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, agreeing to pay a staggering $145 million. This resolution comes in response to a government lawsuit accusing Life Care of violating the False Claims Act. The core allegation was that Life Care knowingly prompted its skilled nursing facilities to file false claims with Medicare and TRICARE for rehabilitation therapy services. These services, according to the lawsuit, were often unreasonable, unnecessary, or not actually skilled. The announcement was made by the Department of Justice, shedding light on the extensive investigation and subsequent agreement.
Life Care Centers of America, headquartered in Cleveland, Tennessee, is a major player in the healthcare sector, operating over 220 skilled nursing facilities across the United States. This settlement marks a pivotal moment, not just for the company but for the industry at large, highlighting the government’s stringent stance on healthcare fraud and the importance of ethical billing practices.
“This resolution marks the largest settlement ever achieved with a skilled nursing facility chain in the Department’s history,” stated Principal Deputy Assistant Attorney General Benjamin C. Mizer, who heads the Justice Department’s Civil Division. He emphasized the critical need to safeguard the integrity of government healthcare programs, ensuring that service provisions are dictated by clinical necessity rather than financial incentives. This strong statement underscores the severity of the allegations against Life Care Centers of America and the Justice Department’s commitment to combating fraud within the healthcare system.
The settlement addresses accusations spanning from January 1, 2006, to February 28, 2013. During this period, Life Care allegedly engaged in a systematic effort to inflate its Medicare and TRICARE billings through false claims for rehabilitation therapy. Medicare’s reimbursement system for skilled nursing facilities is structured around daily rates that reflect the intensity of skilled therapy and nursing care required by patients. Higher levels of required care translate to higher Medicare reimbursements. The “Ultra High” reimbursement level, the highest tier, is reserved for patients needing a minimum of 720 minutes of skilled therapy weekly across at least two disciplines, such as physical, occupational, or speech therapy, with one discipline provided five days a week.
The core of the government’s complaint against Life Care Centers of America was the implementation of corporate-wide policies and practices designed to classify as many beneficiaries as possible at the Ultra High reimbursement level. This was allegedly done irrespective of the actual clinical needs of the patients. The lawsuit contended that this approach 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 after treating therapists believed that such therapy should be discontinued. The company reportedly meticulously monitored therapy minutes and treatment durations to maximize the number of patients at the highest reimbursement level for the longest possible duration. The settlement also encompasses allegations from a separate lawsuit asserting that Forrest L. Preston, as the sole shareholder of Life Care, was unjustly enriched through Life Care’s fraudulent activities.
U.S. Attorney Nancy Stallard Harr for the Eastern District of Tennessee voiced strong concerns, stating, “Billing federal healthcare programs for medically unnecessary rehabilitation services not only jeopardizes the financial stability of these programs but also exploits our most vulnerable citizens.” She affirmed the commitment to collaborate with federal partners to protect these vital programs and the individuals they serve.
Echoing this sentiment, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida emphasized the need for healthcare decisions to be patient-centric, not profit-driven. “The resolution announced today highlights our office’s dedication to aggressively pursue providers who prioritize financial gain over patient welfare through fraudulent practices,” Ferrer stated. “It is crucial that healthcare providers base their decisions on a patient’s genuine need for services, rather than a self-serving motive to maximize financial profit. Our office remains committed to investigating fraud allegations to ensure the integrity of our public health care programs is upheld.”
In conjunction with the financial settlement, Life Care Centers of America 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 independent review organization to conduct annual assessments of the medical necessity and appropriateness of therapy services billed to Medicare by Life Care facilities.
HHS Inspector General Daniel R. Levinson stressed the importance of medically justified therapy in skilled nursing facilities. “Therapy provided in skilled nursing facilities must be medically reasonable and necessary. We will continue to rigorously investigate companies that subject their residents to needless and unreasonable therapy,” Levinson stated. He added that the Corporate Integrity Agreement with Life Care is specifically designed to ensure that therapy is provided based solely on the individualized needs of each resident.
The settlement, determined based on the company’s ability to pay, originated from 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 Centers of America. The False Claims Act empowers private individuals to file lawsuits on behalf of the government regarding false claims for government funds and to receive a portion of any recovered funds. In this case, the whistleblowers will receive a reward of $29 million.
This settlement is a testament to the government’s strong focus on combating healthcare fraud and represents another success for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative. Launched in May 2009 by the Attorney General and the Secretary of Health and Human Services, HEAT aims to reduce and prevent Medicare and Medicaid fraud through enhanced inter-departmental cooperation. The False Claims Act is a key instrument in these efforts. Since January 2009, the Justice Department has recovered over $31.6 billion through False Claims Act cases, with over $19.2 billion specifically from cases involving fraud against federal healthcare programs.
This case was a collaborative effort involving 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. Assistance was also provided by U.S. Attorneys’ Offices for the District of Colorado, the Middle District of Florida, the Northern District of Georgia, the District of Massachusetts, and the District of South Carolina, along with NCI/AdvanceMed, a Medicare Zone Program Integrity Contractor.
The qui tam cases are officially documented 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 captioned 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.
