Encompass Health Corp. has agreed to pay $48 million to resolve the federal government's False Claims Act allegations that some of its inpatient rehabilitation facilities provided inaccurate information to Medicare to earn higher reimbursement and admitted patients unnecessarily, the government announced Friday.
Birmingham, Ala.-based Encompass, the country's largest inpatient rehabilitation provider, allegedly provided the inaccurate information so that some of its facilities could maintain their status in order to earn its higher reimbursement rate. Medicare and Medicaid use patients' diagnoses to determine whether a facility should be classified as an inpatient rehabilitation facility and to determine the proper reimbursement level.
"This settlement demonstrates our commitment to ensuring that those who participate in federal healthcare programs follow the rules," Assistant Attorney General Jody Hunt with the U.S. Justice Department's civil division said in a statement. "Medicare and Medicaid providers who seek profit inappropriately at the expense of taxpayers will be held accountable."
According to the government, beginning in 2007, some Encompass inpatient rehabilitation facilities falsely diagnosed patients with what they referred to as "disuse myopathy" when there was no clinical evidence for the diagnosis. This was allegedly done to ensure compliance with Medicare's rules regarding classification as an inpatient rehabilitation facility and to increase Medicare reimbursement. Encompass inpatient rehabilitation facilities also allegedly admitted patients who were not eligible for admission because they were too sick or disabled to participate in or benefit from intensive inpatient therapy.
Encompass announced the settlement in a news release, in which it said it fully cooperated with the government's investigation, producing voluminous documentation and submitting to over 30 depositions.
Emcompass CEO Mark Tarr said in a statement that from the beginning, the company believed the allegations were without merit.
"The evidence establishes that Encompass Health did nothing wrong," he said. "But to stop this interminable investigation and avoid further expense, we decided it is in the best interests of Encompass Health and its shareholders to settle with DOJ and end the related litigation."
The settlement resolves three lawsuits filed by Dr. Emese Simon, a former contract physician employed at an Encompass inpatient rehabilitation facility in Sarasota, Fla.; Melissa Higgins, former therapy operations director at Encompass' inpatient rehabilitation facility in Arlington, Texas; and Dr. Darius Clarke, the former medical director at Encompass' inpatient rehabilitation facility in Richmond, Va., and his company, Restorative Health & Wellness.
Encompass wrote in its statement that the allegedly improper diagnoses were made by independent physicians working at Encompass hospitals. Despite the Justice Department's claim that Encompass improperly used the codes under CMS regulations, the company said the CMS periodically reviewed industry usage of the codes and determined Encompass' reliance was appropriate.
"This resolution confirms the propriety of the company's practices under CMS regulations," Tarr said. "As always, our focus is on patient care and our commitment to compliance, ethical conduct and integrity."
Jeff Layne, a Reed Smith attorney who represented Encompass in the case, said this is a positive resolution for his client.
"This settlement resolves a dispute about coding," he said. "Our client can now devote its full time and resources to its core business—caring for patients—without the distraction and expense of litigating multiple unfounded lawsuits"
The lawsuits were filed under the whistleblower provisions of the False Claims Act, which allows whistleblowers to share in the government's recovery. In this case, the whistleblowers will receive $12.4 million from the settlement.
Encompass drew nearly $4.3 billion in net operating revenue and $292.3 million in profit in 2018, company financial filings show.