On October 24, 2016, the Department of Justice announced the resolution of claims that Tennessee-based nursing home company Life Care Centers of America, Inc. ("Life Care") violated the False Claims Act ("FCA") by knowingly causing its 200-plus skilled nursing facilities to seek reimbursement for excessive and unreasonable rehabilitation therapy services. Life Care and its owner Forrest L. Preston agreed to pay $145 million to resolve the claims against them, including the allegation that Life Care's fraudulent billing scheme unjustly enriched Preston. The settlement is DOJ's largest with a skilled nursing chain.

According to the allegations, under the seven-year scheme that began in 2006, Life Care engaged in a systematic effort to increase its Medicare and TRICARE billings by instituting company-wide policies designed to secure the highest level of reimbursement for rehabilitation therapy services and place as many beneficiaries in the highest reimbursement category, regardless of the needs of the patients. These policies included keeping patients longer than necessary in order to continue billing for rehabilitation therapy, in some instances even after treating therapists thought therapy should be discontinued.

This litigation and settlement highlight emerging trends in FCA litigation, including the use of statistical sampling to prove liability. In 2014, the Court approved the Government's use of statistical sampling and extrapolation in this case. The Court authorized the Government to examine a random sample of 400 admissions and then extend its findings of false billings to another almost 55,000 admissions. The use of statistical sampling significantly streamlines FCA litigation because it makes claim-by-claim analysis unnecessary, which significantly reduces the burden previously imposed on the Government and allows it to potentially impose liability for much larger numbers of patients.

In addition to the monetary payment, Life Care entered into a five-year Corporate Integrity Agreement with the Department of Health & Human Services Office of Inspector General. Under the Corporate Integrity Agreement, an independent review organization will annually assess the medical necessity and appropriateness of therapy services billed to Medicare by Life Care. The Corporate Integrity Agreement also imposes other compliance, training, and reporting requirements.

The two former Life Care employees that first brought the allegations under the FCA's whistleblower provisions will share a $29 million whistleblower reward.

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