Federal Judge Denies Motion to Dismiss Involving HCR ManorCare in False Claims Act Case Alleging Medicare Fraud

A McLean False Claims Act Attorney Weighs in

In April 2015, the United States filed a consolidated complaint against the nursing home chain HRC ManorCare for submitting false claims to Medicare for rehabilitation services. HCR ManorCare, who is owned by the Carlyle Group, is one of the nation’s largest nursing home providers, which operates around 282 facilities throughout the United States.

HCR Manorcare filed a Motion to Dismiss on July 7, 2015 in the U.S. District court for the Eastern District of Virginia. On September 4, 2015, Judge Claude M. Hilton denied Defendants’ Motion to Dismiss finding that the government’s allegations about Manorcare’s Medicare fraud in the provision of skilled therapy services stated a viable cause of action under the False Claims Act.

In their Motion to Dismiss Defendants argued that the government had failed to state a claim as matter of law because the disputed reimbursement claims involve clinical disagreements over what constitutes reasonable and necessary therapy. Judge Hilton rejected this argument noting that if such position was adopted, there could never be a False Claims act case. “We even prosecute criminal cases based on this,” explained Judge Hilton. “I’ve tried several criminal cases where the allegation is that there [were] charges for a higher level of treatment than would be appropriate… It seems to me that you’re getting on to a summary judgment kind if issue based on the evidence that comes in or we’re going to have to try it and see who’s right, aren’t we.” (Court transcript at pp. 7-8).

Under Medicare, nursing homes bill skilled therapy at different levels – Low, Medium, High, Very High or Ultra High – based on the amount of therapy required for the patient. During the time for oral argument, ManorCare’s attorney failed to address the significant increase in Ultra High billing levels for ManorCare facilities. For example, the government alleged that in October 2006, ManorCare’s own data showed that it billed Medicare at the Ultra High level for 38.8% of all days billed in rehabilitation therapy. By November 2009, 80.3% of all rehabilitation days were being billed at the Ultra High level. This was not due to a change in ManorCare’s patient population, but was the result of a conscious corporate decision to promote billing at the Ultra High level by pushing patients into therapy that they did not need.

“It will not be lost on ManorCare that this ruling comes on the heels of a recent change in Justice Department policy, making the prosecution of corporate CEO’s who engage in financial misconduct a top priority,” said whistleblower attorney Jeff Downey. Deputy Attorney General Sally Quillian Yates stated recently that “regardless of how challenging it may be to make a case against individuals in a corporate fraud case, it’s our responsibility at the Department of Justice to overcome these challenges and do everything we can do to develop the evidence and bring these cases.”

“The ManorCare complaint filed by the government already alleges that various corporate executives participated in the fraud scheme,” explains Downey. “The government quoted emails from corporate executives, including the Vice President of Rehab, which set Ultra High billing goals at 80% or higher. In a similar fraud case the government is prosecuting against Life Care Centers of America in Tennessee, the government recently sought to add the CEO as a direct Defendant.”

Since the Motion to Dismiss was denied, the case will now transition into discovery, where the government will attempt to find additional evidence supporting their fraud allegations. Interested parties may view the United States’ memorandum in opposition to defendant’s motion to dismiss here: http://www.vawhistleblowerlawyer.com/legal-memorandum-false-claims-act-manorcare/ or contact the Law Office of Jeffrey J. Downey directly for additional information.