As most recently spotlighted by the Department of Justice’s intervention in whistleblower claims against ManorCare, DOJ is increasing its enforcement of the False Claims Act (FCA) against therapy providers. In particular, DOJ has increased both civil and criminal investigations into the billing and providing of therapy minutes. At least five FCA cases involving therapy minutes settled in the millions in 2014 and 2015, and at least two of those cases settled for over $30 million each. The magnitude and increased frequency of these settlements implies there are almost certainly many still-confidential investigations being conducted country-wide, and DOJ’s recent intervention in the whistleblower case against ManorCare confirms DOJ remains ready and willing to litigate these cases.

While particular allegations vary on the margins, DOJ’s scrutiny of therapy practices is common at its core.  Practices DOJ has questioned include:

• Presumptive placement of patients at maximally-reimbursable reimbursement levels (ultrahigh RUG rates);

• High numbers of patients being placed at maximally-reimbursable reimbursement levels;

• Minutes billed at and not above minimum to meet reimbursement levels;

• Minutes seemingly billed in intervals instead of precise billing;

• Billing for more minutes than actually provided;

• Billing initial evaluation sessions as therapy minutes;

• Selection of assessment reference dates that maximize reimbursement;

• Billing unskilled services as skilled services;

• Billing group therapy as individual therapy;

• Non-qualified individuals planning or providing therapy minutes;

• Deviations from patient plans of care to hit minimum minutes for different therapy disciplines;

• Rewarding employees or contractors in ways that may seem to incentivize excessive provision or billing of therapy minutes;

• Documentation deficiencies; and,

• Deficient medical directorship arrangements.

DOJ has contended these practices result in the submission of false claims to the government for reimbursement, resulting in FCA liability and health care fraud.

ManorCare Inc.

DOJ recently intervened in three FCA whistleblower suits against ManorCare and filed a consolidated complaint.  In the pleading, DOJ contends that ManorCare directed its administrators and therapists to deliver excess care to reach ultrahigh reimbursement levels that were unwarranted and caused the government to reimburse the company above the amount to which it was lawfully entitled.  ManorCare allegedly set unrealistic billing goals for its facilities, threatened to terminate those who did not cooperate, and retained patients in their facilities after the proper time for discharge, all in order to increase reimbursement payments.

Significant Recent Settlements

While the allegations against ManorCare are pending, other therapy providers have entered into major settlements rather than litigate and risk significant penalties.

Extendicare — $38 million

The government alleged that nursing services provided were deficient and the provider billed Medicare and Medicaid for medically unreasonable and unnecessary rehabilitation therapy services.  The government also contended that Extendicare increased therapy particularly during assessment reference periods so it could bill Medicare at the highest possible reimbursement rate.

RehabCare and Rehab Systems of Missouri — $30 million

The government claimed that RehabCare paid Rehab Systems of Missouri $400,000 to $600,000 in exchange for referrals for rehabilitation services, and that RehabCare allowed Rehab Systems of Missouri to retain a percentage of the revenue generated by each referral.

ArchCare — $3.5 million; Episcopal Ministries to the Aging – $1.3 million; Life Care Services and ParkVista – 3.75 million

In each of these cases, the government alleged these providers had engaged in a variety of questionable practices, including that they failed to prevent RehabCare from presumptively placing patients at highest reimbursement levels, providing the minimum minutes needed to hit reimbursement levels, discouraging the billing of minutes beyond the threshold for reimbursement levels, and providing unnecessary therapy to increase reimbursement.  In the Life Care case, the government also contended that RehabCare was improperly paid a percentage of revenue generated and that Life Care Services unlawfully received the free services of a RehabCare employee.

Not Without Warning

The increased government activity in this arena has not arrived without warning.  In the last few years, the OIG has issued at least two reports questioning the billing practices of Skilled Nursing Facilities (SNFs).  A 2012 OIG report found that a fourth of all SNF claims submitted in 2009, amounting to $1.5 billion, were incorrect.  A 2010 OIG report observed that, from 2006 to 2008, SNFs increasingly billed at more expensive levels of care, for-profit SNFs were far more likely than nonprofit or government SNFs to bill for expensive levels of care, and that a number of SNFs had questionable billing practices including abnormally high billings in relation to other SNFs.

An Ounce of Prevention…

DOJ’s constant pursuit of therapy companies demonstrates its commitment to curtail this perceived area of potential fraud and abuse.  To avoid DOJ’s target, companies should routinely audit therapy minutes, provider utilization, incentives that could be viewed as unlawful kickbacks, and medical necessity.  In addition, skilled facilities that have contracted with therapy companies should undertake the same review to avoid allegations of collusion or conspiracy.  And if you discover outliers or other red flags (e.g., billing only at ultra-high RUG rates), investigate and determine the cause.  If you question a practice, relationship or system, addressing it immediately and making an assessment of whether disclosure is mandatory will save you the expense and resource allocation of a lawsuit in the future.  DOJ is watching, and you should be, too.