Nursing Home Kickbacks: Who Pays for Admissions, Contracts and Resident Referrals

Nursing home kickbacks are payments or benefits used to buy admissions, supplier contracts or resident referrals for business paid by Medicare, Medicaid or another federal health care program. The benefit can arrive as a medical-director stipend, a discounted pharmacy bill or a nurse practitioner whose salary somebody else pays. Residents become a source of purchased business, with taxpayers paying the bills. If you see the contracts, the admissions or the accounts, you may know what the payment was really buying.

The Discount Goes to the Facility, the Bill Goes to Medicare

A supplier can give a nursing home a cheap service in exchange for other business it can bill directly to the government. The facility saves money on its own expenses. The supplier gains access to residents whose care brings separate reimbursement.

The payment arrangement explains the attraction. During a covered Medicare Part A stay, the nursing home’s payment generally includes room, board, nursing, therapy, drugs and laboratory services. Under Medicare’s consolidated-billing rules, the facility pays outside suppliers for services inside that bundle. A discount reduces what the home spends from its payment. Separately billable services give a supplier another stream of business to pursue.

The Anti-Kickback Statute prohibits knowingly and willfully paying or receiving anything of value to buy business covered by Medicare, Medicaid or another federal health care program. A False Claims Act case follows the bargain through to claims for government payment. The contract, the referral and the bill can sit in different businesses.

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

Who Gets Paid for Nursing Home Admissions?

Hospital discharge planners can receive payments for steering patients into a nursing home. A facility administrator or broker can also receive money tied to changing the coverage that will pay for the resident’s stay.

Morris Park Nursing Home’s 2023 civil settlements included an admission that a hospital discharge-planning supervisor was paid for referrals. During much of the referral period, the payment was $150 for a referred Original Medicare patient who was admitted. The admission unlocked the payment to the person steering the patient.

A separate arrangement involved moving residents from Medicare Advantage to Original Medicare without proper consent. A broker received $1,000 per switched resident, with a share promised to the administrator. In that arrangement, changing the resident’s payer was itself something people got paid to do.

A discharge planner or admissions employee can recognize the connection between the payment and the patient sent to the home.

When a Medical-Director Contract Pays for Referrals

Medical-director kickbacks can hide in contracts that describe clinical or administrative work while compensation follows admissions. The comparison is between the duties on paper, the work performed and the business the physician brings.

Hebrew Homes settled allegations in 2015 that it used medical-director positions to pay for referrals. The government alleged that physicians received payment for duties they largely did not perform. A contract supplied the job description. The referrals allegedly supplied the reason for the job.

The Paksn allegations put the admissions target more directly in view: physicians were allegedly hired and paid according to expected referrals, and payments ended when referrals disappointed.

The work performed and the reason for the payment both matter. We examine those questions with you and healthcare fraud whistleblower lawyers who know medical-director arrangements.

How Therapy Suppliers Buy Nursing-Home Business

A therapy company can buy access to a group of nursing homes through a payment to the company controlling their therapy contracts. RehabCare’s referral case shows the arrangement at the contract level.

The government alleged that RehabCare paid Rehab Systems of Missouri to obtain its nursing-home therapy business. The alleged exchange went in both directions:

RehabCareThe therapy provider seeking the contracts

Upfront payment

$400,000 to $600,000

Continuing payment

Share of referral revenue

Therapy contracts

60 nursing homes

Rehab Systems of MissouriThe therapy company holding the contracts

Civil resolution$30 millionSettlement of the referral allegations involving the therapy providers and management company

Justice Department, RehabCare referral settlement, January 17, 2014

The court’s account of the arrangement shows what the dispute was about. The companies said the payments bought supervisory services, an assembled workforce and an agreement against recruiting those therapists away. The government argued that the recipient supplied referrals without the promised services.

That is an insider’s question as much as an accountant’s: what did the company receiving the continuing payments actually do? The government connected the alleged bargain to Medicare and Medicaid claims. A competing therapy provider started the whistleblower case, and the government joined it.

Reliant Rehabilitation allegedly supplied a different benefit. Its 2018 settlement concerned free or discounted nurse practitioners used to obtain nursing-home therapy business. The government also alleged above-market payments to physicians supervising or collaborating with those practitioners. Clinical labor was part of the alleged price of winning the contract.

Pharmacy Contracts Can Trade One Payment Stream for Another

Pharmacy kickbacks can give the facility a low price on drugs it must pay for while securing other residents’ prescriptions for the pharmacy. The two sides of the bargain appear on different bills.

Omnicare’s 2014 settlement over below-cost pharmacy contracts concerned that arrangement. The government alleged that discounted facility contracts bought access to separately reimbursable pharmacy business. The home’s saving was the pharmacy’s investment in getting that business.

An earlier Omnicare arrangement used a business purchase. The government alleged that a $50 million payment, presented as buying a small pharmacy business, secured long-term pharmacy commitments from Mariner and Sava. The acquisition payment and the contracts belonged to the same alleged bargain. An insider in purchasing or finance could see that connection in the transaction documents and commitments to the pharmacy.

Diagnostic and Ambulance Discounts Buy Referrals Too

Diagnostic and ambulance suppliers can absorb costs the nursing home would otherwise bear in exchange for separately reimbursable referrals. The same resident population gives the facility purchasing power in one transaction and control over business in another.

Kan-Di-Ki, doing business as Diagnostic Labs, provided laboratory and x-ray services to nursing-home residents. In its settlement announcement, the Justice Department alleged below-cost Part A rates in exchange for Medicare Part B business and referrals covered by Medi-Cal, California’s Medicaid program.

The whistleblowers’ complaint put the economic point bluntly:

The complaint also alleged debt forgiveness to keep those referrals coming. A write-off in the supplier’s accounts was another alleged benefit to the nursing home. Two former Diagnostic Labs employees brought the case.

The Regent Management settlement addressed the facility side of an ambulance arrangement. The government alleged that ambulance companies provided free or heavily discounted transports in exchange for Regent’s more lucrative Medicare and Medicaid referrals. Regent would otherwise have paid substantially more for the discounted trips. The allegation reached the business receiving the saving as well as the suppliers seeking the referrals.

Hospice and Home Health Providers Pay for Access to Residents

A nursing facility can be a referral source for hospice and home health providers that bill Medicare for their own services. Payments can go directly to facility employees who steer that business.

The Pro Health civil settlement announced in 2023 addressed allegations that the provider paid employees of assisted-living and skilled nursing facilities for home-health and hospice referrals billed to Medicare. The alleged payment traveled from the outside provider to the person inside the facility. The resulting Medicare business traveled back to the provider.

What Evidence Is Needed to Prove Fraud?

Evidence of nursing home kickbacks connects the benefit, the recipient, the business obtained and the resulting government claim. The contract describes the promised work. Payment records show who received the value. Work records, referrals and admissions show what happened in return.

The California Research Bureau’s Fraud and Abuse in the Health Care Market of California, published in 1997, places purchasing bribery alongside false billing in its account of healthcare fraud. That broader view matters when the payment buying the business sits outside the billing department.

A therapist may see whether the promised supervision happened. An administrator may know why a physician’s contract continued or ended. Accounts payable may show a supplier charging the home very little, while the supplier’s billing records show the government-funded business coming back. We connect those views to the same arrangement.

Building that case means connecting contracts, work performed, payments, referrals and claims across different businesses. That is the work we do with you.

The strongest account explains who controlled each decision and what they knew the payment was buying. That is where someone inside the business can take us beyond the description printed on the invoice.

When You Know What the Payment Bought

If you know why a nursing home won an admission or a supplier won its contract, speak with our whistleblower experts about the payment behind that decision. We work with you to build the case from the contracts, the work and the claims, and bring in healthcare fraud whistleblower lawyers who understand nursing-home referral arrangements. From the first conversation onward, we stay beside you to build your strongest nursing home kickback whistleblower case.