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Whistleblower Lawsuit Results in $30 Million Settlement Against Nursing Home Business

The Justice Department (DOJ) has announced a $30 million settlement in a False Claims Act lawsuit against Rehab Systems of Missouri, RehabCare Group East Inc., and RehabCare Group Inc., three providers of contract therapy, as well as Health Systems Inc., a management company. The four companies were allegedly involved in a scheme of kickbacks for nursing home business referrals. The companies have also agreed to restructure the business arrangement between them as part of the settlement.

According to the complaint, RehabCare paid between $400,000 and $600,000 to Rehab Systems of Missouri upfront in exchange for contract referrals. Rehab Systems was also allowed to keep a percentage of the revenue that resulted from the referrals. RehabCare obtained contracts from Rehab Systems to provide therapy care to patients in 60 nursing homes under the control of James Lincoln, the majority owner of Rehab Systems. The agreement lasted between March 1, 2006 and December 31, 2011.

Stuart F. Delery, Assistant Attorney General for the Civil Division of the DOJ said in a statement that the Department is determined to hold health care providers accountable for attempts to profit from illegal kickbacks in order to protect senior citizen care and Medicare funds.

John Marti, Acting U.S. Attorney for the District of Minnesota stressed the importance of vigilance in monitoring the Medicare Trust Fund and pursing those that abuse the system to advance their own interests. He said the Anti-Kickback Statute was passed in order to protect patients and the federal health care programs from such fraud and abuse.

This case was filed by a whistleblower under the False Claims Act’s qui tam provisions, which provide a mechanism for private citizens with knowledge of wrongdoing to sue on behalf of the government. Whistleblowers are entitled to share in the recovery, and, in this case, the whistleblower received $5.7 million.

The effort is yet another successful achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT). The initiative began in May 2009 when Attorney General Eric Holder and Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced that they would form the joint effort to bolster cooperation targeting fraud and abuse of federal health care programs, especially Medicare and Medicaid.

More than $12.2 billion has been recovered by the DOJ from health care related cases since January 2009. The total sum for False Claims Act cases is over $17.1 billion.

This case, headed up by the U.S. Attorney’s Office for the District of Minnesota, was supported by the DOJ’s Civil Division, the Federal Bureau of Investigation, the U.S. Attorney’s Office for the Eastern District of Missouri, and the HHS Office of Inspector General. Additionally, the DOJ’s Elder Justice and Nursing Home Initiative, a project coordinating DOJ efforts involving elder neglect, abuse, and financial exploitation, also provided assistance on this case.

The lawsuit, U.S. ex rel. Health Dimensions Rehabilitation Inc. v. RehabCare Group Inc., was resolved by this settlement with no determination made in regards to liability.