Horizon West: The Nursing Hours Assigned to Medicare

In the Horizon West fraud case, Horizon West agreed to pay $14.7 million over allegations that it inflated nursing hours assigned to Medicare patients in its cost reports. The Rocklin, California healthcare operator ran approximately 30 facilities across California and Utah.

The Justice Department announced the settlement on September 26, 2006, over costs reported from 1991 through 1998. A former employee brought the case under the False Claims Act, and the government joined it. The allegation reached from the nursing floor to the finance office: the hours assigned to Medicare exceeded the nursing time the government said those patients received.

Nursing-Hour Allocation in Medicare Cost Reports

The government alleged that Horizon West overstated the nursing time spent on Medicare patients. In a system that reimbursed reasonable costs, assigning labor to Medicare mattered because it helped determine the costs the program was asked to bear. The accounting question reached back to the care: which patients actually received the nursing work attributed to them?

The alleged inflation put more nursing time on Medicare’s side of the calculation. Taxpayers were being asked to fund care through a reported number of hours that the government said was false.

For someone who knows the staffing or prepares the reports, the question is concrete: how did the hours spent caring for residents become the hours assigned to Medicare? A total wage bill and the portion assigned to a particular group of patients describe different things. Horizon’s alleged overstatement concerned that assignment of nursing work, the link between health care delivered and the cost reported to the program.

The Payment System Behind the Allegation

Horizon West’s case concerns the earlier reasonable-cost payment system. Medicare began replacing that arrangement with prospective payment for skilled nursing facilities for cost-reporting periods beginning on or after July 1, 1998. The replacement used daily payments adjusted for the kinds of patients being treated.

The Bureau of Labor Statistics described the shift in its March 1999 Monthly Labor Review paper, Health Services Industry: Still a Job Machine?:

The paper explains that those earlier payments were not adjusted for patients’ clinical conditions. The new system initially blended a facility-specific rate with a federal rate. That puts Horizon’s allegation at a turning point in nursing-home payment: reported costs had determined reimbursement, and Medicare was moving toward rates adjusted for the patients being treated.

What Evidence Is Needed to Prove Fraud?

For a nursing-hour allocation allegation, the evidence connects the hours reported to Medicare with the nursing work actually performed. We examine that connection with the insider who knows how the figures were produced, including who directed or approved them.

A person who worked on the floor may be able to explain an assignment that looks ordinary in a spreadsheet. A person who prepared the cost report may understand how a staffing figure became a Medicare cost. We examine the allocation worksheets and instructions alongside the time and care records. If a reported total changed, the reason for the change and the person directing it could explain how an unsupported figure reached the submitted report.

A Former Employee Brought the Case

The Horizon West qui tam case began with a former employee. The government later joined the case, and the announced agreement resolved the civil allegations. Someone who understands the nursing work, the allocation or the approval of the report may hold a part of the explanation that the finished figures leave out.

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

The Same Allocation Problem at Other Nursing-Home Chains

National Healthcare faced a closely related allegation: cost reports allegedly overstated staff hours devoted to Medicare residents. The Justice Department’s account also alleged that personnel were reported as furnishing therapy they had not performed. A former facility administrator brought that case.

The therapy allegation adds a useful distinction. A report could misrepresent both how much staff time went to Medicare residents and what service those employees performed. The first allegation concerned the amount of time attributed to Medicare. The second concerned the kind of work those staff members supposedly performed.

In the civil case against Beverly Enterprises, the government alleged that nursing labor allocated to Medicare residents had not actually been devoted to them. That is the same practical question at the center of Horizon West’s case: did the claimed allocation describe the care?

Why the Care Record Still Matters Under PDPM

Under the Patient Driven Payment Model, resident characteristics affect Medicare payment. The assessment now carries the payment classification: diagnoses, function, nursing needs and other clinical information help determine the daily rate. A false account of the resident’s condition or care can therefore reach the bill through the assessment.

Medicare replaced therapy-volume classification with this model on October 1, 2019. The CMS assessment manual connects nursing classification to clinical conditions and services, function, depression and restorative nursing. The payment question has moved from the nursing hours assigned to a resident toward the resident’s documented needs and care.

For example, Section GG records a resident’s usual performance in self-care and mobility, which feeds the payment calculation. Someone who helps that resident through the day may recognize when the assessment describes different abilities from those shown in the care record. We work with insiders to connect those differences to the classification used for payment.

The allegation against Horizon West shows the older version of that gap between care and reimbursement. The reason an insider’s knowledge matters remains concrete: someone inside the home knows what happened before it became a number on a report.

When the Allocation Does Not Match the Work

If you know how nursing hours became a Medicare cost that the staffing records cannot support, speak to one of our whistleblower experts about the gap. We build your strongest Medicare cost report whistleblower case with you, find Medicare fraud whistleblower lawyers who understand nursing-home cost reporting, and remain your partners through the pursuit of a recovery.