Nursing home therapy providers agree to pay $30 million whistleblower settlement

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*Editor's Note: This article has been updated with a statement from Kindred Healthcare.

Two nursing home therapy providers and a nursing home management company have agreed to pay $30 million to settle claims that they engaged in a kickback scheme, the U.S. Department of Justice has announced.

The case involves 60 Missouri nursing homes. Their majority owner, James Lincoln, allegedly engaged in a subcontract agreement with therapy provider RehabCare, which took over therapy at the facilities in 2006 on the understanding that it would increase Medicare and Medicaid billings. As part of the deal, RehabCare also allegedly paid between $400,000 and $600,000 upfront to Rehab Systems, the former therapy company at those facilities. Rehab Systems also is owned by Lincoln.

RehabCare then continued to pay Rehab Systems a percentage of revenue generated by referrals of patients from the Lincoln-owned nursing homes, even though Rehab Systems was essentially a defunct company after 2006, according to the complaint.

The case garnered attention for the unusual way the whistleblower charges originated: The CEO of a competing rehabilitation provider, Health Dimensions Rehabilitation Inc., brought the lawsuit after hearing suspicious information on a public conference call hosted by RehabCare in 2006.

The whistleblower will receive a $700,000 share of the settlement, according to the DOJ.

RehabCare, Rehab Systems and nursing home management company Health Systems Inc. resolved the charges without admitting wrongdoing, the DOJ announced Friday. The companies also agreed to restructure their business arrangement under the settlement.

Kindred Healthcare acquired RehabCare in 2011.

"As part of this agreement, RehabCare denies all liability but is pleased to have reached a compromise that allows all parties to put this issue behind them," Kindred's Vice President of Communications Susan E. Moss said in an email to McKnight's. "In Kindred's previous SEC filings, this matter had been disclosed and the Company had set aside appropriate reserves."

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