Life Care Centers of America: Therapy Planned Around the Payment

In the Life Care Centers of America fraud case, the company and its owner agreed to pay $145 million to resolve allegations that therapy quotas and prolonged stays drove false Medicare and TRICARE claims. The government alleged that corporate targets overrode therapists’ judgments about who needed treatment, how much they could tolerate and when it should stop. The staff treating the residents knew what a minute target could leave out.

Who the Life Care Settlement Covered

Life Care Centers of America, based in Cleveland, Tennessee, owned and operated more than 220 skilled nursing facilities across the country. Two former Life Care employees brought False Claims Act qui tam cases over allegedly unreasonable and unnecessary rehabilitation therapy. The United States joined their cases and also brought a separate civil action against the company’s owner and sole shareholder.

The Justice Department announced the resolution on October 24, 2016. The resolution also settled the separate owner action over money the owner allegedly kept from the scheme.

The executed agreement places the covered therapy conduct between January 1, 2006 and February 28, 2013. Those dates matter because the payment system rewarded a different set of inputs from the system that later replaced it.

Why the Ultra High Therapy Category Mattered

Under the historical RUG payment system, therapy minutes helped determine a resident’s reimbursement category. The Ultra High category required at least 720 minutes of therapy a week across at least two disciplines, with one furnished on at least five days. The classification affected what the facility could bill for the resident’s stay.

The assessment period made the timing of those minutes valuable. The government alleged that Life Care’s Rehab Managers sometimes overruled the MDS coordinator and selected assessment reference dates that would produce the highest RUG level and payment. A clinical assessment allegedly became a revenue decision when management chose the days to fit the desired rate.

Payment reform had already addressed another way of inflating reimbursement. In Health Services Industry: Still a Job Machine?, the Bureau of Labor Statistics’ Monthly Labor Review described the introduction of prospective payment in nursing homes in July 1998:

The Life Care allegations show the next pressure point: control over the therapy that put a resident into a higher payment category. The complaint described a default expectation of at least two hours of therapy a day for admissions unless staff showed otherwise. The starting point was already a volume of treatment.

The government alleged that by 2008, Life Care billed nearly 68 percent of its Medicare rehabilitation days at the Ultra High level, against a nationwide average of 35 percent among skilled nursing facilities that year.

Therapy Quotas in the Company’s Own Instructions

The government alleged that Life Care planned minutes to reach reimbursement targets, then pressed therapists to deliver those minutes. Its complaint quoted an April 2007 memorandum from the Rehab Manager at Life Care Center of Inverrary:

The instruction supplied a deadline and a billing category that staff were told to protect. The alleged obligation was to preserve the planned minutes. That is a direction an employee can recognize in a daily schedule, a productivity discussion or a manager’s written response to a missed target.

According to the complaint, therapists who missed assigned minutes had to write memoranda explaining the shortfall. Managers told them how much money they were costing the company. Facilities that missed financial targets received more corporate scrutiny and instructions to provide additional therapy without regard to residents’ needs.

The pressure also crossed disciplines. The complaint alleged that Life Care’s rehabilitation manual told therapy departments to manage minutes daily so another discipline could supply more when one fell short. Physical, occupational and speech therapy were allegedly treated as ways to fill the same reimbursement target.

Minutes Rose When the Assessment Window Opened

The complaint described therapy increasing from 30 to 45 minutes a day before an assessment period to 65 to 75 minutes during it, then dropping back afterward without clinical justification. That pattern made the assessment calendar part of the allegation. The resident’s needs supposedly changed with the days that counted toward payment.

The government’s consolidated complaint also alleged that some physicians pre-signed certifications and let Life Care fill in the orders, while others prescribed the same therapy for every patient regardless of necessity. Read together, those allegations describe pressure on both ends of the documentation: the minutes delivered and the medical authorization used to support them.

Routine Care Became Skilled Therapy on the Bill

The government alleged that Life Care billed routine health care activities as skilled therapy. Its examples included repetitive stationary-bike exercise that did not require skilled care and time spent transferring, dressing, toileting, feeding or bathing residents, rather than teaching residents to perform those activities themselves.

That distinction belongs in the treatment note. What the resident did, what the therapist contributed and what the session was meant to accomplish explain the service behind the minute total. The allegations reached the content of therapy as well as its duration.

Prolonged Stays After Therapists Said Treatment Should End

The government alleged that Life Care continued therapy after clinicians concluded that residents had reached their maximum benefit. In one patient account, a physical therapist reported that conclusion on day 59. An occupational therapist requested discharge on day 64 and documented the same lack of further benefit on day 71. Therapy nevertheless continued until the resident exhausted the 100-day Medicare benefit.

According to the complaint, the therapists had put their judgment in writing, and the treatment continued. A discharge recommendation beside the subsequent therapy record can show whose judgment prevailed inside the facility.

The complaint also alleged that Rehab Managers pushed therapists to approach residents repeatedly after refusals, sometimes seven or eight times a day, to meet assigned minutes. On that account, a refusal became an obstacle to the target rather than the end of that attempt at treatment.

One resident’s final days made the conflict especially stark:

What Evidence Is Needed to Prove Fraud?

For a therapy-quota case, the evidence connects the resident’s condition and actual treatment to the assessment, the claim and the people directing the billing. Our whistleblower experts work through those connections with the employees and contractors who know where the records diverge.

The gap between a therapy log and a discharge recommendation can tell the story that a minute total leaves out. We connect that clinical account to the MDS assessment and the Medicare or TRICARE claims.

Management communications supply another part of the story. The Life Care allegations involved planned-minute books, memoranda about missed targets, assessment-date decisions and instructions to provide additional therapy. Read alongside the clinical chart, those records can explain who insisted on continuing treatment and what staff had already told them about the resident.

The contractor’s perspective appeared in the Life Care complaint itself. The government alleged that a rehabilitation contractor ended its agreement at Life Care Center of Yuma in December 2007 because it believed the company was demanding unnecessary therapy primarily to increase revenue. An outside therapy provider could see the same conflict as the staff inside the facility.

What the Settlement Required Beyond the Payment

Life Care’s resolution required a five-year, chain-wide Corporate Integrity Agreement with independent review of the necessity and appropriateness of therapy. The settlement document also identifies annual reviews by an independent organization and reports to the Department of Health and Human Services’ inspector general.

The review requirement went directly to the alleged problem: whether treatment reflected residents’ clinical needs. It made the care supporting the claim part of the settlement’s continuing obligations.

The Whistleblower Reward

The Justice Department announced a combined $29 million whistleblower reward for the two former employees. The agreement assigned the two whistleblowers a 20% share of each settlement payment the government received.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Life Care’s announced award shows the scale a case built from employees’ knowledge of therapy billing can reach.

The Pattern Beyond Life Care

SavaSeniorCare faced similar allegations of corporate pressure to reach high Medicare therapy categories and delay discharge. Its 2021 resolution included independent review of stays and paid claims. The recurring issue was a management target overriding the clinical judgment behind a government bill.

The historical payment rule has since changed. The Patient Driven Payment Model, usually called PDPM, replaced RUG-IV for covered Medicare Part A skilled nursing stays on October 1, 2019. Patient characteristics and clinical needs replaced therapy-minute groups as the basis for classification.

Life Care’s covered conduct belongs to the earlier RUG system. For an insider examining later billing, the connection runs through the diagnoses, function and other assessment inputs that set the payment. The practical question remains recognizable: does the claim reflect the resident, or has the resident’s paperwork been made to fit the revenue target?

When You Know Why the Minutes Changed

If you saw a therapy target override a resident’s needs, tell our whistleblower experts what happened inside the facility. We build your case around the clinical decisions and healthcare billing records, bring in skilled nursing fraud whistleblower lawyers who understand rehabilitation claims, and stay beside you throughout the case.