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Press Release

Contract Rehabilitation Therapy Providers Agree to Pay $8.4 Million to Resolve False Claims Act Allegations Relating to Provision of Medically Unnecessary Therapy Services

For Immediate Release
U.S. Attorney's Office, District of New Jersey

NEWARK, N.J. – A contract rehabilitation therapy provider will pay $8.4 million to resolve allegations that it violated the False Claims Act (FCA) by knowingly causing 12 skilled nursing facilities (SNFs) in New York and New Jersey to submit false claims to Medicare for services that were not reasonable, necessary, or skilled, Acting U.S. Attorney Rachael A. Honig announced today. 

Select Medical Corporation and Encore GC Acquisition LLL have agreed to the settlement to resolve allegations that Select Medical Rehabilitation Services Inc. (SMRS) violated the FCA. Select Medical Corporation was the prior parent company of SMRS, while Encore GC Acquisition is the successor-in-interest to SMR

“Skilled nursing facility residents and their families must be assured that the care and therapy that residents receive is based on medical need, not greed,” Acting U.S. Attorney Honig said. “We must also protect the taxpayers by ensuring that Medicare pays only for appropriate services performed for legitimate medical purposes. We will hold all health care providers who violate the False Claims Act responsible for their actions.”

“Today’s settlement reflects our commitment to protect patients and taxpayers by ensuring that the care provided to Medicare beneficiaries is dictated by their individual clinical needs and not by a provider’s financial interests,” Acting Assistant Attorney General Brian M. Boynton of the Department of Justice’s Civil Division said. “Contract rehabilitation therapy companies, like other health care providers, will be held accountable if they knowingly provide patients with unnecessary services that waste taxpayer dollars.”

“Sticking taxpayers with a hefty bill for unnecessary health care services will never be tolerated,” Special Agent in Charge Scott J. Lampert of the Health and Human Services, Office of the Inspector General (HHS-OIG) said. “Working closely with our law enforcement partners, we will tirelessly pursue unscrupulous health care companies to protect patients and federal health care programs.”  

According to documents filed in this case and the contentions of the United States contained in the settlement agreement:

From Jan. 1, 2010, to March 31, 2016, SMRS contracted with 12 SNFs in New York and New Jersey to provide rehabilitation therapy services to patients of the nursing homes. The United States contends that SMRS’ profit-driven corporate policies and practices encouraged and resulted in the provision of medically unnecessary, unreasonable, and unskilled therapy services being provided to patients irrespective of the individual clinical needs of the patients.

The civil settlement includes the resolution of claims brought under the qui tam, or whistleblower, provisions of the FCA by Melissa Vail, a former SMRS employee. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery.

The resolution obtained in this matter was the result of a coordinated effort between the U.S. Attorney’s Office for the District of New Jersey and the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, with assistance from HHS-OIG and the FBI Newark Field Office.  

The government is represented by Assistant U.S. Attorney Marihug P. Cedeño of the U.S. Attorney’s Office’s Opioid Abuse Prevention and Enforcement Unit in Newark and Trial Attorney Yolonda Campbell of the Civil Division, Commercial Litigation Branch, Fraud Section.

Tips and complaints about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The claims resolved by the settlement are allegations only and there has been no determination of liability.

The qui tam case is captioned U.S. ex rel. Doe v. Select Medical Corporation et al., No. 2:16-cv-03569 (D.N.J.).

Updated July 14, 2021

False Claims Act
Press Release Number: 21-302