Healthcare Business News

Federal lawsuit alleges safety risks, false claims by SNF operator

By Joe Carlson
Posted: December 4, 2012 - 4:30 pm ET

A national investigation triggered by two internal whistle-blowers has resulted in a scathing federal lawsuit accusing Life Care Centers of America of putting corporate profits above healthcare and systematically abusing the company's discretion to gauge how much therapy Medicare beneficiaries need, even when employees protested that the policies may have jeopardized patient health.

Life Care, a privately held skilled-nursing facility operator based in Cleveland, Tenn., with more than 200 locations nationwide, denied the allegations in the False Claims Act lawsuit and vowed to vigorously defend the care it has provided.

“Contrary to the government's allegations, Life Care's therapy programs improve patients' conditions and their quality of life,” according to a company statement. “This belief is supported by medical literature, studies and Life Care's first-hand experience in observing the progress of patients who receive high intensity therapy.”

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The lawsuit comes as the HHS' office of inspector general is encouraging Medicare Administrative Contractors to direct deeper scrutiny of bills for therapy services in skilled-nursing facilities, citing evidence that $1.5 billion had been paid for upcoded claims from 2009. Medicare paid $32.2 billion for skilled-nursing therapy services in 2012.

The government lawsuit (PDF) unsealed Nov. 30 accuses Life Care of implementing national profit goals to encourage caregivers to maximize the number of minutes of therapy patients received, and the intensity of those services, because higher-acuity patients receive larger Medicare payments.

The lawsuit cites many examples. Although skilled-nursing therapy services ranged in price from $232 to $565 in 2006, the complaint alleges, one Life Care division had a program in place known internally as “the 400 Club” to encourage its facilities to make sure its average daily rate for patients was 400, often by classifying patients as need “ultra high” levels of service.

“Welcome to the 400 club!!!!!!!!!!!” read a March 23, 2006 e-mail from a Life Care senior executive to a facility director that achieved the distinction, according to the federal lawsuit.

However, providing services to justify more costly billing may be taxing on patients. The lawsuit cites 10 patients alleged to have gotten more services than they needed, including an “extremely frail” 80-year-old woman in Columbia, S.C., who was placed in a “standing frame” to help her remain upright during therapy in March 2006, even though she required assistance just to control her head and open her eyes.

She died after five days, the lawsuit says.

Numerous employees raised objections, though many were eventually fired or quit. One employee in Estero, Fla., complained to her regional director in a May 7, 2007 e-mail that corporate policies favoring high-reimbursement “RU” billing categories were overriding the front-line therapists clinical known about “what the patients can tolerate.”

“Let me give an example here of Mrs. S. who we were made to put into an RU category even after the therapists who treated her told me that she could not tolerate that level,” the employee wrote. “She expired last Friday ... in front of the building, while being taken to the doctor. I wonder if we had anything to do with hastening that process along.”

To the contrary, Life Care Centers of America said in its written statement that its services benefit patients and save the government money—an estimated $400 million between 2006 and 2010.

“Life Care's analysis reveals that high-intensity therapy allows patients to reach their clinical goals and to be discharged from the nursing facilities more quickly than if the patients had not received this therapy, which ultimately reduces Medicare spending,” the company statement said.

A Nov. 15 court ruling in the False Claims litigation revealed that the government conducted a nationwide probe of the company using U.S. attorneys, HHS inspector general's office officials, and investigators from the Tennessee Bureau of Investigation. They interviewed more than 150 employees and issued several administrative subpoenas. Settlement negotiations to avoid litigation were said to be ongoing in 2010 and 2011, the filing said.

Former Staff Development Coordinator Glenda Martin and Occupational Therapist Tammie Taylor filed similar whistle-blower lawsuits in 2008, both of which were incorporated into the consolidated complaint that was unsealed Nov. 30.

The issue of therapy services in skilled-nursing facilities has been an area of ongoing interest for government investigators, but an industry association said the focus is misplaced.

In an interview last month, before the Life Care lawsuit was unsealed, officials with the American Health Care Association rejected the idea that upcoding of services was responsible for an uptick in patient bills.

Rather, AHCA officials said regulatory and marketplace changes had driven more rehabilitation and long-term acute-care patients who tend to require more complex therapies into skilled-nursing facilities.

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