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Therapy provider, nursing home to pay $30M to settle kickback allegations


A physical therapy provider and a nursing home operator have agreed to pay $30 million to settle False Claim Act allegations in a whistle-blower lawsuit.

The U.S. Department of Justice said Friday that RehabCare Group Inc. and Rehab Care Group East Inc., units of Louisville, Ky.-based Kindred HealthCare Inc.; and nursing home operator Sikeston, Ky.-based Health Systems Inc. and its affiliate, Dexter, Mo.-based Rehab Systems of Missouri L.L.C., were charged in a kickback scheme concerning nursing home referral business.

Between March 1, 2006, and Dec. 31, 2011, RehabCare allegedly arranged with Rehab Systems of Missouri to obtain the latter's contracts to provide therapy to patients in 60 nursing homes controlled by Rehab Systems' majority owner James Lincoln, the agency said. According to its website, RehabCare provides physical, occupational and speech therapy.

In exchange, RehabCare allegedly paid Rehab Systems $400,000 to $600,000 upfront and allowed Rehab Systems to retain a percentage of the revenue generated by each referral.

The whistle-blower in the case, Cambridge, Minn.-based Health Dimensions Rehabilitation Inc., will receive $700,000 as its share of the recovery in the case. Health Dimensions originally filed the lawsuit, and was later joined by the Justice Department, according to news reports.

“Health care providers that attempt to profit from illegal kickbacks will be held accountable,” Stuart F. Delery, assistant attorney general for the Justice Department's civil division, said in a statement. “We will continue to advocate for the appropriate use of Medicare funds and the proper care of our senior citizens.”

Neither company admitted guilt, and the department said there has been no determination of liability.

Kindred said in a statement: “This settlement resolves disputed claims arising from a 2006 transaction between RehabCare and another therapy services provider. Kindred Healthcare acquired RehabCare in 2011. As part of this agreement, RehabCare denies all liability but is pleased to have reached a compromise that allows all parties to put this issue behind them. In Kindred's previous SEC filings, this matter had been disclosed and the Company had set aside appropriate reserves.”