Citing 'thin' evidence of wrongdoing, judge moves $10 million nursing home kickback case closer to trial

Share this content:

The government has presented “thin” evidence against a nursing home therapy provider in a high-profile whistleblower case, but a jury still might reasonably find the therapy company guilty of paying kickbacks, a federal judge recently ruled.

The case has gained attention for originating in an unusual way. The CEO of a rival rehabilitation company brought the whistleblower charges against RehabCare after hearing suspicious information in a public earnings call in 2006.

The federal government joined the whistleblower action, which alleges that RehabCare paid about $10 million in kickbacks to another therapy company, Rehab Systems. James Lincoln, who owned nursing home company Health Systems Inc, also owned Rehab Systems.

Lincoln allegedly entered into an illegal subcontract agreement in 2006, under which RehabCare paid $600,000 up front and $10 million in subsequent kickback payments for referrals from Health Systems nursing homes. The payments were made to Rehab Systems, which the government says essentially ceased to exist after RehabCare took over its business at the Lincoln-owned nursing homes.

The defendants asked for summary judgment in the case, saying that the government has not presented enough evidence showing that the payments were for referrals rather than “something of value.”

Judge Audrey G. Fleissig agreed that the government has not presented this type of evidence, but ruled that other evidence — such as emails and testimony — could still persuade a jury that “at least one purpose” and “perhaps the primary purpose” of the disputed payments was for referrals. 

Because she determined that a jury could reasonably decide in either party's favor, Fleissig denied the defendants' motion for summary judgment as well as one filed by the government, making a trial more likely.