Pennsylvania-based Long-Term Care and Rehab Company Agrees to Pay Over $13 Million to Settle Kickback and Stark Allegations

Post Acute Medical, LLC and its affiliated entities, operators of long‑term care and rehabilitation hospitals across the country (collectively, “PAM”) have agreed to pay the United States, Texas, and Louisiana more than $13 million dollars to resolve claims that it violated the False Claims Act and similar state laws.  The government alleged that the company submitted claims to Medicare and Medicaid that resulted from violations of the Anti-Kickback Statute and the Stark Law.

PAM is based in Enola, Pennsylvania, but it operates more than two dozen long-term care and rehabilitation hospitals in several states including Texas, Louisiana, Arkansas, Nevada, Oklahoma, and Pennsylvania.  According to the Department of Justice, detailed in a press release on August 15, 2018, PAM entered into numerous physician-services contracts on behalf of its hospitals dating back to PAM’s creation in 2006.  Although these physician-services contracts were supposedly to retain physicians as medical directors or in other administrative positions, the DOJ alleged that the company’s payments for these contracts were actually intended to induce physician to refer patients to PAM’s facilities.  These physician-services contracts often take the form of administrative stipends or compensation for additional duties, but when examined closely, the recipients are performing very limited or zero additional responsibilities.

In addition to the sham administrative stipends, the DOJ alleged that the company also entered into “reciprocal referral relationships” with unaffiliated healthcare providers such as home health companies.  Under that alleged scheme, the DOJ believed that PAM referred patients to other providers with the understanding that those providers would refer other patients to PAM’s facilities. These arrangements violate the Stark and Anti-Kickback laws.

Alleged kickbacks and improper physician relationships threaten the impartiality of medical decision-making process, and as such, the DOJ stated that it is committed to preventing illegal financial relationships that undermine the federal health care programs.

The settlement resolves allegations originally brought by a qui tam whistleblower, Douglas Johnson.  The underlying case is United States ex rel. Johnson v. Post Acute Medical, LLC et al., Civil Action No. 17-cv-1269 (M.D. Pa.).

Under the settlement agreement, PAM will pay $13,031,502 to the United States, $114,016 to Texas, and $22,482 to Louisiana.  The whistleblower will receive $2,345,670 as his share of the federal government’s recovery in this case.  As a part of resolving the matter, PAM has also entered in to the five-year Corporate Integrity Agreement with the HHS OIG.  They are also required to undertake an arrangements review that is to be conducted by an Independent Review Organization.