Federal court rules $1 billion nursing home case can proceed, ties alleged poor management to IL gub

The Department of Justice has declined to intervene in a massive, seven-year-old False Claims Act case against HCR ManorCare, newly unsealed court documents show.

In a 2010 lawsuit, regional director of operations Kathi Holloway claimed that ManorCare-owned Heartland Hospice engaged in a “corporate-wide pattern of conduct that has resulted in the submission of thousands of false claims” and payment of “millions of dollars” for care of non-terminal patients.

Heartland is the nation’s third-largest hospice care provider with services in 23 states. ManorCare announced March 2 that Heartland and all of its subsidiaries were being purchased by Quality Care Properties as part of a packaged bankruptcy plan.

On March 1, the Department of Justice filed notice that it would not intervene on Holloway’s behalf, leading U.S. District Judge James G. Carr to unseal the original case Wednesday.

Attorneys for Holloway allege that Heartland employees “falsify patients’ life expectancy in order to ‘qualify’ those patients for hospice reimbursement from Medicare, maintain patients to hospice after their medical condition has stabilized rather than discharging them from hospice as required by Medicare regulations, and exaggerate patients’ ‘signs and symptoms’” to qualify for reimbursement.

The suit also claims Heartland’s marketing and auditing practices supported inappropriate billing in the cases of patients who had chronic conditions, rather than terminal diagnoses.

A spokeswoman for HCR ManorCare declined to comment on the case on Friday.

The case echoes another in which the DOJ dropped a False Claims Act lawsuit in November that it had initially joined against HCR ManorCare in 2015.

Observers have said several recent federal rulings have made false claims cases more difficult to pursue, and the government itself seems to be less interested in supporting whistleblower-based cases.

In this case, Holloway claims that Heartland discharged hundreds of patients who did not qualify for Medicare hospice benefits when its competitor, SouthernCare, agreed to a $24.7 million settlement of similar false claims allegations. But even then, the suit alleges, Heartland did not disclose why it had discharged those patients, nor did it refund “millions” it had already billed for their hospice care.