Breaking Compliance News Blog

The end of 2013 finds the OIG finishing the year with a flourish in the arena of its skilled nursing enforcements. A company that owns nursing homes and therapy companies recently settled a whistleblower case for $48 million, one of the largest nursing home Medicare recoveries in U.S. history. In the settlement, the company also agreed that each of the six involved facilities would be bound by the terms of a five-year corporate integrity agreement (CIA) with the Office of Inspector General. The CIA and the single, lump sum $48 million payment go toward settling claims of overbilling the government for unnecessary therapy services provided to Medicare patients.The case includes claims for:

• submitting false claims to the government for physical, occupational and speech therapy services provided to Medicare beneficiaries that were not medically necessary; 
• providing therapy to patients whose conditions and diagnoses did not warrant it;
• providing therapy to patients solely to increase reimbursement from Medicare; 
• creating a corporate culture that improperly incentivized therapists and others to increase the amount of therapy provided to patients to meet planned targets for Medicare revenue;
• setting therapy targets without regard to patients' individual therapy needs;
• billing for inflated amounts of therapy it had not provided; and
• keeping patients in facilities for periods of time exceeding what was medically necessary for treatment of their conditions. 

The lawsuit was originally filed in 2006 by two therapists under the whistleblower provisions of the False Claims Act.  It involves claims through August of 2011. The amount that the whistleblowers will receive has not been determined, but such awards can be as high as 25% of the recovery.

 About the settlement, the company's president and CEO indicated that the company has made, and will continue to make, significant investments in compliance. Additional costs associated with enhanced compliance activities, including monitoring expenses and other costs under the corporate integrity agreement, and interest expense on a portion of the settlement amount, will total approximately $2.5 million annually. No figure was given for the amount spent defending the case, but given that the lawsuit lasted for seven years from the time of filing, the legal costs would be expected to be significant.

The claims in this case are not new to us, and some of the lessons it presents have been covered on multiple occasions in the past; and yet, there are a number of pointers we can take away. For example, this case reminds us that the OIG enforces to get money. Therapy costs the government a lot of money, and where therapy is deemed useless or otherwise does not qualify for reimbursement, the OIG continues to use the false claims act to collect damages that are subject to significant multipliers. Keep in mind, the $48 million and the CIA represent a compromised agreement. The potential damages could have been much higher.

Also of note is that the claims settled involve corporate culture. In this case, the OIG's allegations about culture very specifically spell out that the company set targets to maximize reimbursements from Medicare. This enforcement involved claims from a time period prior to March 23, 2013, when compliance became mandatory in nursing homes. The Affordable Care Act made compliance mandatory in skilled nursing, and providers can be excluded for simply not having an effective compliance program. This may have the effect of lightening the burden of proof for the government. In other words, the government may not have to prove that the corporate culture caused fraud; it may only need to prove that the provider did not have a culture of compliance, or other compliance program components, in order to exclude the provider from participation in federal programs. But regardless of how and when the government enforces, a comprehensive and effective compliance program is not only mandatory under the ACA, it is also essential in preventing fraud and abuse, and in preparing for OIG surveillance.