Combating Nursing Home Fraud Results in Millions Being Paid to the Government and Whistleblowers

[This article first appeared on Cafepharma, written by Joseph Gentile.]

Fraud and corruption is rife in the long term care industry.  This is especially true in nursing home facilities, where billions of tax dollars are spent caring for veterans, the poor and the elderly.

Nursing home fraud not only endangers the public health, but results in billions of wasted tax dollars due to unlawful overpayments by Medicare, Tricare, Medicaid and other government health programs. Government prosecutors are aware of the corruption and have highlighted tools that they and the public have to combat this scourge.

Chief among these anti-corruption tools is the False Claims Act – a law that protects tax dollars and public safety by encouraging whistleblowers to identify misuse and rewarding them with a portion (from 10% to 30%) of any amount that the government recovers from wrongdoers. The FCA has allowed the government to recover billions of dollars from all kinds of healthcare providers – doctors, hospitals, pharmaceutical companies, pharmacy benefit managers, etc. – and providing the whistleblowers who bring these violations to the government’s attention with billions of dollars in rewards.

With a growing elderly population, the FCA is now being aimed at combating the rampant fraud occurring at nursing homes. Indeed, earlier this year at an FCA conference held annually in Washington D.C., government prosecutors noted their interest in using the FCA to combat nursing home fraud, allowing them to not only protect the elderly but reduce government waste and help encourage whistleblowers to continue their good work.

For example, in just the past few years, the government has recovered millions of dollars from nursing home facilities and paid out sizeable rewards to those who blew the whistle on the types of fraud that occurred there. A sampling of those cases are below.

Life Centers of America — $145 million

In 2016, Life Care Centers of America Inc. paid a $145 million settlement to resolve claims brought by two whistleblowers, both of whom were former Life Care employees. According to the lawsuit, Life Care systematically billed Medicare and TRICARE for unnecessary services – putting patients in higher reimbursement tiers and improperly keeping patients in rehabilitation therapy, even after treating therapists recommended discharge. The whistleblowers split a $29 million reward.

RehabCare Group — $125 million

In 2016, RehabCare and their parent Kindred Healthcare Inc. agreed to pay the federal government $125 million to resolve allegations that they improperly billed Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred. The government made a separate $16 million settlement with the nursing facilities that hired RehabCare to provide therapy services and were allegedly complicit in submitting fraudulent Medicare claims. The government paid $24 million to the two whistleblowers.

Omnicare & IVAX Pharmaceuticals — $112 Million

In 2009, nursing home pharmacy Omnicare and drug manufacturer IVAX Pharmaceuticals paid $112 million to federal and state governments for engaging in kickbacks in exchange for prescribing an antipsychotic drug to nursing home patients. Johnson & Johnson provided Omnicare with kickbacks in multiple forms, such as rebates that were conditioned on Omnicare engaging in an “Active Intervention Program” for Risperdal and payments “disguised as data purchase fees, educational grants, and fees to attend Omnicare meetings.” Omnicare also regularly paid kickbacks to nursing home facilities by providing consultant pharmacist services at rates below the company’s cost and below the fair market value of such services in order to induce the facilities to refer their patients to Omnicare for pharmaceutical services. It was also alleged that Omnicare solicited, and IVAX paid, $8 million in kickbacks in exchange for Omnicare’s agreement to purchase $50 million in drugs from IVAX. As a reward for  bringing this to light, whistleblowers received an undisclosed amount in rewards.

Genesis Healthcare — $53.7 Million

In 2017, Genesis Healthcare Inc. agreed to pay the federal government $53.7 million to settle six federal lawsuits and investigations alleging the company’s subsidiaries violated the FCA. Genesis allegedly submitted false claims to government health programs for medically unnecessary therapy and hospice services and providing substandard nursing care. The settlement resolved allegations originally brought under the qui tam provision of the FCA by six whistleblowers, all of whom were former employees of Genesis. Five of the individual whistleblowers alleged the subsidiaries billed Medicare and Medicaid for hospice services they did not provide and fraudulently billed patients by not discharging them when they were not terminally ill. One of the whistleblowers alleged their colleagues falsified records to say they conducted face-to-face interactions when they hadn’t. The whistleblowers received a combined $9.67 million.

Guardian Elder Care & Related Companies —$15.4 Million

In 2020, Guardian Elder Care Holdings Inc. and its related companies agreed to pay $15.4 million to resolve FCA allegations that they deliberately overbilled Medicare and the Federal Health Benefits Program for medically unnecessary rehabilitation therapy services. From Jan. 1, 2011, through December 31, 2017, Guardian had some of its nursing facilities bill patients at the highest level of Medicare reimbursement out of financial considerations, rather than out of medical necessity and resident needs. Two former Guardian employees stepped up as whistleblowers and brought a suit against the company under the qui tam provision of the FCA. The whistleblowers will receive approximately $2.8 million as a reward.

Reliant — $6.1 Million

In 2018, rehabilitation therapy provider Reliant Rehabilitation Holdings Inc. agreed to pay the federal government $6.1 million for violating the FCA by paying kickbacks to nursing facilities and physicians in exchange for promoting its rehabilitation therapy services to Medicare beneficiaries. A physician brought the initial lawsuit under the qui tam provision of the FCA as a whistleblower and received $915,000 as part of the settlement.

SouthernCare, Inc. — $5.9 Million

In 2018, hospice care provider SouthernCare agreed to pay $5.9 million to the federal government for violating FCA by submitting claims to the Medicare for hospice care that was medically unnecessary or lacked documentation. To be eligible for Medicare coverage, hospice care must be reasonable and necessary, a physician must certify that the patient’s life expectancy is six months or less, and the provider must satisfy other documentation requirements.  Two former employees brought allegations against the company as whistleblowers. The two whistleblowers claimed admitted patients were not terminally ill and lacked appropriate documentation, with some of the patients treated for years. The two whistleblowers shared a $1.1 million reward.