National Healthcare: More Medicare Hours on Paper Than on the Time Records

The National Healthcare fraud case produced a $27 million settlement over allegations that the company overstated nursing hours in Medicare cost reports and billed personnel as providing therapy they did not perform. The nursing hours claimed on the reports conflicted with the nursing staff’s own time records. Medicare was allegedly paying for care that existed on paper, at taxpayers’ expense.

The settlement concerned a company that then owned, leased or provided services to 105 nursing homes nationwide. National Healthcare Corporation was headquartered in Murfreesboro, Tennessee. The Department of Justice announced the settlement on December 15, 2000.

A former administrator at Palm Gardens of Orlando, a facility the company then managed, brought the whistleblower case. The United States joined it.

What Is a Red Flag for Health Care Fraud?

In this case, the red flag was a Medicare cost report claiming more nursing time for Medicare patients than the staff’s time records supported. The government alleged that National Healthcare began submitting those inflated reports in 1991 to collect additional Medicare money.

That allegation concerned how nursing labor was assigned to Medicare residents. A nursing home could have staff working in the building while still overstating how much of their time belonged to Medicare care. The payroll expense and the share charged to Medicare answer different questions.

An employee who knows how the allocation was prepared may be able to explain a difference that the final report alone does not explain. That is where knowledge of the facility’s daily work can expose a false claim for payment.

Which Is an Example of Billing Fraud?

Billing personnel as providing therapy when they did not perform that work was the second allegation in the National Healthcare case. The Justice Department said certain personnel at some nursing homes were billed as performing therapy on Medicare patients, and that the homes received additional payments as a result.

The nursing-hour allegation concerned how much time employees devoted to Medicare care. The therapy allegation concerned what employees did. In the government’s account, the billing turned their work into a different service, one that brought the home more Medicare money.

For a therapy or payroll insider, that distinction is concrete. An employee’s actual duties, schedule and clinical work can tell a different story from the service attributed to that employee on a bill. Our work is to connect that firsthand knowledge to the payment the facility sought.

Why the Historical Cost-Report System Matters

National Healthcare’s case concerned nursing labor and therapy costs under the historical cost-report system. Medicare then used reasonable-cost reimbursement for skilled nursing facilities. The transition to prospective payment began with cost-reporting periods starting July 1, 1998, replacing that approach with daily payments adjusted for patients’ care needs.

A contemporary Bureau of Labor Statistics paper, Health services industry: still a job machine?, published in the Monthly Labor Review in March 1999, described the difference. Before the change, Medicare reimbursements could vary widely for nursing-home patients with the same diagnosis. The new system initially blended a facility-specific rate with a federal rate.

The paper also placed nursing homes within a broader change in health care spending. Payments for services following hospitalization had risen sharply while growth in hospital and physician payments slowed. Nursing-home reimbursement was part of the next effort to control those costs.

That history gives the cost reports their financial meaning. Under cost-based reimbursement, the way a home assigned its nursing labor to Medicare patients mattered to what it sought from the program. The government’s allegation was that National Healthcare used those reports to collect additional reimbursement for hours the staff’s own records contradicted.

What Evidence Is Needed to Prove Fraud?

For a case about inflated nursing labor and misrepresented therapy work, the useful evidence connects the cost report or bill to the work actually performed and the people responsible for reporting it. We examine how a facility’s operating information reached the Medicare payment request.

Nursing Labor and the Medicare Allocation

Staff time records and payroll show the work recorded inside the facility. Nursing notes and resident records connect that work to the patients receiving care. We examine those records together to understand how the facility arrived at the nursing hours it represented to Medicare.

Therapy Work and the Billed Role

For the therapy allegation, we examine clinical notes and therapy records alongside the employee’s duties and billing records. The question is whether the therapy represented to Medicare matches the work the personnel actually did. Understanding both the clinical work and the reimbursement claim is what makes that comparison useful in a whistleblower case.

The Settlement and Whistleblower Reward

The government agreed to pay the whistleblower a 20% share of the settlement recovery. National Healthcare also entered into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General as a condition of the settlement.

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

The Nursing-Hour Pattern at Horizon West

Horizon West agreed to a $14.7 million settlement over allegations that it inflated nursing hours allocated to Medicare patients on cost reports covering 1991 through 1998. Announced in September 2006, it concerned the same kind of labor allocation as National Healthcare’s case. The operator then ran approximately 30 facilities in California and Utah.

National Healthcare’s network was nationwide, but the disputed accounting practice was recognizable at either scale.

Both cases put the cost report beside the work done inside the home. The alleged overstatement concerned the nursing time assigned to Medicare patients, with federal money following that allocation. A healthcare employee familiar with those reports would recognize the same payment problem in a different company.

You Know How the Hours Became the Bill

If you worked with nursing allocations, therapy records or Medicare cost reports and saw the numbers change on their way to billing, speak to one of our whistleblower experts about how the hours were counted. We bring in Medicare cost-report whistleblower lawyers who understand nursing-facility reimbursement and stay beside you to build your strongest Medicare whistleblower case.