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Rescare Corporation will pay $2.15 million to settle claims that it defrauded the United States and the state of Texas

The Attorney General of the State of Texas announced today that ResCare Corporation agreed to pay $2.15 million to settle a whistleblower lawsuit alleging that it defrauded the State of Texas and the United States in connection with a contract for the provision of mental health services to Medicaid recipients. United States of America ex rel. Jennifer Hudnall, and the State of Texas v. ResCare, Inc., et al., U.S.D.C. N.D. Tex., Civil Case No. 3:01cv1154-H.

The whistleblower lawsuit was initially filed on June 18, 2001, by Ms. Jennifer Hudnall, a former Mental Health Provider who worked at ResCare facilities in the State of Texas, on behalf of the United States government and the State of Texas. The Complaint alleged that Ms. Hudnall’s responsibilities with ResCare included evaluating patients and developing an individualized plan of care. Ms. Hudnall was terminated in July 2000, allegedly in retaliation for attempting to correct fraudulent practices by ResCare and Citadel.

In its lawsuit, the State of Texas and Ms. Hudnall alleged that, since on or before June 2000, ResCare and Citadel, defrauded and continued to defraud, state and federal governments out of millions of dollars through various false or fraudulent schemes emphasizing profits over patient health and welfare. These practices included:

  1. BILLING FOR MENTAL HEALTH SERVICES THAT WERE UNNECESSARY, ILLEGAL, OR WERE NEVER ACTUALLY PROVIDED;
  2. FALSIFYING PATIENT RECORDS TO JUSTIFY CONTINUED BILLING FOR TREATMENTS AND SERVICES WHICH WERE OF NO HELP TO PATIENTS;
  3. BACKDATING AND FALSIFYING TREATMENT PLANS AND PATIENT RECORDS TO ENSURE THAT MEDICAID ELIGIBILITY WOULD NOT LAPSE, SO THAT BILLING FOR UNNECESSARY SERVICES COULD CONTINUE;
  4. BILLING FOR UNNECESSARY AND NON-REIMBURSABLE RECREATIONAL ACTIVITIES SUCH AS PIZZA PARTIES AND CAR RIDES; AND
  5. BILLING FOR THERAPY SERVICES WHILE PATIENTS WERE ACTUALLY ASLEEP.

The “qui tam” lawsuit was filed under the Texas Medicaid Fraud Prevention Act, Tex. Hum. Res. Code Ann. Section 36.001 et seq., as well as the Federal False Claims Act. Medicaid is funded both by the State of Texas and the Federal Government. The Texas Medicaid Fraud Prevention Act allows private individuals to sue companies that are defrauding the government and recover damages and penalties on the government’s behalf. Those found liable can be required to pay as much as two times damages plus a penalty of up to $10,000 for each false claim submitted to the State. Similarly, those found liable under the Federal False Claims Acts are required to pay treble damages plus a penalty of up to $10,000 for each false claim.

In the late 1970′s, Medicaid and disability funding was expanded to include care of the mentally ill. As a result of this expansion, government spending on care for the disabled has risen from $4.3 billion in 1977 to more than $22 billion in 2000. The Texas Department of Mental Health/Mental Retardation currently administers Medicaid services for approximately 550,000 Texans with some form of mental illness and/or functional impairment.

Since the 140-year old statute was strengthened significantly by Congress in 1986, the Federal False Claims Act has resulted in the recovery by the federal government of almost $12 billion. More than sixty percent of all recoveries obtained under the Federal False Claims Act have come as a direct result of actions initiated by whistleblowers and their counsel. In recent years, a growing number of states across the country have passed their own False Claims Acts. Presently, twenty states and the District of Columbia have their own False Claims or Qui Tam Acts. False Claims legislation is also pending in a number of other states. The State of Texas passed its own False Claims Act in 1995.

The whistleblowers are represented by Marc S. Raspanti, Esquire, Michael A. Morse, Esquire, and John H. Cochran, Esquire. Ms. Hudnall’s counsel, Marc S. Raspanti, Esquire, commented that:

“My client is extremely gratified because this settlement returns millions of dollars back into the Texas Medicaid program, where it can properly be used to provide treatment to some of our most vulnerable citizens. This settlement could not have been possible without the sacrifices of my client and the unprecedented teamwork between the whistleblower, the Texas Attorney General’s Office and the United States Department of Justice.

This case also demonstrates that the growing number of State False Claims Acts can and will play an active and prominent role in future efforts to combat fraud against taxpayers. Those who seek to defraud state taxpayers should now be on notice that they will face serious repercussions for their actions.”

For more information about the False Claims Act and whistleblower cases, we invite you to visit the False Claims Act Resource Center at www.falseclaimsact.com.

For more information about this case, we invite you to visit the internet site for the Texas Attorney General’s office, located at www.oag.state.tx.us.

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