Kindred Healthcare to pay $125 mln to end Medicare fraud probe

(Reuters) - Kindred Healthcare Inc agreed to pay $125 million to settle government allegations that the largest U.S. nursing home therapy provider knowingly caused skilled nursing facilities to submit false or fraudulent Medicare reimbursement claims.

The U.S. Department of Justice on Tuesday said the accord resolves claims under the federal False Claims Act against Kindred and contract therapy providers RehabCare Group Inc and RehabCare Group East Inc, which Kindred bought in June 2011.

RehabCare was accused of having since January 2009 engaged in schemes that permitted the submission of Medicare reimbursement claims for rehabilitation therapy services that were unreasonable, unnecessary, unskilled or nonexistent.

The government said these schemes included reporting extra therapy to boost reimbursements, scheduling therapy that patients’ treating therapists thought superfluous, and providing skilled therapy to patients who were asleep.

U.S. Attorney Carmen Ortiz in Massachusetts said RehabCare and its nursing facility customers engaged in a “systematic and broad-ranging” scheme focused on boosting reimbursements instead of patients’ clinical needs.

Four skilled nursing facilities using Kindred and RehabCare will pay $8.23 million to settle related claims, the Justice Department said.

Kindred said RehabCare denied engaging in illegal activity, and agreed to settle without admitting wrongdoing to “provide clarity” to shareholders, customers and regulators.

The Louisville, Kentucky-based company also said it previously set aside money for the accord, and intends to record a related tax benefit in last year’s fourth quarter.

Tuesday’s settlement resolves a whistleblower lawsuit filed in December 2011 by physical therapist Janet Halpin of Massachusetts and occupational therapist Shawn Fahey of New Hampshire, who have worked at RehabCare. They will receive nearly $24 million as their share of the recovery.

Kindred shares were down 4 percent at $9.69 in early afternoon trading on the New York Stock Exchange on Tuesday.

The case is U.S. ex rel Halpin et al v. Kindred Healthcare Inc et al, U.S. District Court, District of Massachusetts, No. 11-12139.