Centers Healthcare: Management Reviewed the Reports That Hid the Relationships

In the Centers Healthcare cost reports fraud case, Centers agreed to pay $6,063,500 over concealing or misstating related-party dealings in Medicare cost reports for 44 skilled nursing facilities. Taxpayers fund the care, but the reports concealed who was doing business with whom.

The settling company was Centers for Care LLC, doing business as Centers Healthcare, together with the facilities identified in its agreement. The Justice Department announced the resolution on July 1, 2025.

What Centers Admitted in Its Medicare Cost Reports

Centers admitted that the covered cost reports contained one or more of three kinds of false statements or material omissions. A third party prepared the reports at Centers’ direction, according to the settlement agreement’s admissions:

1. Whether related-party transactions existed. Reports stated that the provider had no business transactions, including management contracts, with entities or individuals connected to the provider or its officers through ownership, control, family or similar relationships. That answer concealed the relationship Medicare needed disclosed.
2. What the related-party costs were. Reports contained false statements or material omissions in the calculations and disclosures of allowable costs for related-organization transactions.
3. Whether a home office was involved. Reports represented that related-organization transactions were not associated with a home office. The agreement describes a home office as an entity providing centralized management and administrative services under common ownership and control.

An insider may recognize one of those failures without having prepared the entire report.

The admission also reaches the review inside Centers:

The reports went to Medicare administrative contractors, which process and pay skilled nursing facility claims.

Why Related-Organization Costs Matter to Medicare

When a nursing facility buys services, supplies or facilities from an organization under common ownership or control, it must disclose the relationship and calculate the allowable cost. The federal agreement describes that amount as the lower of actual cost and the open-market price for comparable services, facilities or supplies. A payment recorded on an invoice does not answer both questions.

A nursing home can pay rent to a property company and management fees to a service company while the same ownership group controls both sides. The operating facility records an expense. The receiving company records revenue. The money stays inside the same enterprise.

That makes the relationship between buyer and seller part of the cost report’s substance. The facility’s books show the charge it paid. The supplier’s accounts help show the underlying cost. Ownership records and management agreements explain whether the apparent vendor sits inside the same business. Looking only at the facility’s expense line can miss the other side of the transaction.

Control also reaches beyond a shared name on company paperwork. The Centers agreement describes common control as the power, directly or indirectly, to significantly influence or direct an organization’s actions or policies. The connection can run through the people or organizations making the decisions, as well as through ownership stakes.

The reporting obligation matters even in a payment system that uses set rates. Skilled nursing facilities submit annual Medicare cost reports describing their financial operations and the costs of caring for Medicare beneficiaries. The reports in the Centers agreement used Form CMS-2540-10. The agreement explains that the Centers for Medicare and Medicaid Services uses those data when updating payment rates. An officer associated with the facility must certify the report’s accuracy and compliance with applicable requirements.

A separate audit by the Department of Health and Human Services’ Inspector General illustrates why disclosure and cost calculation both deserve attention. In its nonstatistical sample of 14 facilities, the agency found undisclosed related parties at three and improper cost adjustments at seven.

The Facilities and Report Years Behind the Settlement

The federal resolution covered facilities in Rhode Island, Kansas, Missouri and New York. Centers’ connection to the facilities was common ownership or control. The agreement identifies the covered facilities and cost-report periods individually in Exhibit A.

Carthage Center for Rehabilitation and Nursing appears with fiscal years ending December 31 of 2018 through 2022. Rochester Center for Rehabilitation and Nursing appears for the years ending in 2021 and 2022. For someone who worked across facilities or through an ownership change, the facility and reporting period connect the admission to the books they actually know.

What Evidence Is Needed to Prove Fraud?

For related-organization cost reporting, the useful evidence connects the submitted report to the ownership relationship, the underlying expense and the management review. Our whistleblower experts examine those connections together, because different people inside a health care business see different parts of them.

An accountant may know that the same organization manages both businesses. A vendor may know which company actually supplied the service. Those perspectives become especially useful when a cost report says there were no related-party dealings or no home-office connection. We connect the insider’s account to the contracts and ownership records that explain the relationship.

Invoices show what the facility was charged. Supplier accounts, payroll records and agency invoices can help explain the cost of the work underneath it. Consolidated accounts and entries that remove transactions between group companies can show whether a reported expense moved money outside the enterprise or between its own businesses.

Someone working in the business office may know which relationship information reached the preparer. Someone reviewing financial reports may know how a central management charge was described. The insider’s value is often knowing why an entry does not match the business behind it.

Who Pays for Resolving the False Reports?

Centers and the facilities could not pass the costs of resolving the false cost reports back to the government through Medicare and Medicaid payment requests. The agreement required separate accounting for those costs and adjustments to reports that already included them.

How This Differs From the State Care Investigations

The New York Attorney General’s care and financial-control agreement was a separate state matter resolved in November 2024. The state resolution addressed the Attorney General’s allegations concerning related-party financial transfers, insufficient staffing and failures of resident care. Its relief included resident-care funding and health and financial monitors.

A separate New Jersey investigation of Hammonton Center and Deptford Center in 2025 alleged undisclosed related transfers, loans and rents alongside inadequate staffing. That investigation connects the financial relationships to care concerns, while the federal Centers settlement addresses what the Medicare reports disclosed.

How Much Does a Medicare Fraud Whistleblower Case Pay?

A qui tam whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If you know how related-party transactions were reported inside a nursing home business, our whistleblower experts can assess what that knowledge means for a Medicare cost-report case.

You Know the Companies Behind the Costs

If the ownership, invoices or management charges you know do not match what went into the Medicare cost report, bring that discrepancy to our whistleblower experts. We build the case with you and bring in healthcare fraud whistleblower lawyers who understand Medicare cost reports and related-party accounting. Speak with us about building your strongest cost-report whistleblower case, with our experts beside you throughout.