Federal attorneys have sued Forrest Preston, founder and chairman of Cleveland, Tn.-based Life Care Centers of America, claiming that he was "unjustly enriched" by receiving Medicare funds he was not entitled to receive.
The civil suit in Chattanooga Federal Court asks for the return of "millions of dollars."
The government earlier sued Life Care on similar charges based on allegations by "whistle blowers." The government later attempted to add Mr. Preston to the lawsuit. However, that filing was later dropped, and the government said at the time it planned to sue him separately.
Mr. Preston is the sole shareholder for Life Care, which operates over 200 nursing facilities, including 20 in Tennessee.
Medicare paid Life Care over $4.6 billion from January 2010 to February 2016 for services rendered by Life Care skilled nursing care facilities.
The 15-page suit says Mr. Preston was the prime beneficiary of the government payments, "including the revenue recovered for services not covered by Medicare."
It says from at least 2009 that Life Care "engaged in a systematic scheme to maximize its Medicare billing. Life Care accomplished this by setting aggressive targets at corporate levels that were completely unrelated to its beneficiaries actual conditions, diagnoses, or needs.
"Life Care then reinforced those targets at corporate meetings and presentations, through regular emails from or visits by corporate personnel, through employee performance evaluations, by imposing action plans on under-performing facilities, and various other means.
"Life Care also frequently overrode or ignored the recommendations of its own therapists and unnecessarily delayed discharging beneficiaries from its facilities.
"Given the importance of therapy minutes to its Medicare revenue, Life Care closely managed the productivity levels of its facilities and of its rehabilitation therapists at every level of its corporate hierarchy.
"Life Care generated numerous reports that closely tracked, among other things, the amount of rehabilitation therapy provided, average length of stay levels, and Medicare reimbursement. At times, Preston requested such reports be created.
"Individuals at the highest level of the company were involved in aggressively driving the company’s push for increased Medicare revenue. For example, Cathy Murray, Life Care’s former Chief of Operations, frequently told her employees, their job was to make money for Forrest Preston.
"Life Care used its Rehabilitation Opportunity Committee (or Rehab Performance Committee) as one method to push its facilities and therapists to achieve its rehabilitation therapy and length of stay targets. Life Care established this committee in 2005 to increase Medicare revenues relating to the provision of rehabilitation therapy services. Preston was a member and active participant of the Rehab Opportunity Committee.
"While pressuring those facilities and employees that failed to meet Life Care’s rehabilitation therapy and length of stay targets, Life Care applauded and rewarded those employees and facilities that met or exceeded its targets. For example, in 2007, Forrest Preston’s “Chairman’s Award” went to an Executive Director whose facility reached an 83 percent Ultra High/Very High RUG billing level.
"Life Care’s compliance office, known as the Integrity Services Department or the Corporate Compliance Department, received dozens of internal complaints from around the country regarding Life Care’s corporate pressure tactics and inappropriate billing for therapy services. Chief Integrity Services/Compliance Officers reported directly to Preston. Preston personally terminated a compliance officer who raised concerns regarding the investigation of complaints and was substantially involved in the firing of another compliance officer after she raised concerns regarding the investigation of complaints.
"Although the Life Care Integrity Services Policy Manual indicated that the Chief Integrity Services Officer or designee would be responsible for investigating hotline complaints to Integrity Services, in practice, the investigations were frequently conducted by the very Life Care employees responsible for setting therapy targets and pressuring employees, including the Vice President of Rehabilitation Practice Standards and other corporate rehabilitation staff.
"Although the Integrity Services Policy Manual provided that hotline complaints would be treated confidentially and emphasized that Life Care would not retaliate against employees who reported a complaint to Integrity Services, Life Care’s investigations frequently focused more on rooting out the complainant than investigating or addressing the problem identified in the complaint.
"An informal study conducted by Integrity Services found that Life Care terminated approximately 57 percent of the employees who provided their names within three weeks of filing their complaint. Preston was aware of this study and discussed it with the Chief Compliance Officer.
"Instead of supporting Integrity Services’ compliance efforts, Life Care management frustrated those efforts by interfering with Integrity Services’ investigations, impeding access by Integrity Services staff to potentially relevant data, and pressuring Integrity Services to close complaint cases. Preston personally instructed Integrity Services personnel that they were not permitted to make unannounced visits to Life Care facilities, and this was ultimately Preston’s decision.
"Numerous employees, including therapists and administrators, resigned due to the constant corporate pressure to provide excessive therapy and their unwillingness to subject Medicare beneficiaries to unnecessary rehabilitation therapy just to increase beneficiaries’ RUG levels. Numerous corporate divisional and regional employees also quit because of Life Care’s
constant pressure to increase Medicare reimbursement.
"Despite its actions, Life Care and Preston knew, or should have known, that Medicare only paid for skilled rehabilitative therapy services that were reasonable and necessary, consistent with the nature and severity of the patient’s illness or injury, the patient’s particular medical needs, and accepted standards of medical practices.
"As a direct result of Life Care’s corporate pressure to maximize its billings, Life Care therapists provided Medicare beneficiaries with excessive amounts of therapy that was not medically reasonable and necessary, and was sometimes even harmful. Although Life Care and Preston received numerous complaints, from both inside and outside the company, that its corporate pressure to meet therapy targets was undermining the clinical judgment of its therapists at the expense of nursing home patients, those complaints were largely ignored or the individuals that complained were chastised or punished.
"Life Care’s corporate strategy and pressure succeeded in significantly inflating the money it received from Medicare and resulted in Life Care knowingly submitting false claims to Medicare for medically unreasonable, unnecessary and unskilled therapy services, and using false records and statements to support those false claims. As the sole shareholder of Life Care, Preston was the ultimate financial beneficiary of the proceeds of Life Care’s scheme."