Former Kindred Exec Settles Medicare Fraud Allegations

The former chief executive officer of Louisville, Ky.-based HealthEssentials Solutions and co-founder of Kindred Healthcare Inc., has resolved allegations of Medicare fraud related to HealthEssentials reimbursement claims by agreeing to a $1 million settlement.

The Justice Department accused Michael R. Barr, who along with W. Bruce Lunsford co-founded the post-acute care company that’s now known as Kindred Healthcare, of knowingly causing HealthEssentials to submit false claims to Medicare between 1999 and 2004. Barr is no longer with Kindred.

Norman Pfaadt, HealthEssentials’ former chief financial officer, agreed to pay $20,000 to resolve similar allegations.

HealthEssentials provided primary medical care to patients in skilled nursing facilities, assisted living communities, and other care settings from 1998 until it filed for bankruptcy and ceased operations in 2005. Barr founded HealthEssentials and served as president, CEO, and board chairman, while Pfaadt served as both CFO and senior vice president. 

“Healthcare executives should lead by example and create cultures of compliance within their companies, not pressure their employees to cheat the taxpayers,” said Assistant Attorney General for the Civil Division Stuart Delery in a statement. “We will continue to hold health care executives personally accountable for their dealings with Medicare.”

HealthEssentials pleaded guilty in March 2008 to submitting false statements to Medicare related to services it provided to patients in assisted living communities, and entered a civil settlement with the government, according to the Justice Department. In May 2011, Karen Stone, the now-defunct company’s former director of billing, pleaded guilty for her role in the company’s billing scheme.

With the $1 million settlement, Barr’s and Pfaadt’s alleged liability under the False Claims Act for their roles in HealthEssentials’ false billings has been resolved.

The government alleged that during the 1999 and 2004 timeframe, HealthEssentials billed for services that were inflated or not medically necessary, and that both Barr and Pfaadt pressured the company’s employees to inflate billings despite having been advised against doing so by attorneys on the grounds that it was improper. 

As part of the settlement, Barr agreed to a three-year period of exclusion from participating in federally-funded healthcare programs. 

The allegations resolved through the settlement arose in part from a whistleblower lawsuit filed by former HealthEssential employees Michael and Leigh RoBards, who will receive a total of $153,00. 

Written by Alyssa Gerace

Alyssa Gerace