ArchCare Catholic Health Care System: Evaluations Turned Into Treatment Minutes

In the ArchCare Catholic Health Care System fraud case, the nursing-home operator agreed to pay $3.5 million to resolve allegations of inflated Medicare rehabilitation therapy claims at three facilities. The government alleged that therapy schedules and reported minutes followed reimbursement targets instead of patients’ needs. The details reach into decisions a therapist or billing employee would recognize: how much treatment to schedule, what to call an evaluation, and which minutes reached the Medicare bill.

The Justice Department announced the ArchCare settlement on March 2, 2015. Catholic Health Care System, also known as ArchCare, operated Terence Cardinal Cooke Health Care Center in New York City and Ferncliff Nursing Home in Rhinebeck, New York. The resolution also covered Kateri Residence in New York City, which ArchCare had previously operated.

ArchCare contracted for therapy through a subcontractor, Physical and Occupational Rehabilitation Therapy and Speech-Pathology Services, PLLC, an affiliate of RehabCare Group East and Kindred Healthcare. ArchCare’s facilities submitted the Medicare claims. That division of work sits at the center of the case: the government alleged that the facilities failed to prevent practices by their therapy contractor that inflated reimbursement.

Therapy Targets Came Before Individual Evaluations

The ArchCare resolution covered allegations of unnecessary therapy and false reports of treatment. According to the government’s announcement, patients were presumptively placed in the highest reimbursement category unless they could not tolerate that much therapy. An individualized evaluation was supposed to determine the appropriate level of care. The alleged starting point was the highest-paying category, with the patient expected to fit it.

The scheduling allegations worked in both directions. RehabCare allegedly planned enough minutes to reach the highest reimbursement level while discouraging treatment beyond the minimum threshold. It also shifted planned minutes between therapy disciplines to hit the target. Residents’ care allegedly followed the payment target instead of their needs.

Other allegations concerned what went into the reported total. The release describes initial evaluation time reported as treatment, unskilled palliative care reported as skilled therapy, and estimated or rounded minutes reported instead of actual minutes. Those practices allegedly changed the bill without changing the care a resident received.

Why the Assessment Calendar Mattered

Under the historical Resource Utilization Group system, therapy delivered during an assessment window helped set the facility’s daily Medicare payment. The government’s complaint against RehabCare explains that rehabilitation categories depended on therapy minutes and disciplines during a seven-day look-back period. The resulting category could determine payment beyond the days measured.

For the period before October 1, 2011, the ArchCare release alleged that RehabCare supplied high levels of unreasonable or unnecessary therapy during those assessment periods, then less therapy outside them. According to the government, ArchCare frequently billed at the highest therapy-based levels even when residents were receiving less. The government called the wider RehabCare practice ramping: therapy rose when the payment measurement was being taken.

The target also put a price on extra treatment. In the national RehabCare complaint, the government described contracts under which nursing facilities paid the contractor a daily amount tied to the patient’s RUG category. The alleged incentive was to reach the category’s threshold and limit the labor beyond it. That helps explain why the ArchCare allegations included both pushing therapy up to a target and discouraging minutes above it.

Medicare replaced this therapy-volume classification system for covered Part A skilled nursing stays with the Patient Driven Payment Model on October 1, 2019. The ArchCare allegations belong to the earlier payment system. Under CMS’s assessment manual, diagnosis, function and other patient characteristics now affect payment classification. For today’s nursing home insider, pressure to record a diagnosis or level of assistance the clinical notes do not support raises the same question: what did the facility tell Medicare?

Which Is an Example of Billing Fraud?

Reporting evaluation time as treatment is an example of alleged skilled nursing therapy billing fraud in the ArchCare settlement. The government’s later complaint against Kindred and RehabCare gives a detailed example at Terence Cardinal Cooke. It alleged that physical therapy evaluations regularly took 45 minutes or longer, but a supervisor directed therapists to report a fixed evaluation allowance and record the remaining time as treatment:

The clock followed the billing instruction, not the evaluation. Medicare allegedly paid for treatment minutes that were really evaluation time.

The same complaint alleged that RehabCare directed therapists at Ferncliff to report all initial evaluations as 15 minutes, whatever their actual length, and label the balance as therapy. The allegation was about changing the description of work already performed. An evaluation became treatment on the report.

The distinction mattered because the payment rules described in the complaint already included the cost of initial evaluations in the facility’s rate. Evaluation time could not also count toward the therapy-minute total used to reach a higher category. Relabeling that time allegedly helped generate a higher Medicare payment without the treatment minutes to support it.

What Are the Documentation Requirements for Skilled Nursing Facilities?

For the therapy claims at issue here, the documentation had to connect the patient’s clinical needs and the treatment delivered to the assessment and Medicare bill. The government complaint describes therapy times entering the Minimum Data Set assessment, with the RUG category then carried into the HIPPS payment code on the facility’s claim.

An evaluation and treatment plan describe the patient’s needs. Daily notes and schedules show the treatment recorded. The assessment and claim show what the facility told Medicare. Payroll and contractor records add another view of the work behind those entries.

We examine those relationships with the insider who understands them. A therapist may recognize evaluation time relabeled as treatment. An assessment coordinator or billing employee may see that total carried into a payment category. A manager may know who set the schedule and what happened when the clinical recommendation conflicted with the target.

The national RehabCare complaint even described a scheduling feature that carried missed minutes into the following day only for certain residents. It quoted the contractor’s own manual:

That instruction made the assessment calendar part of the scheduling machinery. It gives an insider something more concrete than a general pressure to increase revenue: a rule inside the software workflow that favored minutes affecting reimbursement.

The Facility Settlement and the Contractor’s Case

ArchCare’s resolution addressed its facilities’ claims. The later national case addressed the therapy provider’s role in allegedly causing false claims.

The contractor’s resolution was much larger than ArchCare’s facility settlement. On January 12, 2016, the Justice Department announced that Kindred and RehabCare agreed to pay $125 million in the separate national resolution. The contractor’s case included the same kinds of alleged conduct: reimbursement targets driving schedules, evaluation time reported as therapy, and inflated or inaccurate treatment minutes.

The same announcement named Wingate Healthcare among the nursing-facility operators settling claims based on RehabCare’s allegedly unnecessary or nonexistent therapy. ArchCare was among the earlier facility settlements. The pattern reached both sides of the contract: the company supplying therapy and the nursing home billing Medicare for it.

A physical therapist who had been a RehabCare rehabilitation manager and an occupational therapist who worked for the contractor brought the national whistleblower case. The government joined it and filed its own complaint. The Justice Department announced that the whistleblowers would receive nearly $24 million as their share of the RehabCare recovery. Their roles show why knowledge of therapy delivery matters well before an employee sees a submitted claim.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Minutes Were Recorded

If a nursing home’s or therapy contractor’s targets overruled your clinical judgment, or you saw evaluations turned into treatment minutes, speak with our whistleblower experts about how the minutes were inflated. We connect those decisions to the Medicare claims and bring in Medicare therapy fraud whistleblower lawyers to build your strongest case. We stay beside you throughout it.