Life Care Centers of America Inc., a prominent name in skilled nursing facilities, and its owner, Forrest L. Preston, have reached a significant settlement with the U.S. government. The agreement, totaling $145 million, resolves allegations that Life Care violated the False Claims Act. The lawsuit contended that Life Care knowingly caused its skilled nursing facilities to submit false claims to Medicare and TRICARE for rehabilitation therapy services that were not medically necessary, unreasonable, or genuinely skilled. The Department of Justice made the official announcement of this landmark settlement.
Life Care, headquartered in Cleveland, Tennessee, is a major operator in the long-term care industry, managing over 220 skilled nursing facilities across the United States. This settlement marks a pivotal moment, being the largest of its kind with a skilled nursing facility chain in the Department of Justice’s history.
“Protecting government healthcare programs from fraud is a top priority. This significant settlement with Life Care Centers underscores our commitment to ensuring that healthcare decisions are driven by patient needs, not financial incentives,” stated Principal Deputy Assistant Attorney General Benjamin C. Mizer, who heads the Justice Department’s Civil Division. “It is crucial to maintain the integrity of programs like Medicare and TRICARE, guaranteeing services are provided based on clinical necessity rather than financial considerations.”
The allegations resolved by this settlement pertain to the period between January 1, 2006, and February 28, 2013. During this time, the government alleged that Life Care engaged in a systematic effort to inflate its Medicare and TRICARE billings through false claims related to rehabilitation therapy. Medicare compensates skilled nursing facilities at a daily rate that is determined by the intensity of skilled therapy and nursing care required by qualifying patients. Higher levels of required care lead to higher Medicare reimbursement rates. The most substantial reimbursement level is designated for “Ultra High” patients, defined as those needing a minimum of 720 minutes of skilled therapy weekly, delivered by at least two therapy disciplines (such as physical, occupational, or speech therapy), with one discipline providing therapy five days a week.
According to the government’s complaint, Life Care implemented company-wide policies and practices aimed at classifying as many beneficiaries as possible into the Ultra High reimbursement category, regardless of patients’ actual clinical needs. This allegedly led to numerous beneficiaries receiving unreasonable and unnecessary therapy. Furthermore, Life Care was accused of prolonging patient stays to continue billing for rehabilitation therapy, even when therapists believed that further therapy was no longer beneficial. The company reportedly monitored therapy minutes and durations meticulously to maximize the number of patients billed at the highest reimbursement level for the longest possible duration. The settlement also addresses allegations in a separate lawsuit that Forrest L. Preston, as Life Care’s sole shareholder, was unjustly enriched through these fraudulent practices.
“Billing federal healthcare programs for services that are not medically necessary compromises the financial stability of these vital programs and takes advantage of vulnerable individuals,” said U.S. Attorney Nancy Stallard Harr for the Eastern District of Tennessee. “We are dedicated to collaborating with our federal partners to safeguard these programs and the people they serve.”
U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida added, “This resolution highlights our office’s firm stance against providers who prioritize financial gain over patient welfare through fraudulent billing practices. Healthcare decisions must be based on patient needs, not on maximizing profits. Our office will continue to aggressively pursue allegations of fraud to protect the integrity of our public health programs.”
In conjunction with the financial settlement, Life Care has also entered into a five-year chain-wide Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG). This agreement mandates an annual independent review of the medical necessity and appropriateness of therapy services billed to Medicare.
“It is imperative that therapy services in skilled nursing facilities are medically reasonable and necessary. We are committed to rigorously investigating companies that subject residents to unnecessary therapy,” stated HHS Inspector General Daniel R. Levinson. “This Corporate Integrity Agreement with Life Care is structured to ensure that therapy is provided based solely on the individual needs of each resident.”
The settlement amount was determined based on Life Care’s ability to pay. The allegations were initially raised in lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act by Tammie Taylor and Glenda Martin, former employees of Life Care. The False Claims Act allows private individuals to file lawsuits on behalf of the government for false claims against government funds and to receive a portion of any recovered funds. In these cases, the government intervened and filed its own complaint. The whistleblowers in this case will receive a reward of $29 million.
This settlement is a clear demonstration of the government’s strong focus on combating healthcare fraud and is a significant achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative. HEAT, established in May 2009 by the Attorney General and the Secretary of Health and Human Services, enhances collaboration between the two departments to prevent and reduce Medicare and Medicaid fraud. The False Claims Act is a critical tool in these efforts. Since January 2009, the Justice Department has recovered over $31.6 billion through False Claims Act cases, with more than $19.2 billion specifically from cases involving fraud against federal healthcare programs.
The case was handled through collaboration between the Civil Division’s Commercial Litigation Branch, the U.S. Attorneys’ Offices for the Eastern District of Tennessee and the Southern District of Florida, and the HHS-OIG, with support from various other U.S. Attorneys’ Offices and NCI/AdvanceMed.
The qui tam cases are referenced as United States ex rel. Taylor v. Life Care Centers of America, Inc., No. 1:12-cv-64 (E.D. Tenn) and United States ex rel. Martin v. Life Care Centers of America, Inc., No. 1:08-cv-251 (E.D. Tenn). The case against Forrest L. Preston is United States v. Preston, No. 1:16-cv-113 (E.D. Tenn). It is important to note that the claims resolved by this settlement are allegations, and there has been no formal determination of liability.
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Alt text: Life Care Centers of America Headquarters building exterior, showcasing the corporate office of the skilled nursing facility chain.
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Alt text: Portrait of Benjamin C. Mizer, former Principal Deputy Assistant Attorney General and head of the Civil Division at the Department of Justice, who announced the Life Care Centers settlement.
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Alt text: Headshot of Nancy Stallard Harr, former U.S. Attorney for the Eastern District of Tennessee, emphasizing her role in prosecuting healthcare fraud cases like the Life Care Centers settlement.
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Alt text: Official portrait of Wifredo A. Ferrer, former U.S. Attorney for the Southern District of Florida, highlighting his commitment to fighting healthcare fraud and ensuring ethical healthcare practices.
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Alt text: Image of Daniel R. Levinson, former HHS Inspector General, underscoring the HHS-OIG’s role in healthcare oversight and the Corporate Integrity Agreement with Life Care Centers.
