Therapy Contract Kickbacks: Buying the Right to Treat a Nursing Home’s Residents

Nursing home therapy contractor kickbacks buy access to a facility’s therapy business through payments, continuing shares or free clinical services. The benefit goes to someone who can direct the business, and the residents’ care generates the federal claims. If you negotiate therapy contracts, approve vendor payments or manage rehabilitation staff, you may see the bargain in a payment agreement or a promise of free staffing. The question is what the therapy company expected to get back.

In 2014, RehabCare agreed to a $30 million settlement over an alleged arrangement to obtain nursing home therapy contracts. The government alleged that RehabCare paid for access to residents. A later RehabCare settlement concerned allegations about the treatment nursing homes billed.

RehabCare’s Upfront Payment for Access to Residents

A therapy contractor’s upfront payment for access to nursing home residents was at the center of the RehabCare referral case. The government alleged that RehabCare paid Rehab Systems of Missouri to obtain therapy contracts serving approximately 60 nursing homes under common control. Rehab Systems and the homes shared a controlling owner.

The Department of Justice described an upfront payment of $400,000 to $600,000, followed by continuing percentages of revenue.

The court’s earlier opinion described arrangements paying 10% and 15% of therapy profits under a subcontract and a recruitment and non-solicitation agreement.

The companies said the compensation purchased services, an assembled workforce and contractual protection. The government’s allegation was that the payments bought the therapy business.

The alleged arrangement gave the recipient a continuing financial stake in the business it sent to RehabCare. The initial check was only part of the exchange. The settlement required the companies to restructure that arrangement as well as pay.

Why the Therapy Contract Reaches Medicare Claims

Medicare pays the skilled nursing facility for covered Part A care, including bundled therapy, while the facility’s contract determines what an outside therapy supplier receives. That makes the therapy contract a way into the federal payment stream.

The CMS claims-processing manual describes the bundled payment. Room, board, nursing, therapy and other covered services sit inside the facility’s payment, subject to specified exclusions. The company supplying therapists and the facility billing Medicare can therefore be different businesses. A management company can occupy another role, with its own agreements and decisions.

The Anti-Kickback Statute targets deliberate payments or other benefits used to buy referrals or other federally funded health care business. When the bargain buys that business through kickbacks, the resulting claims can become part of a False Claims Act case.

The California Research Bureau’s 1997 report, Fraud and Abuse in the Health Care Market of California, separates steering business for a fee from upcoding and billing for services never performed. A kickback buys the business. False billing inflates the claim.

Free Nurse Practitioners Can Buy Therapy Business

A free nurse practitioner can be the benefit in a nursing home therapy referral kickback. Reliant Rehabilitation allegedly supplied nurse practitioners to client facilities free or below fair market value to obtain their therapy business.

In its August 2018 settlement announcement, the Department of Justice described the arrangement and a $6.1 million resolution. The allegations covered services supplied from April 2013 through May 2017. The value reaching the nursing home was clinical labor that the therapy company provided cheaply or without charge.

The same matter included a separate allegation that Reliant paid physicians above market value to supervise or collaborate with those practitioners.

For someone inside the business, the connection may be visible in who paid for the practitioner, what services the practitioner performed and how the offer related to the therapy contract. A staffing proposal can carry the financial benefit just as a payment agreement can. In the government’s account, the free or discounted service helped secure the therapy account.

RehabCare’s Later Therapy-Billing Case Followed the Treatment

RehabCare’s 2016 therapy-billing settlement concerned allegedly inflated or unnecessary treatment and services reported but never delivered. Kindred and RehabCare agreed to pay $125 million in that separate resolution.

The government alleged automatic placement in the highest reimbursement category, inflated therapy during assessment periods and evaluation time counted as treatment. The government’s amended complaint quoted an executive explaining the incentive to keep treatment minutes at the payment threshold:

That is the contractor’s labor cost meeting the facility’s reimbursement target. The government also alleged that managers overrode therapists’ discharge recommendations to extend stays and enlarge Medicare claims. The treatment records and the directions given to therapists carry that story.

These allegations arose under the historical RUG payment system. Medicare replaced RUG-IV with the Patient Driven Payment Model for covered Part A stays on October 1, 2019. Patient characteristics and clinical needs became the basis for classification.

Changing how Medicare calculates the facility’s payment does not remove the contractor’s incentive to win its business. The contract still controls access to residents and payment for their therapy.

What Evidence Is Needed to Prove Fraud?

For therapy contract kickbacks, the evidence connects the contract, the benefit actually supplied, the decision directing the business and the resulting federal claims. The description of services in an agreement belongs beside the payment records and the work actually performed.

Different people may hold different parts of that story. Someone in finance may know why a continuing payment was calculated from therapy proceeds. A rehabilitation manager may know what work a contractor’s staff actually performed. An MDS coordinator or therapist may see the clinical records that support the facility’s billing. The person negotiating the contract may know what was offered in return for awarding it.

Ownership and management agreements help identify who controlled the decision and who received the benefit. Referral volume, admissions records and claims then connect that business decision to the care Medicare paid for. We work through those connections with you, including the difference between the service described in the agreement and the business the payment allegedly bought.

Can a Competing Therapy Provider Be the Whistleblower?

Yes. A competing therapy provider brought the RehabCare referral case, and the Department of Justice reported a $5.7 million whistleblower reward. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

A contract bought with a kickback rewards access to residents instead of the quality of therapy. Honest providers compete against the payment, while taxpayers fund the care that follows. If you know what a rival offered to secure a facility’s therapy business, our whistleblower experts can work through that arrangement with you.

Service Agreements and the People Directing the Business

Professional-service agreements can disguise payments for referrals, and companies outside the certified nursing facility can cause its claims. Other nursing home cases show why both the work performed and the decision-maker matter.

Hebrew Homes allegedly used medical-director positions to pay physicians for referrals while the stated duties went largely unperformed. Its 2015 settlement supplies a close comparison for the Reliant physician-payment allegations. The important connection runs from the promised services to the actual work, the compensation and the referrals.

Southern SNF Management and Dynamic Rehab illustrate the supplier’s role in facility billing. In their 2018 resolution, the government alleged that a management company and a therapy consultant caused nursing facilities to submit claims involving unnecessary therapy and inflated payment categories. It shows why understanding who directed the work can matter as much as identifying whose name appeared on the Medicare claim.

When You Know What Won the Contract

If you know a therapy contract came with a payment, a continuing share or free clinical staff, we build the case with you around the benefit, the decision-makers and the federal claims. We stay with you as partners and bring in healthcare kickback whistleblower lawyers who understand nursing home therapy arrangements. Speak to one of our whistleblower experts about what won the contract.