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Medically Unnecessary Rehabilitation Services Leads to $30M Settlement

North American Health Care, Inc. (NAHC), board chairman John Sorenson, and Senior Vice President of Reimbursement Analysis Margaret Gelvezon, agreed to pay a total of $30 million to resolve allegations they violated the False Claims Act by submitting false claims to government healthcare programs for medically unnecessary rehabilitation services provided to residents at NAHC’s skilled nursing facilities (SNFs). NAHC, a private, for-profit company headquartered in Orange County, CA, has service agreements to operate 35 SNFs, most located in California. Under the settlement agreement, NAHC will pay $28.5 million, Sorensen will pay $1 million, and Gelvezon will pay $500,000. As part of this settlement, NAHC has also entered into a five-year Corporate Integrity Agreement (CIA). The CIA applies to all facilities managed by NAHC and requires an independent review organization to annually review therapy services billed to Medicare.

The government contended that Sorenson concocted multiple schemes to boost the revenues and image of NAHC. One such scheme allegedly involved working with local physicians to “regenerate” Medicare coverage by having patients who had exhausted their 100-day coverage for skilled nursing at the higher Medicare rate needlessly readmitted to acute care hospitals for three days, then sent back to NAHC facilities. This would allow for an additional 100 days of compensation to NAHC at the higher rate. The government also cited Sorenson’s attempt to falsely inflate the Medicare star rating that ranks nursing facilities based on health inspections and quality measures and staffing. Sorenson was also alleged to have paid doctors to sign letters authored by NAHC employees in an effort to falsely convince surveyors that a facility did not have deficiencies, and that NAHC misreported its staffing levels in order to obtain higher star ratings.

NAHC filed for bankruptcy protection in California in 2015 even though it remained profitable, citing the fact that if the multiple lawsuits against it succeeded, it could not survive financially.


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