Report: Long-term care providers pay the price for CMS' poor auditor oversight

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

The complaint involves nursing home company Health Systems Inc. and therapy company Rehab Systems of Missouri. Rehab Systems provided therapy at the 62 Health Systems facilities owned by James Lincoln, who also co-owned Rehab Systems.  The latter company 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.

In 2011, Kindred Healthcare purchased RehabCare. Kindred intends to “vigorously defend against these allegations,” according to spokeswoman Susan Moss.

Prosecutors did not identify specific individuals who referred Medicare or Medicaid patients to RehabCare for kickbacks, the defendants argued in their motion for dismissal. 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” for the case to proceed, the judge ruled.

Health Dimensions Rehabilitation Inc. originally brought the complaint, and the government joined the whistleblower action in 2011. Health Dimensions, which is headquartered in Minnesota, stands to share in any funds recovered in the case. RehabCare provides services at about 50 nursing facilities in Minnesota.