DOJ sues HCR Manor Care, alleges it provided medically unnecessary services

By Jessica M. Karmasek | Apr 22, 2015

ALEXANDRIA, Va. (Legal Newsline) - The federal government is suing skilled nursing chain HCR Manor Care, alleging that the health care provider “knowingly and routinely” submitted false claims for services that were not medically reasonable and necessary.

The U.S. Department of Justice, in a news release Tuesday, announced it has intervened in three False Claims Act lawsuits and filed a consolidated complaint against Manor Care over submitted claims to Medicare and Tricare for rehabilitation therapies.


Manor Care, based in Toledo, Ohio, is one of the nation’s largest providers of short-term post-acute and long-term care with nearly 300 skilled nursing facilities, or SNFs, in 30 states.


The DOJ’s complaint, filed in the U.S. District Court for the Eastern District of Virginia April 10, alleges that the nursing chain, owned by The Carlyle Group, exerted pressure on SNF administrators and rehabilitation therapists to meet unrealistic financial goals that resulted in unnecessary services.


“HCR Manor Care received numerous complaints that corporate pressure to meet Ultra High and length of stay targets was undermining therapists’ clinical judgment at the expense of its patients’ well being,” according to the government’s 56-page complaint. “These complaints came from both inside and outside the company.


“HCR Manor Care made no changes in response to these complaints.”


According to the DOJ, Manor Care allegedly set prospective billing goals designed to significantly increase revenues without regard to patients’ actual clinical needs and threatened to terminate SNF managers and therapists if they did not administer the additional treatments necessary to qualify for the highest Medicare payments.


Manor Care also allegedly increased its Medicare payments by keeping patients in its facilities even though they were medically ready to be discharged, the DOJ’s complaint states.


“The Department of Justice is committed to ensuring that health-care providers who pressure their employees to provide medically unnecessary services to Medicare beneficiaries and Tricare recipients solely to increase their own profits are held accountable,” said Benjamin C. Mizer, principal deputy assistant attorney general of the department’s Civil Division.

“We will not relent in our efforts to stop these false billing schemes and recover funds for federal health-care programs.”


Andrew G. McCabe, assistant director in charge of the FBI’s Washington, D.C., field office, said the action was a the result of a “robust” investigation.


“Health-care fraud is a top priority for the FBI and we will continue to work closely with federal, state and local law enforcement partners to address vulnerabilities, fraud and abuse in the health-care industry,” he said.


The three consolidated lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.


The FCA permits the government to intervene in such lawsuits.


A defendant that violates the law is liable for three times the government’s losses plus civil penalties.


Manor Care argues that the DOJ made the decision to intervene in the civil lawsuit despite its “full” cooperation with the government’s investigation.


“Our cooperation included producing information that we believe refutes the basic claims contained in the lawsuit,” the company said in a statement to its employees, patients, families and business partners. “Unfortunately, the government disagreed and instead proceeded with its case.


“We believe this lawsuit is unjust, and we will vigorously defend ourselves in court.”


Manor Care said it “vehemently” disagrees that it provided more rehabilitation care than medically necessary.


“This lawsuit is the result of a billing dispute between our company and the federal government that stems from the government’s view that our industry as a whole is providing a level of care to Medicare rehabilitation patients that exceeds the government’s expectations, despite the fact that these services were ordered by licensed physicians and delivered by licensed therapists,” it said Tuesday.


“The government bases its allegations on retrospective analyses performed by a few alleged experts who have never cared for, spoken with or even seen the patients in question. Instead, these alleged experts second-guess the hands-on clinical judgment of tens of thousands of experienced, licensed, caring who actually provided care to our patients.”


In February, attorneys for Manor Care -- Anspach Meeks Ellenberger LLP in Toledo -- filed a motion for disqualification of West Virginia’s Supreme Court chief justice, Robin Davis, from hearing a petition for writ of prohibition in an ongoing case against a former Manor Care-affiliated nursing home filed on behalf of the estate of Sharon Hanna.


Davis has refused to recuse herself from the case.


In December, ABC News reported that plaintiff’s counsel in another nursing home matter, particularly Michael Fuller of the McHugh Fuller Law Group from Hattiesburg, Miss., had purchased a Learjet from the Charleston-based Segal Law Firm, owned by Davis’ husband Scott Segal, for more than $1 million in 2011.


The ABC News story also reported that Fuller and other attorneys at the firm had been responsible for raising more than $35,000 for Davis’ 2012 successful re-election campaign.


In June, Davis authored the majority opinion in the Douglas case, upholding a jury verdict in favor of Fuller’s client, Tom Douglas, who alleged severe neglect led to the death of his 87-year-old mother, Dorothy.


The ruling did, however, cut the punitive damages award from $80 million to nearly $32 million.


Former West Virginia gubernatorial candidate Bill Maloney has filed a Judicial Investigation Commission complaint regarding Davis, Segal and the personal injury lawyer who purchased a jet from them.


From Legal Newsline: Reach Jessica Karmasek by email at

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