$10 million therapy-provider kickback case may proceed, judge says

A False Claims Act lawsuit involving a nursing home chain and therapy providers in Missouri can move forward, a federal judge has ruled. The case originated when a whistleblower alleged that a therapy company received more than $10 million in kickbacks as part of a scheme to overbill Medicare and Medicaid.

The complaint involves James Lincoln, who owned nursing home company Health Systems Inc. and therapy company Rehab Systems of Missouri. Rehab Systems provided therapy at the 62 Health Systems facilities. Lincoln allegedly entered into an illegal subcontract agreement with another therapy company, RehabCare, in 2006.

Under that agreement, RehabCare took over therapy at the Missouri nursing homes with the understanding it would increase Medicare and Medicaid billing. RehabCare paid Lincoln's Rehab Systems $600,000 to take over the therapy, and promised to pay Rehab Systems 10% of its ongoing billings. Federal prosecutors say Rehab Systems received more than $10 million through this deal, even though the company essentially ceased to exist after 2006.

The case should be dismissed in part because federal prosecutors did not identify specific individuals who referred Medicare or Medicaid patients to RehabCare for kickbacks, the defendants argued in their motion to dismiss. However, while that motion was pending, Judge Audrey G. Fleissig granted the defendants' motion to compel the government to provide this information. An amended complaint  with this information includes “enough detail” to allow the case to proceed, the judge said in denying the motion to dismiss.

Plaintiff Health Dimensions Rehabilitation Inc. stands to share in any funds the government recovers in the case. Legal documents do not clarify how the Minnesota-based company became involved in the matter, and the company has declined to comment, according to the Minneapolis Star-Tribune.