Fraud Watch: Feds Sit Out ManorCare Case, Carter Health Under Investigation

US Declines to Intervene in Heartland Hospice case

The U.S. government has declined to intervene in a False Claims Act (FCA) case brought against HCR ManorCare’s hospice division, Heartland, though it asked to be kept updated on pleadings in the case.

The decision to not intervene marks another victory in FCA cases for ManorCare; in November, a Medicare fraud case against the Toledo, Ohio-based skilled nursing provider was dismissed. But it’s not necessarily out of the woods yet; the government declining to intervene doesn’t mean an FCA case won’t go forward, Brian Roark, a partner at Bass, Berry & Sims PLC in Nashville, Tenn., told Bloomberg BNA.


Heartland Hospice, which is owned by HCR ManorCare, was accused by a whistleblower of “a corporate-wide pattern of conduct that has resulted in the submission of thousands of false claims and statements.” The case was filed in the U.S. District Court of the Northern District of Ohio in 2010.

Heartland Hospice was accused of falsifying patients’ life expectancy to qualify them for hospice reimbursement and maintaining them on hospice after their medical condition stabilized. The complaint also said that Heartland’s auditors were instructed to review only the most recent benefit period for audited patient files, rather than the whole time of treatment.

The government decided not to intervene in the action, according to a notice filed March 1 that was obtained by Home Health Care News. As a result, the qui tam plaintiff, Kathi Holloway, is the sole prosecutor, though the order noted that the government could decide to intervene “upon the showing of a good cause.”


It’s a bit of good news for the skilled nursing provider, which recently entered Chapter 11 bankruptcy so it could be taken over by Quality Care Properties (NYSE: QCP) after a long run of financial difficulties.

Carter Healthcare Under Investigation

Multiple agencies are investigating Carter Healthcare, the FBI confirmed to Fox affiliate KOKH on March 9.

Based in Oklahoma City, Carter provides home health, hospice, pharmacy and other services across seven states. It employs more than 750 people, according to the company website.

Authorities are not revealing why Carter is under scrutiny, but the corporate office was blocked off following a raid on Friday, KOKH reported. The company had not returned a phone call from Home Health Care News as of press time.

Miami-Area Home Health Agency Owner Gets 20 Years for $66 Million Fraud Scheme

The owner and operator of several home health care agencies in Miami was sentenced to 240 months in prison at the end of February for his role in a $66 million conspiracy to defraud Medicare.

Rafael Arias, 52, was sentenced and ordered to pay $66.4 million in restitution and to forfeit the gross proceeds traced to the offense, the Department of Justice (DOJ) announced. Arias pleaded guilty on Nov. 30, 2017, to one count of conspiracy to commit health care fraud and wire fraud.

As part of his guilty plea, Arias admitted he was the owner and operator of more than 20 home health agencies between Dec. 2007 and Sept. 2015. To hide his identity and ownership interests, Arias recruited nominee owners to fraudulently present themselves as agency owners. He and his co-conspirators also paid illegal bribes and kickbacks to patient recruiters and submitted false and fraudulent home health care claims to Medicare for patients who did not qualify of for whom services were never performed.

See the full announcement here.

Hospice Company and Owner Settle False Claims Act Case for $1.24 Million 

Horizons Hospice, LLC and its owner and CEO John C. Rezk have agreed to pay the United States $1.24 million to resolve allegations that the company fraudulently billed Medicare and Medicaid services for patients who were ineligible for hospice care.

The defendants allegedly submitted false claims to Medicare and Medicaid for patients who did not qualify from June 27, 207, to August 1, 2012. The company also changed its name to 365 Hospice, LLC.

Home Health Owner Gets 18 Month Sentence for Kickback Scheme

Norma de la Cruz, owner of Glenview, Illinois-based TLC Healthcare, has received an 18 month federal prison sentence for her role in a kickback scheme, the U.S. Department of Justice announced on March 6.

The 81-year-old de la Cruz pleaded guilty last year to one count of conspiracy to offer and pay unlawful kickbacks. From 2012 to 2014, de la Cruz used a personal account as well as a TLC business account to pay bribes and kickbacks to recruiters, offering $500 to $600 for each patient referral. TLC fraudulently billed Medicare for home health services purportedly provided to these patients, causing the Medicare program to pay out $390,000 in that two-year period.

In one instance, de la Cruz paid a recruiter at least $65,000, according to the DOJ. She reportedly used proceeds from the scheme to gamble at Chicago-area casinos, where she accumulated losses of about $245,0000 during the approximate time period of the kickback scheme.

Written by Amy Baxter and Tim Mullaney

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