At the end of October, Life Care Centers of America, Inc., a private nursing home company owned by Forrest L. Preston, settled a qui tam lawsuit by agreeing to pay $145 million to the government and the whistleblowers in the case. Life Care Centers, which is based in Cleveland, TN, owns over 260 residential care and nursing home facilities in 28 states and offers multiple types of care, from short-term post-operative care to longer term dementia care. This settlement came out of a consolidated lawsuit initially brought under the False Claims Act as two separate qui tam lawsuits that originated with a therapist and a registered nurse who used to work for Life Care. The consolidated suit alleged that, from January 2006 until February 2013, Life Care committed health care fraud by billing Medicare and TRICARE (the government’s health care program for the military and their dependents) for therapy that was given to patients who didn’t need it or were otherwise ineligible to receive it. The therapist and the nurse who came forward with these allegations were eventually joined by the Department of Justice in pursuing the case.

Although healthcare fraud is unfortunately not particularly unusual, the industry has watched this lawsuit unfold more closely because it has set a precedent by allowing the use of statistical sampling to prove the fraud. That is, instead of forcing the case to drag on by reviewing over 150,000 individual claims from 54,000 admissions, only 400 randomly selected admissions were reviewed, and the total number of false claims filed was calculated from the findings within that 400. In this case, the results indicated that Life Care was able to defraud Medicare and TRICARE of so much money because it required its therapists to meet goals for doing certain types of therapies, causing the therapists to feel pressured to give patients unneeded or potentially harmful therapies and causing Life Care to bill Medicare at the highest billing level possible for years.

Another lawsuit has been filed against Preston, who benefited the most from the fraud as the sole owner of Life Care.