In a lawsuit filed last month the federal government alleged that a major long-term-care company used a companywide scheme to defraud Medicare but kept internal records in the event the fraud was discovered and reimbursement was denied.
Filed in U.S. District Court in Tampa, Fla., the suit names Louisville, Ky.-based Vencor, a national operator of long-term acute-care hospitals and nursing homes, and Ventas, the real estate investment trust formed through a spinoff of Vencor's physical assets in 1998.
The complaint is a detailed version of a whistleblower lawsuit filed in 1997 by two former employees of Vencor Hospital-Central Tampa. The government intervened in that lawsuit in May (May 24, p. 4), but the amended complaint added details not available at that time.
The lawsuit adds to Vencor's growing list of troubles. Hampered by huge losses and heavy borrowings, Vencor has defaulted on interest payments and struggled to pay rent to Ventas. Vencor is negotiating with its bank lenders to restructure its debt.
The suit alleges that Vencor caused Medicare to be charged twice for respiratory, pharmaceutical and radiology services to patients in skilled-nursing facilities.
Vencor provided those services through a subsidiary called Vencare. According to the suit, Vencare charged the nursing homes, which numbered 1,590 in 1995, for the services. The nursing homes then billed Medicare.
Vencor recouped money for those services a second time by including those charges in its hospital cost reports as if the services were provided to patients on an outpatient basis or by in-house departments, the suit claims.
In a similar scheme that the lawsuit claims was inspired by Vencor's approach to its cost reports, Las Vegas-based Transitional Hospital Corp. allegedly caused double-billing for contract respiratory therapy to skilled-nursing facilities from 1995 to 1997. Vencor acquired THC's 16 long-term acute-care hospitals in 1997 for $640 million.
In light of Vencor's precarious financial situation, including Ventas as a defendant may give the government a target with deeper pockets. Vencor lost $651.6 million, or $9.53 per share, on $3 billion in revenues last year. Ventas reported net income of $26.8 million, or 39 cents per share, on $149.9 million in revenues for the eight months ended Dec. 31, 1998.
Still, with 98% of its portfolio leased to Vencor, Ventas' fate hangs on that of Vencor and the continued receipt of rent.
The whistleblowers' attorney confirmed that some settlement talks had taken place. Vencor and Ventas executives did not return calls for comment. The Justice Department and the U.S. attorney's office declined comment.