Preferred Care: Higher Care Levels on the Bill

Preferred Care and its owner agreed to a $540,000 settlement in the Preferred Care Stanton fraud case over allegations of upcoding and materially substandard care. The government alleged that Preferred Care coded patients for more skilled nursing services than they needed or received.

At the time of the announcement, Preferred Care’s network owned or operated approximately one hundred skilled nursing facilities nationwide. The settling parties included Preferred Care Inc., its Kentucky facility Stanton Nursing and Rehabilitation Center, Preferred Care Partners Management Group and the owner. Former employees brought the allegations through False Claims Act qui tam lawsuits. The case reached from the care delivered inside Stanton to the companies responsible for its operation and management.

How the RUG Upcoding Allegations Worked

The government alleged that Preferred Care, its management company and Stanton Nursing improperly coded patients at higher care levels from July 1, 2012 through October 31, 2017. According to the government, those codes produced higher Medicare payments.

During that period, Medicare tied skilled nursing reimbursement to a patient’s resource utilization group, commonly called a RUG. The level reflected the anticipated skilled therapy and nursing services the patient required. The alleged mismatch was concrete: the billed level exceeded what the patient needed or actually received. Taxpayers, the government alleged, paid for the higher level.

Nurses, therapists and other direct-care staff contribute observations about the resident. A registered nurse coordinates or conducts the assessment, and contributors certify their portions. The Minimum Data Set brings that information into a standardized resident assessment. The nursing notes, therapy notes and orders behind it matter because they explain the patient whose care the code is supposed to describe.

This was a RUG-era case. Medicare replaced the RUG system with the Patient Driven Payment Model on October 1, 2019, under CMS’s payment-system change.

The incentive to move residents into higher therapy categories reached beyond this case. In The Medicare Payment System for Skilled Nursing Facilities Needs to Be Reevaluated, its 2015 report, the HHS Office of Inspector General estimated that movement toward higher therapy categories added $1.1 billion in Medicare payments during fiscal years 2012 and 2013. That was a national estimate of additional payments. Preferred Care’s case turned on a more specific allegation: the higher billed levels exceeded the services residents needed or received.

When a Payment Target Comes Before the Patient

A separate whistleblower complaint against Ascension Health Senior Care described pressure to maximize reimbursement in a supervisor’s alleged words:

That alleged instruction puts the revenue target ahead of the clinical assessment. It shows why an insider’s account of who pushed a care level can explain something the final code alone cannot. The assessment records the level. The instruction can explain how it was chosen.

The Worthless-Care Allegations at Stanton

The government separately alleged that certain patients at Stanton Nursing received materially substandard or worthless services from July 1, 2012 through April 30, 2015. The settlement addressed both that care allegation and false claims involving Medicare and Kentucky Medicaid.

The two allegations ask different questions about the same business. Upcoding concerns the level of services represented on the bill. The care allegation concerns what residents actually received. A therapist may understand the treatment behind an assessment, while a nurse or aide knows what happened through the rest of the shift. Connecting those accounts to the facility’s claims brings the resident’s experience into the payment case.

For a care allegation, we look at the clinical notes alongside schedules, payroll and time records. The notes describe the services. The staffing records help show who was there to provide them. The claims show what the facility asked the government to pay. Those are different views of the same days of care, and the connection between them is what an insider can help explain.

In the separate Vanguard Healthcare care case, the government alleged failures in wound care, infection control, nutrition and hygiene. Those allegations show what a care case can concern beyond the billing code: the daily services residents depend on.

The Settlement Went Through Bankruptcy

Preferred Care, Stanton Nursing and Preferred Care Partners Management Group entered Chapter 11 bankruptcy in November 2017. The settlement received bankruptcy approval in 2018, and the settling parties agreed to pay the United States and Kentucky.

What Evidence Is Needed to Prove Fraud?

Evidence for a skilled nursing upcoding case connects the resident’s needs and actual services to the assessment, the bill and the people directing those decisions. We compare the original and changed MDS assessments with the clinical record and the bill. A changed care level has a history behind it: the clinical observations, the people contributing to the assessment and the payment classification that followed.

Corporate roles matter here. Preferred Care Partners Management Group managed the facilities. The network included Stanton and twenty other Kentucky facilities at the time of the settlement announcement. The local facility and the management company sat at different points in the operation, and both were named in the government’s allegations.

Management agreements help connect corporate responsibilities to the care operation. Payroll helps explain the staffing behind the care record. An MDS coordinator, therapist, nurse or finance employee may know a different part of the same transaction. We work with that knowledge to connect the clinical decisions to the claim and the people responsible for it.

Former Employees Brought the Case

Former employees used the False Claims Act’s qui tam provisions to bring the Preferred Care allegations on the government’s behalf.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For an insider in health care, the starting point is what your work lets you explain about the difference between the service and the bill.

You Know the Care Behind the Code

If you saw care levels change without the treatment to match, speak to one of our whistleblower experts about the care behind the code. We build your strongest skilled nursing whistleblower case around your knowledge of the residents, the assessments and the billing decisions, and bring in skilled nursing fraud whistleblower lawyers who understand those connections. We stay beside you as your account becomes a case for recovering public money.