Life Care Centers of America and its owner, Forrest L. Preston, will pay $145 million to resolve a government lawsuit alleging that Life Care violated the False Claims Act by knowingly causing skilled nursing facilities to submit false claims for rehabilitation therapy services that were not reasonable, necessary or skilled.

Life Care, based in Cleveland, Tennessee, owns and operates more than 220 skilled nursing facilities across the country.

The settlement resolves allegations that Life Care submitted false claims for rehabilitation therapy by engaging in a systematic effort to increase its Medicare and TRICARE billings.

Medicare reimburses skilled nursing facilities at a daily rate that reflects the skilled therapy and nursing needs of their qualifying patients.

The greater the skilled therapy and nursing needs of the patient, the higher the level of Medicare reimbursement.

The highest level of Medicare reimbursement for skilled nursing facilities is for “Ultra High” patients who require a minimum of 720 minutes of skilled therapy from two therapy disciplines – physical, occupational, speech – one of which has to be provided five days a week.

Federal officials alleged in its complaint that Life Care instituted corporate-wide policies and practices designed to place as many beneficiaries in the Ultra High reimbursement level irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy to many beneficiaries.

Life Care also sought to keep patients longer than was necessary in order to continue billing for rehabilitation therapy, even after the treating therapists felt that therapy should be discontinued.

Life Care carefully tracked the minutes of therapy provided to each patient and number of days in therapy to ensure that as many patients as possible were at the highest level of reimbursement for the longest possible period.

The settlement also resolves allegations brought in a separate lawsuit by the United States that Forrest L. Preston, as the sole shareholder of Life Care, was unjustly enriched by Life Care’s fraudulent scheme.

The settlement, which was based on the company’s ability to pay, resolves allegations originally brought in lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act by Tammie Taylor and Glenda Martin, former Life Care employees.

The whistleblower reward in this case will be $29 million.

“In Life Care’s national network of nursing homes, only one nurse and one therapist had the courage to expose these practices, which struck them as improper and even dangerous to the nursing home residents,” said Michael Sullivan, partner with Finch McCranie, which represented Glenda Martin, one of the two whistleblowers. “There were two keys to the case. First, thanks to the Justice Department lawyers’ excellent work, the court correctly recognized that statistical sampling can be used to prove a defendant’s violations of the False Claims Act, and rejected Life Care’s attempt to force an endless trial over each of the thousands of Medicare claims involved. This case now paves the way for proving health care fraud in large cases by statistical sampling.

“Second, to remove any possibility that Life Care might believe it could escape paying a judgment, our firm gathered evidence to enable the government to recover the Medicare funds that had been moved from Life Care to companies and individuals affiliated with Life Care. The case settled shortly after the government, with our assistance, sued Life Care’s owner to reach the assets transferred from Life Care, by using legal theories our firm has used successfully in other fraud cases,” Sullivan added.

Glenda Martin, the former Life Care registered nurse whom Sullivan represented, objected to the practices during her 14 years at various Life Care facilities in Tennessee and North Carolina.

“I personally and strongly believe I righted a great wrong in coming forward and speaking out when I did,” Martin said.