Justice Department: Settlement reached in Life Care overbilling lawsuit

Life Care Centers of America, headquartered in Cleveland, Tenn.

The U.S. Department of Justice is apparently close to a settlement with Cleveland, Tenn.-based Life Care Centers of America, the nation's largest private nursing home company, over charges that the company overbilled the government for its costs of treating patients.

In a motion filed Friday, lawyers for the Justice Department asked U.S. District Court Judge Harry "Sandy" Mattice for a 90-day extension in the legal action because "the parties have reached a settlement in principle, subject to all required approvals."

photo Beecher Hunter, Life Care president
photo Forrest Preston

In the motion the government attorneys said that "Life Care has made a settlement offer that the attorneys for the United States will recommend to the Department of Justice official who has the authority to accept or reject the offer."

Additionally, the lawyers said that the Department of Health and Human Services Office of the Inspector General will be negotiating a corporate integrity agreement with Life Care, "to be executed simultaneously with the settlement in this action."

In a typical corporate integrity agreement, a company spells out how it is going to assure the government that it will not violate the law again. That might include hiring a top official to monitor company activities, establishing a mandatory employee training program, setting up a way for employees to complain anonymously, or agreeing to some outside monitoring of their activities for a period of years.

Life Care President Beecher Hunter said he had no comment on any possible settlement agreement.

"The motion speaks for itself," he said when contacted Monday.

Life Care owns some 200 skilled nursing, rehabilitation, Alzheimer's and senior living campuses in 28 states - 20 of them in Tennessee, including facilities in Hixson, Red Bank, East Ridge and Ooltewah in the Chattanooga area.

The company is solely owned by 83-year-old Forrest Preston, whose net worth has been estimated at nearly $2 billion, according to Forbes magazine, making him one of the wealthiest people in East Tennessee.

The Justice Department sued under the federal False Claims Act, alleging that "Life Care caused the Medicare and TRICARE programs to pay for services that were not covered by the skilled nursing facility benefit, that were not medically reasonable and necessary, and that were not skilled in nature." TRICARE provides civilian health benefits for U.S military personnel, including retirees and their dependents.

Specifically, government lawyers claim that Life Care's top officials pushed staffers to keep Medicare and TRICARE patients in their facilities for the maximum of 100 days, whether they needed treatment or not, and encouraged therapists to provide treatment to patients even if they did not need the therapy.

The government complaint alleges that top Life Care officials "engaged in a systematic scheme to maximize the number of days it billed to Medicare and TRICARE at the Ultra High level." The Ultra High Level requires at least two therapists in different disciplines to provide 720 minutes or more of skilled therapy a week.

The Justice Department complaint states that, in 2008, Life Care billed almost 68 percent of its Medicare rehab days at the most expensive level, while the national average hovered around 35 percent.

The complaint alleges that top Life Care officials set targets for patient billing that were not related to a patient's actual needs, gave out bonuses based on how well employees or facilities met those goals, and overruled or ignored the recommendations of its therapists.

Medicare paid Life Care more than $4.2 billion between January 2010 and February 2016, according to the government's complaint.

Besides the complaint against Life Care, the Justice Department also filed a separate complaint against Preston, arguing that he was aware of his employees' actions and benefited from them. It is unclear whether the possible settlement the Justice Department said it has reached includes its complaint against Preston as well.

Contact staff writer Steve Johnson at 423-757-6673, sjohnson@timesfreepress.com, on Twitter @stevejohnsonTFP, and on Facebook, www.faceboook.com/noogahealth.