Life Care Services, a Des Moines-based company that manages nursing homes across the United States, and ParkVista, a California nursing home company, have agreed to pay a $3.8 million settlement for the alleged overbilling of Medicare. The two companies were, according to Department of Justice officials, involved in an arrangement under which a therapy company provided “unreasonable and unnecessary” rehabilitation services to nursing home residents.

The settlement further resolves allegations that Life Care Services and ParkVista failed to prevent other therapy care practices designed to inflate Medicare reimbursement, including:

• in lieu of using individualized evaluations to determine the level of care most suitable for each patient’s clinical needs, presumptively placing patients in the highest reimbursement level unless it was shown that the patients could not tolerate that amount of therapy;

• providing the minimum number of minutes of therapy required to bill at the highest reimbursement level while discouraging the provision of therapy in amounts beyond that minimum threshold, despite the Medicare requirement that the amount of care provided be determined by patients’ clinical needs;

• arbitrarily shifting the number of minutes of planned therapy between therapy disciplines to ensure targeted reimbursement levels were achieved; and

• reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.

Life Care Services released a statement saying it disputed the government’s allegations, but “opted to settle to avoid the cost and uncertainty of protracted litigation.”

The pricey settlement serves as a reminder that when a facility contracts with an outside rehabilitation therapy provider, the facility has a continuing duty to ensure that the provider is not engaged in conduct prohibited by the False Claims Act. Since 2009, there has been a strong initiative by the Department of Justice to investigate and prosecute fraud committed by Skilled Nursing Facilities in the light of a November 2012 report by the Department of Health and Human Services claiming that some of them engaged in improper and fraudulent billing practices, resulting in $1.5 billion in Medicare overpayments in 2009.

If you offer long-term care facilities, skilled nursing facilities, or hospice facilities, it is critical that correct billing practices and procedures and strictly followed.