Skilled Nursing Facility Management Company to Pay $16.7 Million to Settle Therapy Fraud Claims

Longwood Management Corporation–a California-based skilled nursing facility management company–and 27 affiliated skilled nursing facilities (Longwood) have agreed to pay $16.7 million to resolve allegations that they violated the False Claims Act by submitting false claims to Medicare for rehabilitation therapy services that were not reasonable or necessary.

The Resolved Allegations Against Longwood Focus on Over-Utilization Medicare Part A Therapy Benefit

The settlement resolves allegations that SNF management company Longwood submitted false claims for rehabilitation therapy by engaging in a systematic effort to increase Medicare billings.  Medicare reimburses skilled nursing facilities at a daily rate that reflects the skilled therapy and nursing needs of qualifying patients.  The greater the patient’s needs, the higher the level of Medicare reimbursement.  The highest level of Medicare reimbursement for skilled nursing facilities is for “Ultra High” therapy patients, who require a minimum of 720 minutes of skilled therapy from two therapy disciplines (e.g., physical, occupational, or speech therapy), one of which has to be provided five days a week.

Longwood allegedly knowingly submitted or caused the submission of false and fraudulent claims to Medicare for medically unreasonable and unnecessary Ultra High levels of rehabilitation therapy for Medicare Part A residents.  Specifically, Longwood allegedly pressured therapists to increase the amount of therapy provided to patients to meet pre-planned targets for Medicare revenue.  These targets were alleged to have been set without regard to patients’ individual therapy needs and could only be achieved by billing for a high percentage of patients at the Ultra High level.

The settlement partially resolves allegations brought in two lawsuits filed by whistleblowers under the qui tam provisions of the False Claims Act, which allows private parties to bring suit on behalf of the government and entitles the whistleblowers to share in any recovery.  The whistleblowers will collectively receive $3,006,000 of the settlement proceeds.

Over-Utilization of Therapy in Skilled Nursing Facilities is a Systemic Problem

The cases against Longwood highlights systemic problems among unscrupulous Skilled Nursing Facility (SNF) management companies and contract SNF therapy companies.  For instance, in 2016 the largest nursing home therapy provider in United States, Kindred/RehabCare agreed to pay $125 million to settle fraud allegations which also originated with a whistleblower filing suit under the False Claims Act.  Further, in the Kindred/RehabCare case four nursing homes using Kindred/Rehab Care as a therapy contractor agreed to pay $8.225 million.  The allegations in that $125 million SNF Therapy Fraud case included:

  • Presumptively placing patients in the highest therapy reimbursement level, and not relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
  • 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 among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
  • Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation 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)

Indeed, the SNF Therapy-driven reimbursement structure was so problematic and rife with fraud that in October 2019, Medicare implemented a new payment structure called Patient Driven Payment Model (PDPM) that was designed to more accurately compensate SNF operators by not incentivizing Ultra-High levels of therapy to such an extent.  However, the False Claims Act provides a ten-year statute of limitations which would allow whistleblowers to file allegations over fraud occurring up to ten years prior to the filing of the case–extending into the time-period where the therapy-driven reimbursement model was used in SNF reimbursement.

Furthermore, as fraudsters have proven that virtually no government program is safe from fraud and abuse, the PDPM model is likely to be the victim of fraud as unscrupulous SNF operators figure out how to exploit the new PDPM payment model.

Frohsin Barger & Walthall would like to thank and congratulate the brave whistleblowers that came forward in these cases, as well as their attorneys.  Kreindler and Associates of Houston, Texas represented the whistleblowers in the recent settlement with Longwood and the Law Offices of Jeffrey Newman in Marblehead, Massachusetts represented the Relators in the RehabCare case.

For more information on the Longwood settlement, read the full DoJ press release here.

For more information on Skilled Nursing Fraud and the False Claims Act, contact Frohsin Barger & Walthall