Amedisys to Pay $150 Million in Medicare False-Billing Case

Apr 23, 2014 5:04 pm ET

(Updates with analyst’s report in seventh paragraph.)

April 23 (Bloomberg) -- Amedisys Inc., one of the largest home-nursing providers, will pay $150 million to settle U.S. claims that it falsely billed Medicare and that it entered into improper financial relationships with referring physicians.

The accord announced today resolves claims that Amedisys billed Medicare from 2008 to 2010 for services that weren’t medically necessary, for patients who weren’t homebound and for people who didn’t need skilled nursing and therapy services.

“These billing violations were the alleged result of management pressure on nurses and therapists to provide care based on the financial benefits to Amedisys, rather than the needs of patients,” the Justice Department said in a statement.

The settlement comes amid proposed cuts in Medicare payments to Amedisys and similar providers under the Patient Protection and Affordable Care Act. Amedisys, which gets more than 80 percent of its revenue from Medicare, announced in March that it would close 29 care centers and consolidate 25 more.

The company denied the allegations, according to the settlement agreement. A spokeswoman didn’t immediately return a call seeking comment on the accord. Amedisys first announced in a Nov. 12 regulatory filing that it agreed to pay $150 million.

Amedisys fell 2.3 percent to $13.82 in Nasdaq Stock Market trading at 4 p.m. New York time.

The settlement is “a relatively massive amount considering the size of the company and its current financial condition,” Sheryl Skolnick, a Stamford, Connecticut-based analyst at CRT Capital Group, said in a report.

Integrity Agreement

From 2009 to 2013, the U.S. collected $17.3 billion in civil settlements, at least $4.8 billion in criminal penalties associated with false-claims settlements.

Amedisys also resolved claims that from 2008 through 2012, it violated the Anti-Kickback Statute for home-health services referred by a private oncology practice in Georgia, according to the settlement agreement. In addition, the company entered into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.

In February, William Borne stepped down as chief executive officer and chairman of the company he started in 1982. Borne, 56, was replaced on an interim basis by Chief Financial Officer Ronald LaBorde, 57, while Amedisys seeks a permanent CEO.

Shareholder KKR & Co., the private-equity firm led by Henry Kravis and George Roberts, successfully petitioned for one of its fund managers to be appointed to the Amedisys board. The appointment was announced a day before news of the closings. KKR is Amedisys’s largest shareholder with a stake of about 15 percent, according to data compiled by Bloomberg.

380,000 Patients

Amedisys provides home health and hospice care for more than 380,000 patients a year and serves more than 2,200 hospitals and 61,000 physicians, according to its website.

The company’s operations “will now be made more difficult and more expensive by the potentially significant restrictions of the CIA and the requirement for auditing/monitoring by multiple entities,” Skolnick wrote, referring to the corporate integrity agreement.

The company settled seven lawsuits, including six filed in federal court in Philadelphia, under the False Claims Act. That law lets citizens sue on behalf of the government and share in any settlement.

The whistle-blowers who brought the cases were primarily former Amedisys employees and will split more than $26 million, according to a statement by Philadelphia U.S. Attorney Zane Memeger. The case was investigated by the Justice Department civil division, as well as U.S. attorneys in Philadelphia, Atlanta, Kentucky, South Carolina and western New York.

Largest Settlement

The accord is “by far the largest home health-care settlement” in the history of the False Claims Act, according to whistle-blower lawyers from the Durrell Law Office, Thomas & Associates and Kenney & McCafferty. The three firms represent CAF Partners, a group of five whistle-blowers, including three who worked at the company.

“The fraud as alleged permeated every aspect of Amedysis’s home health services,” attorney Tavy Deming, of Kenney & McCafferty, said in an interview.

“The case is about Amedysis signing up elderly patients for services who didn’t qualify under the Medicare rules,” she said. “The company made those patients appear sicker than they were to increase revenue, and they kept treating patients for longer than medically necessary.”

In a 2012 complaint, CAF claimed that company clinicians around the U.S. used a proprietary laptop program to collect data about patients that ultimately triggered higher payments from Medicare. A billing system at the company headquarters also served to increase billing to Medicare, according to CAF.

Whistle-blowers referred to the laptop program and billing system as “the secret sauce,” said Kenney & McCafferty attorney Emily Lambert.

--With assistance from Tom Schoenberg in Washington.