Michigan Home Health Owner Kickbacks: Referral Payments Disguised as Ordinary Expenses

A Michigan home health business owner agreed to a $1 million civil settlement over alleged referral kickbacks involving Lakeshore Home Health Care, U.S. Rehab Services and Lakeshore Spine & Pain. The home health fraud case began with a whistleblower who worked in one of the owner’s offices. The Justice Department’s August 13, 2013 announcement described allegations that cash and checks bought patient referrals while the paperwork called them bonuses, mileage reimbursements and payments for services never performed.

An expense entry can describe a trip or a consulting job while the person processing it knows the payment followed a patient. We look at what the money bought, and who knew why it was paid.

The Referral Network Behind the Payments

The government alleged that the owner directed the referral-payment scheme from at least January 2007 through January 2012. Lakeshore Home Health Care operated from Lansing, Michigan. Lakeshore Spine & Pain’s medical clinics were based in Ludington, and U.S. Rehab Services’ physical therapy clinics were based in Mt. Pleasant. Physicians, mid-level practitioners and others received payments for sending patients into the network.

The allegations reached several kinds of care: home health, physical therapy and electrodiagnostic testing. The owner had worked as a physical therapist. A Sixth Circuit opinion describing the criminal case records his guilty plea in 2012 to conspiracy to pay and receive healthcare kickbacks.

According to the Justice Department’s account of the civil complaint, the government alleged that sham medical-director and consulting contracts paid for work never performed. In that account, the contracts made referral purchases look like ordinary business expenses. The same payment disguise appears in sham marketing arrangements used to pay patient recruiters. Here, the government’s allegations put practitioners themselves among the paid referral sources.

We find the supposed consulting work especially revealing. A contract described a service, but the government alleged that no one performed it. The business wanted the patients the recipient could send.

The government also alleged that Lakeshore Spine & Pain routinely upcoded medical-service claims to obtain higher insurance reimbursements than it was entitled to receive. The same Justice Department announcement reported criminal convictions of a practice administrator and a biller at those clinics for their roles in the upcoding scheme. Its account of the criminal kickback cases identified a separate practice administrator, physicians and physician assistants among those convicted of paying or receiving referral payments.

How a Paid Referral Reaches a Home Health Claim

A paid referral can direct a patient into an agency, while the home health certification chain supplies the clinical support for Medicare payment. That chain brings together the encounter, certification, agency assessment, plan of care and visit records. Different people can control each part.

The agency’s assessment and the practitioner’s certification do different jobs. A person who sees the referral payment may therefore know something that never appears in the nurse’s account of the patient’s condition.

The distinction matters to the money. The agency submits claims for care following the referral. We connect the compensation arrangement to those patients and claims, then to the payment records. The clinical file tells one part of the story. The referral transaction tells another.

Assessment data also affect reimbursement. In home health assessment upcoding, the question is what changed between the clinical assessment and the information used for payment.

The Office Worker’s Case Reached Both Governments

The whistleblower filed a civil lawsuit under the False Claims Act and the Michigan Medicaid False Claims Act. The United States and Michigan joined it. The Justice Department reported that the governments had recovered $1.14 million across the related civil cases by the announcement, which extended beyond the owner’s individual agreement. The Sixth Circuit’s September 10, 2020 opinion also describes a separate, later criminal case in which the same owner concealed his control of Paramount Home Care behind a friend’s nominal ownership.

A Certification Can Be the Paid Referral

A separate criminal case involving Grand Home Health Care shows why a patient’s need for care does not answer the referral-payment question. The Seventh Circuit’s February 10, 2015 opinion described payments to a physician of $400 for new-admission forms and $300 for recertifications.

The patients needed home health and chose their agencies independently from brochures. The court nevertheless treated the paid certifications and recertifications as referrals in the criminal case. The signature controlled access to reimbursable care even when the patient had already chosen the agency.

For an insider, that puts attention on the transaction behind the form. The payment can buy the signature that lets the agency proceed.

What Evidence Is Needed to Prove Fraud?

For a referral-payment case, the useful evidence connects the payment, the patient, the claimed service and the people directing the arrangement. A consulting contract identifies what someone was supposedly paid to do. The referral records and payment entries can show what actually triggered the money. Certification, assessment and visit records connect that patient to the agency’s claim, and the remittance shows what the payer paid.

An office worker may recognize the payment arrangement, a clinician may know the care, and a billing employee may see the claim. We work with that specific knowledge to connect the decisions across the business.

How Much Does Medicare Fraud Whistleblower Pay?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The Michigan announcement reports that the office worker received a share of the civil settlement proceeds.

You Know Why the Payment Was Made

If you saw referral payments disguised as expenses, speak to one of our whistleblower experts. We build your strongest home health whistleblower case with you, bring in home health fraud whistleblower lawyers who understand referral compensation, and stay beside you as the case moves forward.