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Life Care lawsuit

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Cleveland billionaire and senior living titan Forrest Preston is in the government's crosshairs, after federal prosecutors this month amended their False Claims Act lawsuit against Preston's company, Cleveland-based Life Care Centers of America, and added a count of unjust enrichment against the 82-year-old sole shareholder.

The addition of an unjust enrichment count against Preston represents the government's claim that he ultimately benefited from the alleged, institutional over-billing of government care programs like Medicare and Tricare at Life Care Centers across the country — charges that resulted in the original, ongoing False Claims Act suit against Life Care.

Preston is also accused in court documents of exerting authoritarian control over his company and using its coffers to give himself loans, up to $50 million worth.

In response to the government's addition of Preston to the lawsuit, Life Care officials pointed to a statement issued by a company attorney to employees earlier this month.

"The motion to include Mr. Preston as a named defendant in the case adds no new claims whatsoever," the statement says on the company website. "It is puzzling that the government would seek to include Mr. Preston as a party at this late date when it made a conscious choice not to do so at the outset. Life Care continues to believe in the best interest of its patients and in its important therapy programs."

Life Care's statement goes on to say the company "will not bow to government pressure by way of including Mr. Preston in the case or otherwise, and will continue to vigorously defend the lawsuit and stand up for the rights of its patients to obtain full rehabilitation therapy."

Preston — CEO and chairman at Life Care — founded the company in the 1970s and remains its sole shareholder.

Life Care Centers of America generates annual revenues of about $2 billion. There are over 260 Life Care or Century Park facilities across America, employing more than 42,000 people.

The False Claims Act suit was originally filed in 2008 when two former Life Care employees — one in Tennessee and one in Florida — filed separate complaints against the company for what they claim is over-billing by the company for rehab services by providing unnecessary services and keeping patients longer than necessary.

In November 2012, the two cases were consolidated and the United States filed its consolidated complaint in intervention against Life Care.

Now, more than seven years since the first complaint was filed, government prosecutors say in the course of discovery they've uncovered information that more directly ties Preston personally to the day-to-day operations and corporate culture at Life Care.

According to an Aug. 6 filing by prosecutors, "it was not until discovery that the United States learned of the extent of Mr. Preston's involvement in the management of Life Care, the degree to which he was aware of complaints from his own employees regarding the conduct at issue in this litigation, the degree to which he ignored corporate formalities, and the degree to which he benefited unjustly from Life Care's unlawful conduct, its submission of false claims and the undercapitalization of the company."

Government prosecutors accuse Life Care Centers of America of over-billing government care programs, and of providing rehab and care to patients "that were not covered by the skilled nursing facility benefit, that were not medically reasonable and necessary, and that were not skilled in nature."

They say Life Care set unrealistic and unnecessary rehab goals "that were completely unrelated to its [patients'] actual conditions, diagnoses or needs."

And according to prosecutors, the practices persisted with encouragement from top company brass, and with the threat of disciplinary action for facilities or employees who complained about or failed to meet goals.

Life Care also "frequently overrode or ignored the recommendations of its own therapists and unnecessarily delayed discharging [patients] from its facilities," the government claims.

According to prosecutors' filings, in 2008 Life Care billed almost 68 percent of its Medicare rehab days at the highest (most expensive) level, while the national average was around 35 percent.

Contact staff writer Alex Green at agreen@timesfreepress.com or 423-757-6480.

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