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Two whistleblowers split $24 million in rehab services FCA settlement

A contract therapy provider agreed Tuesday to pay $125 million to resolve a government lawsuit alleging that they violated the False Claims Act by knowingly causing skilled nursing facilities to submit false claims to Medicare for rehabilitation therapy services that weren’t reasonable, necessary, and skilled, or that never occurred, the Justice Department said Tuesday.

The settlement involved Louisville, Kentucky-based Kindred Healthcare Inc. and two of its units — RehabCare Group Inc. and RehabCare Group East Inc. Kindred acquired the units in 2011. They now operate under the name “RehabCare as a division of Kindred.”

The settlement resolved allegations originally brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare. 

The False Claims Act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.  The government may intervene and file its own complaint in such a lawsuit, as it did in this case. 

Haplin and Fahey will receive nearly $24 million as their share of the recovery from RehabCare, the DOJ said.

RehabCare is the largest provider of therapy in the United States, contracting with more than 1,000 skilled nursing facilities in 44 states to provide rehabilitation therapy to their patients.

The government’s complaint alleged that RehabCare’s policies and practices led its skilled nursing facilities customers to submit artificially and improperly inflated bills to Medicare.

The government’s complaint alleged that RehabCare’s schemes included:

  • Presumptively placing patients in the highest therapy reimbursement level, rather than relying on individual evaluations to determine the level of care most suitable for each patient’s clinical needs.
  • Boosting the amount of reported therapy during “assessment reference periods” before October 2011, thereby causing and enabling skilled nursing facilities to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods (a practice known as “ramping”).
  • Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy
  • Arbitrarily shifting the number of minutes of planned therapy among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy.
  • Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation time.
  • Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care), and
  • Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.

U.S. Attorney Carmen M. Ortiz of Massachusetts said: “The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs.”

The case was United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS (D. Mass.).

The DOJ said the claims settled were allegations only and there has been no determination of liability.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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