Inpatient Rehabilitation Facility Network Encompass Pays $48 Million to Resolve Medicare Fraud Allegations

Alabama-based Encompass Health Corporation (now HealthSouth Corp.) has agreed to pay $48 million to settle Medicare fraud allegations. According to prosecutors, Encompass’s Inpatient Rehabilitation Facilities (IRFs) falsified "disuse myopathy" diagnostics in order to maintain their standing as high-reimbursement Medicare-approved IRFs.  

The alleged fraud was brought forward in three separate whistleblower lawsuits, later joined by the Department of Justice. According to the allegations, Encompass IRFs systematically admitted patients who were “too sick or disabled to participate in or benefit from intensive inpatient therapy." 

According to U.S. Attorney Maria Chapa Lopez (Florida, Middle District), "This important civil settlement concludes a lengthy, comprehensive investigation that brought to light a nationwide scheme that the government contends was intended to defraud our fragile public health programs." 

News of fraudulent practices at Encompass is especially relevant, because the company is the largest operator of IRFs nationwide, controlling over 131 facilities in over 35 states. Although its CEO, Mark Tarr, claims the company “did nothing wrong," three former employees in the states of Florida, Texas, and Virginia were able to produce sufficient evidence of fraud to persuade the Department of Justice to join the lawsuit. Now, they are set to share a $12.4 million whistleblower award. Under the False Claims Act, tipsters can receive between 15 and 30 percent of any recoveries resulting from the information they provide. 

U.S. Attorney Chapa Lopez said in a statement that the settlement with Encompass confirms the Department of Justice’s commitment to “civil health care fraud enforcement as a key component of the mission of [her] office.”

The whistleblowers responsible for exposing the alleged misconduct are Dr. Emese Simon M.D., a doctor who worked at an Encompass IRF in Sarasota, Melissa Higgins who used to run the Therapy Operations department at company’s facility in Arlington, Texas, and Dr. Darius Clarke M.D., a former Medical Director at Encompass’s IRF in Richmond, Virginia. Dr. Clarke’s company, Restorative Health & Wellness, was also part of the lawsuit.   

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