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Justice Department’s Medicare fraud investigation of nursing home chain Life Care Centers of America revealed by unsealed court records
Following a scathing report last month by the U.S. Department of Health and Human Services’ Office of Inspector General (HHS-OIG) on nursing home Medicare fraud, a federal judge recently unsealed court records detailing the U.S. government’s four-year investigation of and Medicare fraud lawsuit against a leading nursing home operator.
In response to a petition by attorneys for the Chattanooga Times Free Press, U.S. District Judge Harry S. Mattice, Jr., unsealed court records on November 30, 2012 revealing that the U.S. Department of Justice (DOJ) has been conducting a nationwide Medicare fraud investigation of Cleveland, Tenn.-based Life Care Centers of America, Inc. (Life Care). According to the court records and the Chattanooga Times Free Press, the DOJ has received assistance from many lawyers, investigators, and officials from various U.S. Attorneys’ Offices, the Commercial Litigation Branch of the DOJ’s Civil Division, the HHS-OIG, and the Tennessee Bureau of Investigation.
Two whistleblower Medicare fraud lawsuits prompted DOJ’s investigation of and consolidated False Claims Act lawsuit against Life Care
The DOJ began its investigation in 2008 after two whistleblower employees at Life Care facilities in Tennessee and Florida filed Medicare fraud lawsuits under the federal False Claims Act against the privately owned Life Care, which operates more than 230 nursing homes and assisted living facilities in 28 states across the U.S. According to the unsealed court documents at the U.S. District Court for the Eastern District of Tennessee, Tammie Taylor, a former occupational therapist at Life Care Center at Inverrary, in Lauderhill, Florida, filed a Medicare fraud lawsuit, also known as a qui tam action, against Life Care in the U.S. District Court for the Southern District of Florida on June 25, 2008. In addition, registered nurse Glenda Martin, who is a former staff development coordinator at Life Care Center of Morristown, which does business as The Heritage Center, in Morristown, Tennessee, filed a separate qui tam action against Life Care on October 16, 2008.
The court documents unsealed on November 30, 2012 reveal that Justice Department prosecutors were trying to negotiate a settlement with Life Care from mid-2010 through 2011 to avoid litigation. But after prosecutors were unsuccessful in reaching a settlement, the Justice Department intervened in both qui tam actions against defendant Life Care and filed a consolidated False Claims Act lawsuit against Life Care on November 28, 2012, the court filings say. The DOJ is acting on behalf of the U.S. HHS’ Centers for Medicare and Medicaid Services (CMS), which administers the federal Medicare program, and the U.S. Department of Defense’s Tricare Management Activity, which administers the U.S. military’s healthcare insurance program (TRICARE).
The government’s prosecution team, which includes DOJ attorneys from the U.S. Attorney’s Office for the Eastern District of Tennessee and other states, are seeking “to recover millions of dollars that Life Care caused the Medicare and TRICARE programs to pay for services that were not covered by the skilled nursing facility benefit, that were not medically reasonable and necessary, and that were not skilled in nature,” according to the DOJ’s lawsuit. “The defendant was unjustly enriched at the expense of the United States, in such amounts, as determined at trial.”
Life Care Centers of America used “systematic scheme” to bilk millions from taxpayer-funded Medicare and TRICARE, says DOJ
The Justice Department’s Medicare fraud lawsuit alleges that Life Care regularly and deliberately bilked the taxpayer-funded Medicare and TRICARE programs out of millions of dollars since at least 2006. Life Care accomplished this, the lawsuit claims, by engaging in a “systematic scheme” to “ramp up” the amount of intensive and more profitable therapy that Life Care provided to Medicare patients. In other words, according to the Justice Department, Life Care had a corporate strategy to maximize the daily minutes and the number of days it billed to Medicare and TRICARE at the “ultrahigh level” of therapy. The ultrahigh level refers to the highest and most profitable of five levels of physical, occupational, or speech therapy used to determine patients’ care and resource needs and, therefore, Medicare and TRICARE payments to nursing homes.
The government alleges in the False Claims Act lawsuit that Life Care Centers of America, Inc., deliberately carried out its “systematic scheme” to defraud and overcharge the federal Medicare and TRICARE programs by:
- “Aggressively push[ing] its facilities and therapists to get as many of its Medicare beneficiaries into the Ultra High RUG [resource utilization group] level as possible.”
- “Setting aggressive Ultra High related targets that were completely unrelated to its beneficiaries’ actual conditions, diagnoses, or needs.”
- “Reinforc[ing] those targets at corporate meetings and presentations, through regular emails from or visits by corporate personnel, through employee performance evaluations.”
- “Imposing action plans on underperforming facilities.”
- “Punish[ing] those facilities and employees that failed to meet its Ultra High targets or that complained about corporate pressure.”
- “Reward[ing] and applaud[ing] those that met its targets.”
- “Frequently overr[iding] or ignor[ing] the recommendations of its own therapists and unnecessarily delay[ing] discharging beneficiaries from its facilities.”
- “Pressur[ing] its facilities and therapists to extend their Medicare beneficiaries’ stays in Life Care facilities to maximize Medicare revenue.”
- “Provid[ing] excessive amounts of therapy that were not medically reasonable or necessary.”
- “Provid[ing] services that did not qualify as skilled rehabilitation therapy simply to meet the ever-increasing demands of higher Ultra High targets.”
As a result of Life Care’s “systematic scheme” and “corporate pressure to maximize its Ultra High billings,” Life Care rehabilitation therapists “provided Medicare and TRICARE beneficiaries with excessive amounts of therapy that was not medically reasonable and necessary, and sometimes even harmful,” the government’s lawsuit says. “Instead of providing skilled rehabilitation therapy that was tailored to beneficiaries’ particular needs, Life Care therapists routinely provided generic, nonindividualized services that did not (and could not) benefit the beneficiaries and that served primarily to inflate what Life Care billed Medicare and TRICARE for those beneficiaries.”
Life Care’s “systematic scheme” and constant corporate pressure on rehabilitation therapists to “upcode” increased Medicare payments, says DOJ
According to the Justice Department, Life Care’s “systematic scheme” and corporate pressure on Life Care rehabilitation therapists to “upcode,” i.e., fraudulently bill Medicare and TRICARE for higher and more profitable levels of therapy that patients’ care and resource needs did not justify, were successful. “By 2008, for example, Life Care billed nearly 68 percent of its Medicare rehabilitation days at the Ultra High level—a level far in excess of the nationwide Ultra High average of 35 percent among all skilled nursing facilities during that same year,” the DOJ lawsuit says. “Life Care’s corporate strategy and pressure succeeded in…inflating the money it received from Medicare and TRICARE.”
The lawsuit provides many examples to show that Life Care rehabilitation therapists, who, the DOJ alleges, were constantly pressured to “upcode” and “ramp up” billable therapy minutes, regularly provided, and Life Care billed Medicare for, ultrahigh therapy that Life Care knew was “medically unreasonable, unnecessary, and unskilled.” According to the DOJ, Life Care therapists also inappropriately provided, and Life Care billed for, ultrahigh therapy that “sometimes jeopardized the health of Medicare patients who were imminently terminal, fatigued, sick, or otherwise medically unstable.” For example, the government’s complaint states:
Patient D was a 92-year-old resident of Life Care of Orlando in Florida who was dying of metastatic cancer (melanoma) that had spread to his brain and lungs. Patient D had received palliative radiation therapy and was becoming weaker and more medically fragile after that treatment. Nevertheless, Life Care therapists recorded at least two hours a day of therapy in all three disciplines at the Ultra High level for Patient D from July 24, 2007, until his death on August 8, 2007. Two days before Patient D’s death, he was spitting out blood. Life Care therapists, however, still recorded 48 minutes of physical therapy, 47 minutes of occupational therapy, and 30 minutes of speech therapy that very day. The day Patient D died, Life Care therapists recorded 35 minutes of physical therapy and had him scheduled for occupational therapy later in the day.
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