Kindred agrees to pay $125 million for Medicare fraud claims against subsidiaries it bought after most wrongdoing occurred

Louisville-based Kindred Healthcare Inc. has agreed to pay $125 million to settle federal allegations that it knowingly submitted false claims to Medicare for rehabilitation therapy, according to a U.S. Department of Justice news release.

The lawsuit, brought by two whistleblowers, focused on contract providers RehabCare Inc. and RehabCare Group East Inc., which Kindred bought in 2011, after most of the alleged wrongdoing occurred. RehabCare is the largest provider of therapy in the nation, according to the release.

The Justice Department announcement alleged that RehabCare had set "unrealistic financial goals" and scheduled therapies "to achieve the highest reimbursement level," regardless of the needs of the patients, providing services that were not "reasonable, necessary and skilled, or that never occurred."

"This False Claim Act settlement addresses allegations that RehabCare and its nursing facility customers engaged in a systematic and broad-ranging scheme to increase profits by delivering, or purporting to deliver, therapy in a manner that was focused on increasing Medicare reimbursement rather than on the clinical needs of patients,” U.S. Attorney Carmen M. Ortiz of Massachusetts said in the release.

Allegations against RehabCare include: placing patients in therapy at the highest reimbursement level, regardless of the patients actual therapy need; ramping up the amount of reported therapy during the Medicare assessment period; scheduling therapies even after the patient had been discharged by their therapist; arbitrarily shifting the amount of time to other therapy disciplines, like physical or speech therapy, to achieve maximum reimbursement levels, regardless of patient need; providing "significantly higher amounts of therapy" at the end of therapy to achieve the highest level of therapy reimbursement; inflating initial reimbursement levels by reporting evaluation time as therapy time; rounding up actual therapy minutes provided; and billing for services for patients while they slept or couldn't benefit from them.

RehabCare denied any illegal activity, "but in order to provide clarity for contract customers, shareholders, and government oversight entities," and to "avoid the cost and distraction of protracted litigation" has agreed to the settlement without any admission of wrongdoing, according to the Kindred news release.

Since January 2009, the Justice Department has recovered more than $27.1 billion through False Claims Act cases, with more than $17.1 billion from cases involving fraud against federal health-care programs, according to the department.