Beverly Enterprises, Fort Smith, Ark., disclosed last week that California is conducting an investigation related to "possible criminal charges" against the nursing home chain stemming from patient-care issues.
In its quarterly filing with the Securities and Exchange Commission, Beverly said it was notified April 29 by state officials that they were investigating patient-care surveys from nursing home inspections conducted at 20 of the elder-care chain's California nursing homes from 1998 to 2001.
"Of all the survey issues raised during that three-year period, we've submitted plans of corrective actions that were approved by the state, so we do not know what the basis for the use of the word `criminal' might be," said Beverly spokesman James Griffith.
In 2000, Beverly paid the federal government $175 million to settle a criminal Medicare fraud case involving inflated nursing costs. The agreement with the government included a $5 million criminal fine and a $170 million civil settlement, the largest settlement ever paid to date by a nursing home company.
Beverly said in its SEC filing that it is in talks with the state to resolve the most recent matter.
Griffith said Beverly representatives will meet with state officials in June. Officials from the state attorney general's office would not comment on the investigation.
Nancy Weaver, a healthcare analyst with Little Rock, Ark.-based investment banking firm Stephens, has followed Beverly since 1996 and said the state's use of the word `criminal' is unusual. "I think (Beverly) is waiting to have more interaction with the attorney general and to find out what the scope of his issues are," she said.
Weaver said roughly 30% of homes nationwide have citations for deficiencies.
Griffith said the state's April 29 letter indicates the investigation centers on patient-care issues, not billing or cost-report issues, "which makes it all the more puzzling to us," he said. He said he did not believe the company committed any criminal wrongdoing.