsidiary. In a press release, Kindred stated that it agreed to the settlement without any admission of wrongdoing in order to provide clarity for contract customers, shareholders and government oversight entities.

The government’s unsealed Complaint in Intervention alleged that RehabCare manipulated the amount and type of patient therapy to achieve a higher Medicare reimbursement level than was warranted for the patient. Skilled nursing facilities are reimbursed by Medicare by resource utility groups (RUGs), which reflect the anticipated costs associated with providing nursing and rehabilitation services to beneficiaries with similar characteristics or resource needs. A patient’s RUG is assigned based upon the time and type of therapy provided to the patient during a seven-day reference period, and the amount of reimbursement is tied to the RUG level that is determined during that reference period.

The CIA, which applies to both RehabCare and Kindred, has a five-year term and, among other requirements, provides for the development of staff training regarding the accurate use of RUGs, documentation of therapy services, coordination of care and other requirements for the provision of therapy. In addition, Kindred must engage an independent review organization to conduct annual medical necessity and appropriateness reviews related to contracted rehabilitation services. The CIA also requires the submission of annual reports that include certifications as to compliance with applicable federal health care program requirements and with the CIA from several executives of RehabCare and with executives of Kindred who have direct oversight responsibilities for RehabCare, including the compliance officer, CEO and CFO of Kindred.

The case was originally brought via a qui tam lawsuit filed by two former employees of RehabCare.  These individuals will receive approximately $24 million as their share of the recovery.

A copy of the DOJ press release is available here.

© 2019 McDermott Will & Emery

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About this Author

Associate

Amanda Enyeart is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  Amanda focuses her practice on general regulatory health law matters. 

Previously, Amanda was an associate at a national law firm in its Chicago office where she provided guidance on regulatory issues, such as practitioner licensure; telehealth; Medicare and Medicaid reimbursement; and compliance with Stark Law and the Anti-Kickback Statute and state fraud and abuse laws.

Additionally, Amanda has...

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Laura Morgan, Health Care Attorney, McDermott Law Firm
Associate

Laura B. Morgan is an associate at the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  She focuses her practice on counseling hospital and other health care industry clients on a range of regulatory issues, including Federal health care program fraud and abuse, the Stark law and Medicare reimbursement issues.

Laura received her J.D., magna cum laude, and Certificate in Health Law from Loyola University Chicago School of Law.  At Loyola, she was a Beazley Institute for Health Law and Policy Fellow, the Editor-at-Large of the Loyola University Chicago Law Journal, and an editorial staff member of the Annals of Health Law.  Laura also served as a Legal Extern in the Office of General Counsel at a large Chicago health system. 

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