Wave’ of cost report cases likely in Beverly’s wake

Beverly Enterprises, the nation's largest nursing home chain, has agreed to pony up $175 million to settle charges that it was engaged in a nationwide scheme to defraud Medicare with bogus cost reports. Health care attorneys warn, however, that Beverly won’t be the last provider to be targeted.

Health care attorney Marie Infante of Pyles Powers Sutter & Verville in Washington, DC, says scores of providers are at risk based on the way the government built its case against Beverly. "There are a lot of other facilities that are at risk based on this theory," she says. "There is apparently a whole wave of these coming in California."

According to the government, between 1992 and 1998 the Fort Smith, AK-based nursing home chain started improperly billing Medicare for the salaries of nurses by inflating the number of hours attributable to Medicare patients.

"Instead of recording the true time spent on Medicare patients, Beverly-California fabricated nursing cost figures based on set formulas designed to maximize profits while avoiding detection by Medicare auditors," according to the U.S. Attorney’s office in the Northern District of California. "The phony cost figures were backed by false documents, such as phony sign-in sheets, that appeared to support Beverly's claims for payment."

Infante says it’s the precision with which Beverly was collecting its information that came under fire. "When the government says Beverly falsified records,’ it’s saying estimates of time were not carried out with the degree of precision they want to see," she explains.

The attention of long-term care providers has recently shifted to prospective payment and enforcement, she notes.

"But there is lingering liability here," she cautions. "They must not forget that time and attention must still be paid to old cost reporting issues."

Moreover, she says there is considerable state activity on the Medicaid side to go back and examine Medicaid cost reports with a similar view for expenses that may have been inflated or items that were improperly allocated.

"Prosecutors have the upper hand on this right now," Infante says. "You can have a margin of error that is very small in terms of estimates and actual numbers, but patterns such as rounding up 50-minutes to an hour are probably enough to get you in a lot of trouble these days."