Two Atlanta-Based Nursing Home Chains and Their Principals Pay $14 Million to Settle False Claims Act Case

February 26, 2010 - WASHINGTON—Atlanta-based Mariner Health Care Inc. and SavaSeniorCare Administrative Services LLC, as well as their principals, Leonard Grunstein, Murray Forman and Rubin Schron, have agreed to pay the United States and several states $14 million, the Justice Department announced today. This settlement arises from allegations of the United States that the defendants solicited kickback payments from Omnicare, the nation’s largest pharmacy that specializes in dispensing drugs to nursing home patients, in exchange for agreements by Mariner and Sava to continue using Omnicare’s pharmacy services for 15 years.

In a complaint filed in March 2009 and unsealed in November 2009, the United States alleged that Omnicare, Mariner, Sava, Grunstein, Forman, and Schron conspired to arrange for Omnicare to pay Mariner and Sava $50 million in exchange for the right to continue providing pharmacy services to the nursing homes, which together constituted one of Omnicare’s largest customers. The parties allegedly attempted to disguise the $50 million kickback as a payment to acquire a small Mariner business unit that had only two employees and was worth far less than $50 million. According to the complaint, Omnicare paid $40 million of this amount prior to actually acquiring the Mariner business unit and, at the same time, Omnicare obtained new 15-year pharmacy contracts from Mariner and from Sava, a new nursing home chain that Grunstein and Forman created from the Mariner chain. The complaint alleged that Grunstein and Forman illegally tied the new pharmacy contracts to Omnicare’s agreement to purchase the small Mariner business unit, and that the total $50 million purchase price for the business unit actually was a kickback by Omnicare to keep the future business of Mariner and Sava.

Approximately $7.84 million of the settlement proceeds will go to the United States, while $6.16 million has been allocated to certain state Medicaid programs. In November 2009, the United States, numerous states and Omnicare entered into a $98 million settlement agreement that, among other things, resolved Omnicare’s civil liability under the False Claims Act for allegedly paying a kickback to Mariner and Sava.

The government’s complaint further alleged that, in 2006, after the government issued subpoenas concerning the transaction, the individual defendants created backdated documents in a further attempt to hide the kickback.

“Nursing home residents and their families are entitled to make health care decisions free from the distortions caused by illegal kickback schemes,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division.

“This case reflects the government’s continuing efforts to pursue those who scheme to hide illegal payments that can affect the way drugs and other services are delivered to nursing home residents, an especially vulnerable patient population,” said Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts.

As part of the settlement, Mariner has entered into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services (OIG-HHS). This agreement provides for Mariner to put in place procedures and reviews to avoid and promptly detect conduct similar to that which gave rise to this matter. At the same time, OIG-HHS has reserved its rights to seek exclusions of Sava, Grunstein, Forman and/or Schron from participation in Medicare, Medicaid and all other federal health care programs.

The settlement resolves a whistleblower action, United States ex rel. Resnick v. Omnicare, Inc., et al., No. 06-10149-RGS (D. Mass.), filed under the qui tam provisions of the False Claims Act.

The case was handled by the Justice Department’s Civil Division, the U.S. Attorney for the District of Massachusetts, the Office of Inspector General of the Department of Health and Human Services, and the Federal Bureau of Investigation.

This settlement is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $3 billion.