Whistleblowers win $23 million in Medicare fraud case

Jeffrey A. Newman

Jeffrey A. Newman

Jeffrey A. Newman & Associates, a top national whistleblower law firm, has won a $125 million settlement against RehabCare Group Inc. in Massachusetts.

Two witnesses – whistleblowers – Newman’s law firm represented will be awarded more than $20 million for their actions, the law firm said when announcing the settlement.

The case was based on allegations from the two whistleblowers who worked for facilities owned by the company in Haverhill, Mass. The company agreed to settle a False Claims Act (FCA) lawsuit alleging Medicare billing fraud at skilled nursing facilities around the country.

Newman’s firm represented Janet Halpin and Shawn Fahey, who sued RehabCare/Kindred in the U.S. District Court in Boston under the FCA’s whistleblower provisions. Halpin is a former rehab manager; Fahey is a licensed occupational therapist.

Both had first-hand knowledge of the company’s wrongdoings and turned to the whistleblower statute for justice, according to Newman’s law firm. The law provides a financial award to the whistleblowers.

The two were awarded $23.9 million, plus interest; the law firm did not say whether they split the award, or each received that amount.

The whistleblower provisions of the federal law permits private citizens known as “relators” to bring lawsuits on behalf of the federal government to and receive a portion of the proceeds of any settlement or judgment.

“This particular settlement is an excellent example of what the False Claims Act is designed to encourage,” said Newman, who filed the December 2011 suit. “When a person has sufficient information about a major fraud against the government, this law provides strong incentive to come forward.

Kindred/RehabCare are like many other companies in the United States, provide Occupational, Physical and Speech therapy rehabilitative services to patients in skilled nursing facilities, much of which is covered by Medicare or other federal health programs.

According to the lawsuit, Kindred /RehabCare caused its SNF customer to bill for unreasonable and unnecessary rehabilitation therapy. Many of the patients were billed to Medicare at the highest resource utilization group (RUG) rate, ultra-high, during Medicare A patient stays at the facilities. The complaint alleged that the company submitted fraudulent bills to Medicare in that the services billed for were excessive and unrelated to individual patient needs, as required by laws and regulations.

The federal government accused the company of:

  • Presumptively placing patients in the highest therapy category, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
  • “Ramping,” i.e., during the period prior to Oct. 1, 2011, boosting the amount of reported therapy during so-called “assessment reference periods,” thereby causing and enabling nursing facilities to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods when the nursing facilities were not required to report to Medicare the amount of provided therapy;
  • Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy;
  • Arbitrarily shifting the number of minutes of planned therapy between different therapy disciplines to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
  • Providing significantly higher amounts of therapy at the end of a therapy measurement period not due to medical necessity but to reach the minimum time threshold for the highest therapy reimbursement level and thus to cause and enable nursing facilities to bill for the care of their Medicare patients accordingly, even though the patients were receiving materially less therapy on preceding days;
  • Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time in violation of the Medicare prohibition on counting initial evaluation time as therapy time;
  • Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy, e.g., when a patient had been transitioned to palliative end-of-life care; and
  • Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.


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