Contract Rehab Provider to Pay $4 Million to Resolve False Claims Act Allegations Relating to the Provision of Medically Unnecessary Rehabilitation Therapy Services

Encore Rehabilitation Services LLC (Encore) has agreed to pay $4.03 million to resolve allegations that Encore violated the False Claims Act by knowingly causing three Michigan skilled nursing facilities to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary or skilled, the Department of Justice announced today.  Encore, based in Farmington Hills, Michigan, provides rehabilitation services to patients at over 600 health care facilities, including skilled nursing facilities, in over 30 states.

“Today’s settlement reflects our continuing efforts to protect patients and taxpayers by ensuring that the care provided to beneficiaries of government-funded healthcare programs is dictated by clinical needs, not a provider’s fiscal interests,” said Deputy Assistant Attorney General Michael Granston of the Department of Justice’s Civil Division.  “Rehabilitation therapy companies provide important services to our vulnerable elderly population, but they will be held to account if they knowingly provide patients with unnecessary or ineligible services.”

This settlement resolves allegations that Encore’s policies and practices at three Michigan skilled nursing facilities resulted in the provision of unreasonable, unnecessary, or unskilled rehabilitation therapy or the recording of therapy minutes as individual therapy when concurrent or group therapy was actually provided.  The settlement relates to Encore’s alleged conduct at the Autumn Woods Healthcare Facility in Warren, Michigan between Sept. 1, 2012, and July 31, 2018, the Bay Shores Senior Care and Rehab Center in Bay City, Michigan, for the period from April 1, 2013, to April 6, 2017, and MediLodge of Yale in Yale, Michigan, for the period from Oct. 1, 2010, to April 6, 2017.

“Billing federal healthcare programs for medically unnecessary rehabilitation services not only undermines the viability of those programs, it exploits our most vulnerable citizens,” said U.S. Attorney Matthew Schneider for the Eastern District of Michigan.  “We are committed to working with our federal partners to protect both vulnerable Michiganders and these helpful healthcare programs.”

“The resolution announced today demonstrates my office’s commitment to aggressively pursuing providers who utilize fraudulent practices to knowingly put their own financial self-interest over a duty to patients,” said U.S. Attorney Andrew Byerly Birge for the Western District of Michigan.  “It is imperative that providers make healthcare decisions based upon a patient’s need for services rather than a self-serving desire to maximize financial profits.” 

Contemporaneous with the civil settlement, Encore entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health & Human Services, Office of Inspector General (HHS-OIG) requiring, among other things, the implementation of a risk assessment and internal review process designed to identify and address evolving compliance risks.  The CIA requires training, auditing, and monitoring designed to address the conduct at issue in the case.

“The submission of claims for unreasonable, unnecessary or unskilled rehabilitative services is improper and unacceptable,” said Special Agent in Charge Lamont Pugh III, HHS-OIG – Chicago Region.  “The public expects that proper services will be provided and that tax payer dollars will not be wasted.  OIG Corporate Integrity Agreements help to ensure that contracted providers, who have caused improper billing practices change their behavior.”

The settlement resolves allegations originally brought in lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act by Linda Anderson, Reza Saffarian and Audrey Theile, and Adam LaFerriere, former Encore employees.  The False Claims Act permits private parties to file suit on behalf of the United States and to share in any recovery.  The amount to be recovered by the private parties in this matter has not been determined.

The matter was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorneys’ Offices for the Eastern District of Michigan and the Western District of Michigan, and the HHS-OIG.

The three qui tam cases are docketed as United States ex rel. Anderson v. Encore Rehabilitation Services, LLC, No. 2:14-cv-13759 (E.D. MI), United States ex rel. Saffarian, et al. v. Encore Rehabilitation Services, LLC, et al., No. 1:16-cv-605 (W.D. MI), and United States, et al., ex rel. LaFerriere v. Encore Rehabilitation Services, LLC, et al., No. 1:17-cv-95 (W.D. MI).  The claims resolved by the settlement are allegations only; there has been no determination of liability.