Court OKs class action suit against rehab provider

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A federal court has certified a securities fraud lawsuit brought against a national rehabilitation and long-term care provider as a class action.

The U.S. District Court for the Eastern District of Pennsylvania said the lawsuit against Select Medical Corp., can proceed as a class action on behalf of all individuals who purchased company stock between July 29, 2003, and May 11, 2004. Select, which provides medical rehabilitation services on a contract basis to nursing homes, assisted living and senior care centers, failed to disclose information on the risks associated with its operations, its reliance on Medicare reimbursements and changes in anti-kickback rules, the lawsuit alleges. Select also operates long-term acute-care hospitals around the country.

Lawyers for Select, headquartered in Mechanicsburg, PA, argued that the company had no legal duty to predict that its profitability would be seriously affected by anti-kickback rules under consideration and subsequently implemented by the Centers for Medicare & Medicaid Services.