Feds Recover $30mm: Claim Skilled Nursing Facilities Billed for Unnecessary Rehab Therapy

California’s Orange County-based North American Health Care Inc. (NAHC) has agreed to pay the U.S. government $28.5 million to resolve long-running allegations it billed Medicare and TRICARE for medically unnecessary rehabilitation therapy services in violation of federal and state False Claims Acts. NAHC’s senior vice president of reimbursement analysis and chairman of the board will pay an additional $1.5 million, the Department of Justice announced today.

California North American Health Care Alleged False Claims Act Violations

False Claims Act and other charges claim NAHC’s inpatient skilled nursing facilities subjected its residents to unnecessary occupational, physical and speech therapy sessions while the government footed the bill. The private, for-profit company operates 35 facilities across California, billing Medicare and California Medicaid (Medi-Cal) for eligible services. For services to be eligible for payment, however, they must be “reasonable and necessary for the diagnosis or treatment of illness or injury.”

The government uses the “medical necessity” standard of the False Claims Act to ensure high quality patient care and to combat fraud, abuse, and waste of taxpayer dollars. “Medicare patients and those insured by TRICARE are entitled to receive care necessary for their clinical needs and not the financial needs of their health providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Health care providers will be held accountable if they bill for unnecessary services or treatment.”   

U.S. AG says Margaret Gelvezon and John Sorenson Devised Improper Billing Scheme

The U.S. alleges that, between January 21, 2005 and December 3, 2011, NAHC skilled nursing facilities billed Medicare and TRICARE for medically unnecessary rehabilitative therapy services they provided to inpatients. The government also claims that and Margaret Gelvezon, NAHC’s senior vice president of reimbursement analysis, devised the improper billing scheme to profit from government health care programs and that John Sorenson, NAHC’s chairman of the board, actively reinforced the arrangement at the several NAHC facilities.

Skilled Nursing Facilities Pay $28.5 Million: Enter Corporate Integrity Agreement (Subtitle)

Under the settlement agreement, NAHC agreed to pay $28.5 million to resolve the allegations. Gelvezon and Sorenson will pay an additional $1.5 million, for a total $30 million recovery. All NAHC facilities will also enter into a five-year Corporate Integrity Agreement with the Department of Health and Human Services-Office of the Inspector General (HHS-OIG), requiring an annual review of therapy services billed to Medicare conducted by an independent review organization.

“This office is committed to safeguarding the federal health care programs and the patients who are enrolled in them,” said U.S. Attorney Brian J. Stretch for the Northern District of California.  “Skilled nursing facilities such as NAHC treat some of the most vulnerable patients in the health care system.  These facilities, and the individuals who run them, will be held accountable when they provide treatment based on financial motivations instead of the patients’ needs.”      

Sorenson Motion to Dismiss Denied On Previous Kickback Scheme Allegations

In November 2015, a federal court denied Sorenson’s motion to dismiss a lawsuit alleging that he personally directed a kickback scheme ordering nursing home administrators pay physicians for Medicare beneficiary referrals to NAHC facilities and paid physicians to sign documents defending NAHC from deficiencies discovered during Medicare reviews.

NAHC Files Chapter 11 Bankruptcy

In February 2015, NAHC filed for Chapter 11 bankruptcy protection, “necessitated by the barrage of alleged medical malpractice and other lawsuits filed against the Debtors, claiming damages in the millions of dollars…”

The False Claims Act continues to aid in the recovery of billions in stolen taxpayer dollars. Since January 2009, the U.S. Department of Justice has recovered more than $30.6 billion through False Claims Act cases, over $18.5 billion of that from cases involving fraud against federal health care programs. Although this case was not based on whistleblower information, much of the money recovered for taxpayers was incepted by whistleblowers’ lawsuits entitling the first whistleblower to file to a cash reward ranging from 15 to 30 percent of all money recovered.

“Providing medically unnecessary services to this fragile population can be taxing both for the patient and the program,” said HHS-OIG Special Agent in Charge Steven Ryan.  “Today’s settlement should send a message to others who may be engaging in these schemes that we will pursue justice for our beneficiaries and the programs.”

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