Beverly Enterprises, Fort Smith, Ark., last week offered the federal government $77.5 million to settle a billing dispute over Medicare cost reporting. Beverly officials said they believed the company's reporting practices complied with regulations, but they made the settlement offer to avoid costly litigation.
"It was not a suit at all and it had absolutely no relation to any allegations of criminal misconduct or inappropriate misconduct," said Jim Griffith, a senior vice president at Beverly. "It was purely a billing dispute over cost-based reimbursement issues."
Beverly's offer is subject to review by the Centers for Medicare and Medicaid Services and the approval of the U.S. Department of Justice. A final decision is expected within the next 60 to 90 days, Griffith said. Officials at the Justice Department would not comment on Beverly's offer.
The current settlement is "separate but related" to a previous record-breaking fraud settlement reached between Beverly and the federal government in February 2000, Griffith said. At that time, Beverly's California subsidiary pleaded guilty in U.S. District Court in San Francisco to 10 counts of making false statements to the federal government after falsely billing Medicare by inflating nursing costs at 10 of its homes. As part of the final $175 million settlement, the largest ever paid by a nursing home company, Beverly was forced to sell the 10 homes that engaged in the false-billing practice.
The current $77.5 million offer is related to Beverly's cost reports from 1996 to 1998, and issues regarding reimbursement for bad debt for patients covered by both Medicare and Medicaid, Griffith said.
"Those issues were not addressed in the February 2000 settlement; they were left to be addressed later. And that is what our (new) settlement offer addresses," he said. "It is an attempt to put all of that behind us and resolve the entire Medicare issue."
The settlement offer is reflected in a charge to Beverly's fourth-quarter earnings, which along with other special charges resulted in a fourth-quarter loss of $266.6 million, or $2.56 per share. Without the special charges, Beverly would have earned $14.8 million, or 14 cents per share, in the fourth quarter ended Dec. 31, 2001-a 24% increase over the year-ago period for an operating margin of 9.66%, the company's highest in three years. Quarterly revenue increased slightly to $680.4 million.
For the year, Beverly lost $301.3 million, or $2.90 per share, including special charges, on revenue of $2.7 billion.