A rehabilitation provider in Cleveland, TN, has agreed to pay $145 million to settle False Claims Act allegations that it defrauded the government by submitting claims for rehab services that were not necessary and, in some cases, not provided by skilled caregivers. The settlement is the largest the federal government has ever made with a skilled nursing facility chain for allegations of false claims.

The Department of Justice (DOJ) recently announced the resolution with Life Care Centers of America, which operates more than 220 skilled nursing facilities across the country, and its owner, Forrest L. Preston. DOJ had pursued the company for violating the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare and TRICARE for rehabilitation therapy services that were not reasonable, necessary, or skilled.

The government alleged that for seven years, Life Care submitted false claims for rehabilitation therapy “by engaging in a systematic effort to increase its Medicare and TRICARE billings.” Since Medicare reimburses skilled nursing facilities at a daily rate that reflects the skilled therapy and nursing needs of their qualifying patients, facilities benefit when patients need greater skilled therapy and nursing.

In a statement accompanying the announcement, Principal Deputy Assistant Attorney General Benjamin C. Mizer, JD, head of DOJ’s Civil Division, explained the complaint alleged Life Care instituted corporatewide policies and practices designed to place as many beneficiaries in the Ultra High reimbursement level irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy to many beneficiaries.

The DOJ also claimed that Life Care kept patients longer than was necessary.

“Life Care carefully tracked the minutes of therapy provided to each patient and number of days in therapy to ensure that as many patients as possible were at the highest level of reimbursement for the longest possible period,” the announcement said.

Life Care also entered into a five-year chain-wide Corporate Integrity Agreement with the HHS Office of Inspector General. The settlement amount was based on the company’s ability to pay. The alleged fraud was brought to the government’s attention by two former Life Care employees, who will share a $9 million whistleblower reward.