Vericare Management: Standing Psychiatric Orders and Unsupported Evaluations

In the Vericare Management fraud case, Vericare Management Inc. agreed to pay more than $1 million to resolve allegations that it billed federal health care programs for unnecessary psychiatric evaluations and other unsupported services. The alleged starting point was a standing order for every new nursing-home admission. The whistleblower’s complaint followed that arrangement into managers’ bonuses and clinicians’ paychecks.

The Justice Department announced the settlement on October 29, 2015. Vericare, headquartered in San Diego, supplied psychiatric and psychological services to geriatric patients in long-term care and skilled nursing facilities, including facilities in New Jersey, California and Texas. The settlement covered both the standing-order allegations raised by a whistleblower and a separate billing issue the company disclosed itself.

Standing Orders Made Admission the Trigger

Vericare allegedly obtained standing orders or other agreements with 128 facilities under which its clinicians evaluated every new admission. The government’s account covered January 1, 2012, through December 31, 2014. It said the evaluations went ahead regardless of whether a physician had supplied a patient-specific order establishing medical necessity. Vericare then allegedly submitted claims for diagnostic interviews, evaluations and examinations under those arrangements.

The whistleblower’s complaint described a company standing-order form that required all new residents at participating facilities to see a Vericare provider. It also alleged a direct financial incentive to secure those orders:

That allegation explains why the facility agreement mattered. Securing the agreement could bring a continuing stream of new residents to the supplier, with the manager paid for arranging it. The resident’s arrival became the reason for an encounter that was supposed to depend on the resident’s needs.

More Sessions Meant More Pay

The complaint alleged that Vericare paid psychiatrists, psychologists, licensed social workers and nurses bonuses tied to the number of services and the reimbursement they generated. Its account of a premium-pay program shows how that pressure could reach an individual workday.

Under the plan described in the complaint, psychologists and licensed clinical social workers performing eight or fewer sessions in a day earned no premium pay. Reaching nine sessions triggered extra pay on every session that day. The additional encounter unlocked extra compensation for the earlier encounters too.

The whistleblower also alleged that caseload calculators pushed three or more sessions per month per patient. The standing order supplied the initial evaluation. The caseload target pushed the return visits. The alleged pressure to increase billable services therefore reached separate clinical decisions: whether to see someone in the first place and whether to keep seeing them.

The complaint reproduced correspondence in which the whistleblower, a regional executive, explained why some evaluations did not lead to follow-up counseling. Some concerned competency, some residents needed periodic medication management, and other providers handled some follow-up services. He alleged that management nevertheless pressed for higher follow-up ratios.

The California Research Bureau described the underlying incentive in its 1997 report Fraud and Abuse in the Health Care Market of California: fee-for-service income depends on the frequency and type of services, encouraging more examinations than patients need. Vericare’s alleged compensation arrangements brought that incentive into the employee’s paycheck.

Dementia and the Capacity to Benefit

The Vericare complaint alleged that the company billed Medicare and Medicaid for psychotherapy and psychological services for residents whose severe dementia or cognitive disorders prevented them from benefiting.

The complaint also alleged duplicative psychiatric examinations with missing medical or psychiatric histories, inadequate mental-status testing, failures to coordinate with other treating professionals, and services without supporting medical-record documentation.

The same clinical question appeared in the 2013 case against Park Avenue Medical Associates. The Justice Department described admissions that the company billed psychotherapy for patients with dementia without demonstrating their capacity to benefit. Park Avenue also admitted inadequate documentation of diagnostic examinations and repeated examinations without showing compliance with the applicable rules. Both cases put the reason for the encounter, and the documentation supporting it, at the center of the billing problem.

The Billing Problem Vericare Disclosed Itself

Vericare’s self-disclosure concerned Medicare claims for nursing-facility evaluation and management services that the government alleged lacked support in the patient’s medical record. According to the Justice Department, the company disclosed the issue to the U.S. Attorney’s Office.

Federal prosecutors said the disclosure let Vericare pay significantly less than the government could have sought: three times its losses plus penalties. The standing-order allegations came from a whistleblower. Vericare reported the evaluation and management claims itself.

For an insider familiar with nursing-facility visit billing, this component directs attention to the service represented on the claim and the medical record supporting it.

What Evidence Is Needed to Prove Fraud?

For allegations like these, the evidence connects the resident’s clinical need, the encounter and the claim with the people directing the work. The complaint’s standing-order form, compensation arrangements and internal correspondence give that comparison a company-specific starting point.

We compare the outside supplier’s bills with what the facility’s own staff observed:

• The reason for the encounter. We compare the standing order and any patient-specific order with the resident’s history, cognitive status and the clinician’s reason for an evaluation or return visit.
• The service behind the claim. We connect the session note and encounter date to the service billed and the medical-record support for it.
• The decisions driving volume. We examine compensation plans, caseload targets and management correspondence alongside the services and reimbursement they rewarded.

The useful knowledge can sit with a clinician who understood the resident, a facility employee who saw the standing-order arrangement, or a billing employee who understood the claims. We work with that insider to connect the clinical explanation to the company’s billing decisions.

From Internal Objections to a Whistleblower Case

The case began with a qui tam complaint. The whistleblower described serving as Vericare’s vice president and general manager for its Mid-Atlantic region. His complaint connected the company’s expectations for follow-up visits to internal correspondence explaining the clinical work, and described objections to universal evaluations, repeat sessions and volume bonuses.

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

You Saw What Drove the Appointments

If you saw admission orders or pay targets override residents’ clinical needs, talk with our whistleblower experts about the services your company billed. We build your case around the decisions you witnessed and bring in behavioral-health whistleblower lawyers who understand nursing-home services and Medicare billing. We stay beside you as we turn the clinical record, compensation arrangements and claims into your strongest whistleblower case.