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Settlement Will Resolve Multiple Home Health Care Fraud Cases

WASHINGTON, D.C. -- The Justice Department today announced that Olsten Corporation (Olsten) and a subsidiary, Kimberly Home Health Care, Inc. (Kimberly), will pay $61 million to settle allegations that both companies defrauded the Medicare program. Olsten will pay nearly $51 million as part of a civil settlement, and Kimberly will enter into criminal plea agreements in three districts and pay more than $10 million in criminal fines.

Kimberly will plead guilty to three separate felony charges, which were filed today in the Middle and Southern Districts of Florida and the Northern District of Georgia. The company has agreed to plead guilty to conspiracy, mail fraud and violating the Medicare Anti-Kickback statute, and will pay $10.08 million in criminal fines in connection with its scheme to defraud the Medicare program.

Kimberly's parent company, Olsten, has entered into a civil settlement agreement with the United States and will pay $50.92 million to resolve its civil liability stemming from the same Medicare fraud schemes and an additional scheme in Brooklyn, New York. Olsten and its subsidiaries own and operate management and staffing services for home health agencies in several states, including Florida and Georgia.

"Health care fraud schemes disguised as legitimate business arrangements divert millions of dollars away from patient care each year," said Attorney General Janet Reno. "The Department of Justice is committed to working with its partners to investigate these complex schemes, prosecute those responsible for them, and ensure that ill-gotten gains are returned to the Medicare Trust Fund."

The criminal pleas relate to kickbacks and false Medicare billings made in connection with Kimberly's receipt of fees from another company for Kimberly's management of certain home health agencies. As part of the plea agreement, Olsten and Kimberly have agreed to cooperate with the government in its ongoing investigations of others involved in these schemes. It is up to the district courts to decide whether to accept the plea agreements and impose the sentences.

The civil settlement resolves allegations that Olsten defrauded Medicare in connection with its agreement to sell its home health agencies to Columbia/HCA in 1995 and 1996 and to assist Columbia/HCA in obtaining other home health agencies, and with its subsequent management arrangement with Columbia/HCA. The United States alleged that Olsten and Columbia/HCA caused the taxpayers to foot the bill for Columbia's acquisition of the agencies by passing on part of the purchase costs to Medicare disguised as management fees charged by Olsten. Medicare does not pay for most acquisition costs but it does pay for legitimate management fees.

The civil settlement also resolves allegations that Olsten caused Medicare to be charged for sales and marketing activities that are not reimbursable under Medicare rules. $40.92 million of the civil settlement resolves allegations arising from a lawsuit filed in the Northern District of Georgia (Atlanta) by former Olsten Vice President, Donald McLendon, under the qui tam provisions of the False Claims Act, a federal law that allows private individuals to sue on behalf of the government. The lawsuit, U.S. ex rel. McLendon v. Columbia/HCA Healthcare Corp., No. 97-CV-0890 (N.D. Ga.), which was unsealed today, alleges among other things that Olsten and Columbia/HCA acted together to disguise the unallowable costs associated with Columbia's purchase of home health agencies as management fees, which are reimbursable under Medicare. The remaining $10 million of the civil settlement resolves Olsten's liability in an unrelated matter in the Eastern District of New York. Olsten also accepted deferred criminal prosecution there. In the New York matter, the U.S. alleged that Olsten filed fraudulent cost reports which sought Medicare payment for non-reimbursable costs including personal expenses of corporate executives.

In addition to paying $61 million, Olsten also has agreed with the Department of Health and Human Services to adopt and apply a Corporate Integrity Agreement, which will extend to all of its health care facilities and lines of business located in the United States. Kimberly will be permanently excluded from participation in Medicare and other federal health benefit programs.

"As our health care system has become more sophisticated, so too have the schemes perpetrated against it," said Acting Assistant Attorney General David W. Ogden. "Today's action shows that the law enforcement community is able to protect Medicare and our health care system from those who defraud it, regardless of the sophistication of the scheme."

Today's settlement did not resolve the allegations against Columbia/HCA that are raised in the same qui tam lawsuit, but, in a related development, the Justice Department announced that it would join in McLendon's suit against Columbia. Columbia is the largest health care services provider in the nation.

The complaint unsealed today alleges that Columbia acted with Olsten to illegally obtain Medicare reimbursement for costs Columbia incurred in purchasing home health agencies from Olsten and others. The complaint alleges also that Columbia illegally billed Medicare for its sales and marketing activities, using employees known as community educators (CEs) and home care coordinators (HCCs) to arrange for referrals from physicians and to search hospital patient files to locate patients about to be discharged and in need of home care. The CEs and HCCs were then required to ensure that the patients went to a Columbia-owned home health agency rather than a competitor's agency. The complaint alleges that Columbia then billed Medicare for these activities, in violation of Medicare rules.

Finally, the suit alleges that Columbia improperly billed Medicare for home care visits to persons residing in Assisted Living Facilities ("ALFs"). An ALF typically provides basic personal care services to its residents, services for which Medicare and Medicaid will pay the ALF. A home health agency, such as those owned by Columbia, cannot bill Medicare and Medicaid for the same services for which the ALF is paid.

"This should serve as a reminder to health care providers that they have a responsibility to be good corporate citizens, and if they engage in Medicare fraud, they will be held accountable," Inspector General June Gibbs Brown warned. "We will not tolerate the misuse of our nation's scarce health care resources and are determined to recover every dollar owed Medicare."

Although the lawsuit originally filed by McLendon named additional defendants, the Justice Department joined the suit against only Columbia and Olsten. In light of today's settlement with Olsten, the Justice Department will pursue only the allegations against Columbia/HCA.

Under the False Claims Act, a whistleblower can receive between 15 and 25 percent of the government's recovery in a case that the government joins. Under the agreement announced today, McLendon, the relator in the Olsten matter, will receive $9.8 million.

The investigations were conducted by the United States Attorney's Offices (Middle and Southern Districts of Florida, Northern District of Georgia, and Eastern District of New York), the Criminal and Civil Divisions of the Department, the Federal Bureau of Investigation, and the Department of Health and Human Services' Office of Inspector General.

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