Life Care pays $145 million in record-setting settlement over therapy billing


The nation’s fourth-largest nursing home provider has agreed to pay $145 million to settle claims that it systematically overbilled Medicare and Tricare for medically unnecessary levels of therapy in what authorities said is the largest settlement negotiated with a skilled nursing facility.

The settlement, announced by the Justice Department on Monday, resolves allegations that Life Care Centers of America Inc. and the company’s owner and founder Forrest Preston funneled patients into the highest levels of therapy. Federal prosecutors intervened in two separate whistleblower cases filed by former Life Care employees and filed a separate lawsuit against Preston claiming he was “unjustly enriched” by the fraudulent billing.

In its complaint, the government alleged that Life Care--which owns and operates over 200 facilities nationwide--inappropriately placed patients in the “ultra-high” therapy level, which requires a minimum of 720 minutes of skilled therapy each week. The nursing home chain allegedly kept patients at higher therapy levels for longer than necessary and carefully tracked therapy minutes to maintain higher reimbursement levels. Life Care, which is headquartered in Tennessee, also agreed to enter a five-year corporate integrity agreement as part of the DOJ settlement.

The allegations mirrored those outlined in the $125 million settlement announced earlier this year between the DOJ and RehabCare Group, a subsidiary of Kindred Healthcare Inc., which resolved claims RehabCare billed Medicare for unreasonably high levels of therapy in order to maximize reimbursement. The Life Care case also drew significant attention after a Tennessee court allowed the government to utilize statistical sampling, a controversial legal practice that has elicited pushback from providers.

SNF providers have been routinely singled out for overpayments tied to therapy claims. Earlier this year, the Centers for Medicare & Medicaid Services released utilization and payment data showing $16.6 billion of the $27 billion in Medicare payments made to SNFs were tied to the three highest therapy billing categories.

Last year, the Office of Inspector General found Medicare overpayments to SNFs totaled $1.1 billion in 2012 and 2013, which gave SNFs incentives to bill for higher levels of therapy than necessary. The OIG has called on CMS to change its SNF payment structure, echoing industry claims that the system emphasizes volume over value.