Encompass Health Corporation, the nation’s largest operator of inpatient rehabilitation facilities (IRFs) will pay $48 million to settle claims of Medicare fraud brought forward by three former employees.  It is alleged that some of the IRFs under the corporation’s control lied to Medicare to maintain their status as an IRF and to earn a higher rate of reimbursement.  Additionally, the former employees maintain that several patients who were admitted to the facility did not have conditions that were medically necessary.

The $48 million settlement stems from false claims allegations raised in three lawsuits filed by Dr. Emese Simon M.D., a former contract physician employed at an Encompass inpatient rehabilitation facility in Sarasota, FL; Melissa Higgins, the former Director of Therapy Operations at Encompass’s inpatient rehabilitation facility in Arlington, Texas; and Dr. Darius Clarke M.D., the former Medical Director at Encompass’s inpatient rehabilitation facility in Richmond, Virginia.  The qui tam, or whistleblower, provision of the False Claims Act allowed these three private individuals to sue on behalf of the government for the false claims made by their former employer. Additionally, under the whistleblower provision the three medical professionals can share in any recovery, which will amount to a collective share of $12.4 million.

“This settlement demonstrates our commitments to ensuring that those who participate in federal healthcare programs follow the rules,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Medicare and Medicaid providers who seek to profit inappropriately at the expense of taxpayers will be held accountable.”

Patient diagnoses play a crucial role in the Medicare system.  Such diagnoses are used to determine not only the amount of a facility’s Medicare reimbursement but also the facility’s classification as an IRF.  In order to secure higher reimbursements and to maintain their IRF status, it is alleged that beginning in 2007 several of Encompass’s facilities falsified patient diagnoses claiming “disuse myopathy” when no clinical evidence was presented for such a diagnosis.  Additionally, the lawsuits allege that Encompass’ IRFS admitted patients who were ineligible for the facilities’ intensive inpatient therapy.

“This important civil settlement concludes a lengthy, comprehensive investigation that brought to light a nationwide scheme that the government contends was intended to defraud our fragile public health programs,” said U.S. Attorney Maria Chapa Lopez. “In doing so, we confirm our commitment to civil health care fraud enforcement as a key component of the mission of our office.”