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Justice News

Department of Justice
U.S. Attorney’s Office
District of Minnesota

Tuesday, December 6, 2011

Justice Department Files Complaint Against RehabCare Group, Inc., Rehab Systems Of Missouri, And Others

MINNEAPOLIS -- The U.S. Attorney’s Office for the District of Minnesota announced
late yesterday that a civil Complaint has been filed in an existing federal suit against Rehabcare
Group, Inc. (“RehabCare”), Rehabcare Group East, Inc., Rehab Systems Of Missouri (“RSM”),
and Health Systems, Inc. The Complaint alleges that RehabCare paid kickbacks to RSM in
order to gain access to a lucrative stream of referrals from Medicare and Medicaid

The suit was originally brought under the qui tam, or “whistleblower,” provisions of the
False Claims Act. That statute allows private individuals to file civil actions on behalf of the
United States and share in any recoveries. Health Dimensions Rehabilitation, Inc., the
whistleblower in the case, is a Minnesota corporation that provides physical, occupational, and
speech therapy services in nursing homes and other settings.

The U.S. Department of Justice intervened on claims arising from a transaction in 2006.
The government’s Complaint alleges that RehabCare was interested in purchasing RSM but
correctly determined that paying a purchase price that took into account the value of the
referrals from nursing homes controlled by RSM’s majority owner would violate the Anti-
Kickback Statute. The Anti-Kickback Statute makes it illegal to pay others for referrals of Medicare patients, as patients are supposed to receive services based on their medical needs, not
as a result of financial inducements paid to their health care providers.

The government’s complaint alleges that in order to induce RSM to enter into the deal,
RehabCare paid RSM approximately $600,000 and also agreed to give RSM a lucrative 5-year
contract guaranteeing RSM a portion of RehabCare’s revenue from the stream of Medicare and
Medicaid patient referrals of the nursing homes that RehabCare would service under the deal.
Essentially, in exchange for directing the therapy business at the nursing homes to RehabCare,
RSM received an up-front payment and was guaranteed over ten percent of the revenue from
the ongoing contract therapy operations. Aside from continuing to deliver the business to
RehabCare, RSM provided no services and no value in return. This transaction and the ensuing
contract between RehabCare and RSM constituted kickbacks paid from RehabCare to RSM in
exchange for referrals of business reimbursed by Medicare and Medicaid.

This matter is brought by the Justice Department’s Civil Division, the U.S. Attorney’s
Office for the District of Minnesota, and the U.S. Department of Health and Human Services-
Office of Inspector General.

The case is entitled United States of America ex rel. Health Dimensions Rehabilitation, inc.
v. Rehabcare Group, inc., Civil No. 07-3294 (PAM/JSM).



Updated April 30, 2015