HealthSouth: Skilled Nursing Labor, Billed as Ancillary Services

The HealthSouth SNF infusion labor fraud case accounted for $1 million of the $325 million settlement HealthSouth Corporation agreed to pay over Medicare and other federal health care allegations. The government alleged that its skilled nursing facilities billed infusion labor as ancillary services to escape routine payment limits.

What HealthSouth Allegedly Billed as Ancillary Services

The government alleged that several HealthSouth skilled nursing facilities billed the costs of skilled infusion labor as ancillary services to avoid Medicare’s routine limits on payment for that labor. The allegation concerned facilities HealthSouth owned from November 1997 through January 1998.

The alleged financial advantage was in the category assigned to the work. Calling the charge something else was the means of asking Medicare to pay beyond that limit.

That puts the nurse and the person preparing the bill on different sides of the same transaction. One knows the service and the staff who delivered it. The other sees the classification submitted for payment. Connecting those accounts is how an insider’s knowledge of the work can expose a billing decision that costs taxpayers money.

Why the Payment Era Matters

HealthSouth’s infusion-labor allegation belongs to the period before Medicare introduced prospective payment for skilled nursing facilities. According to the Centers for Medicare & Medicaid Services’ payment history, daily rates adjusted for patient mix replaced reasonable-cost reimbursement for cost-reporting periods beginning July 1, 1998.

The Bureau of Labor Statistics review Health services industry: still a job machine?, published in the Monthly Labor Review in March 1999, described widely varying payments for patients with the same diagnosis under the earlier system. Reimbursement had not been adjusted for their clinical conditions. The replacement tied payment to the average cost of treating patients by diagnosis, initially blending a facility-specific rate with a federal rate. The paper explained what that change meant for ancillary billing:

Why Nursing and Ancillary Classifications Still Matter

Medicare still uses nursing and nontherapy ancillary classifications to determine skilled nursing facility payments. Under the Patient Driven Payment Model, introduced October 1, 2019, resident characteristics drive those classifications. The Medicare resident assessment manual connects payment to clinical conditions, function and services. The pressure point has moved from the historical cost category to the information used to classify the resident.

The resident assessment serves several purposes inside a facility: care planning, payment classification and quality reporting. Its payment classification reaches the bill. That gives a nurse or assessment employee a reason to care about how observations at the bedside become entries in a payment system. An account of the resident’s needs can have consequences beyond the care plan.

For an insider seeing a mismatch today, the useful connection is still between the care and the claim. We work with you to understand how the facility represented that care under the payment rules for your case. HealthSouth’s historical allegation shows why knowing the work behind a billing category can matter.

What Else the HealthSouth Settlement Covered

HealthSouth Corporation agreed to the global payment, which the Justice Department announced on December 30, 2004. Its rehabilitation business spanned outpatient therapy and inpatient care. The resolution covered allegations about outpatient services, hospital admissions, hospital cost reports and home-office cost statements as well as the nursing-facility labor charges.

The outpatient allegations included billing services as one-on-one when one-on-one care had not been provided. The hospital and home-office allegations included costs that Medicare did not allow. Among them were lavish entertainment and certain travel costs for the company’s annual administrators’ meeting at Disney World.

The government also alleged that HealthSouth sought extra payments reserved for extraordinarily costly hospital patients through improper discharge claims. Those allegations reached different parts of the healthcare business, from what happened during a therapy visit to which business expenses the company charged to Medicare.

Three whistleblower suits contributed claims resolved in the agreement. Two named HealthSouth. The SNF-related suit named National Institutional Pharmacy Services, Inc.

What Evidence Is Needed to Prove Fraud?

For an infusion-labor billing case, the evidence connects the care provided, the person who performed it, the category billed and the people who chose that category. An infusion nurse may know who delivered the service, while a payroll or billing employee may see how that work became a charge. We connect those accounts to the Medicare claim with the insider who can explain the decisions behind it.

Independent Review of Medicare Claims

HealthSouth entered a five-year corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General. It required independent review organizations to examine the accuracy of the company’s Medicare claims for inpatient and outpatient rehabilitation therapy.

What Is the Reward for a Medicare Fraud Whistleblower?

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

The Justice Department announced separate whistleblower awards of approximately $8.1 million and $4.1 million in the two suits naming HealthSouth, and a shared award in the suit naming National Institutional Pharmacy Services.

A Parallel in Nursing-Labor Cost Reports

Beverly Enterprises’ nursing-labor settlement addressed another way of moving staff costs onto Medicare. The company agreed to pay $170 million over allegations that it allocated nursing labor to Medicare residents when the labor had not actually been devoted to them.

Beverly’s alleged distortion concerned which residents received nursing time. HealthSouth’s concerned the category used to bill infusion labor. Both allegations turned on how a business represented the work of its nursing staff for payment. The employee who understands the staffing can give meaning to an accounting entry that looks ordinary on its own.

You Know the Work Behind the Charge

If you know how infusion labor moved from the nursing record to a different category on the bill, speak to one of our whistleblower experts about how the labor was billed. We bring in Medicare fraud whistleblower lawyers who understand nursing-facility reimbursement and work with you to build your strongest Medicare whistleblower case. We stay with you as your partners through the case.