Contract Rehabilitation Therapy Provider Settles False Claims Act Violation Allegations

Select Medical Rehabilitation Services Inc. (SMRS), a post-acute care service provider based in Pennsylvania, has become the latest company to settle allegations of violating the False Claims Act with the United States government.

Earlier this month, the Department of Justice announced that the medical rehabilitation company - through its holding organization, Select Medical Corporation and Encore GC Acquisition LLC - had agreed to pay a fine to settle the allegations against it and move forward with its operations.

Medicare Fraud at Its Finest

In a press release, the Justice Department explained that Select Medical Rehabilitation Services had been working with senior nursing facilities (SNFs) across the country since 1997. However, the company made specific contact with 12 of those facilities in New York and New Jersey between January 2010 and March 2016. In that time, the company had forced the facilities to bill Medicare for services that were “not reasonable, necessary, nor skilled.”

Federal officials especially took issue with the fact that Select Medical Rehabilitation Services Inc. took its actions without considering their effects on the medical facilities themselves or their patients' finances. They eventually charged the company with healthcare fraud, citing the False Claims Act as their basis.

The False Claims Act is the oldest and strongest whistleblower protection law available in the United States. Established by President Lincoln, the Act makes it a crime for any individual or company to knowingly make false records or claims concerning any federal healthcare program. With these plans being funded by the federal government, such acts essentially defraud the United States.

As part of the Act, whistleblowers will be entitled to funds obtained if the criminals are prosecuted and fined.

The Justice Department’s release pointed out that Select Medical Corporation had been the controlling company for SMRS at the time the crime was committed. This was before Encore Acquisition LLC became the company’s successor-in-interest.

Eventually, as with all whistleblower cases, the company’s wrong activities were eventually brought to light following a complaint filed by Melissa Vail, a former employee of SMRS. It is unclear what role Melissa Vail played in the company, but she was the one who brought enough information for the Justice Department to move forward with the lawsuit.

The Justice Department has finally agreed to terms with SMRS, with the company and Select Medical Corporation having to pay $8.4 million in fines. The press release didn’t mention that the two companies would be put under any additional compliance requirements.

Encore Acquisitions Escapes But Takes Full Responsibility

For their part, SMRS has failed to comment. However, a spokesperson for Encore Acquisitions said following the resolution that the payments required under the terms of the settlement were not tied to it. The spokesperson confirmed that Encore Acquisitions had nothing to do with the payments and that the company didn’t have any administrative requirements or obligations in connection with the case.

“For several years, Encore has cooperated with a government inquiry related to alleged conduct by Select and SMRS. The conduct at issue concerned 12 facilities serviced by SMRS and occurred prior to Encore’s acquisition of SMRS,” the spokesman explained in his speech.

The spokesperson also reiterated that Encore Acquisitions had nothing to do with the criminal activity in question. However, given that the situation had now become the company’s problem, they had entered into an agreement with the government to resolve the case.

“We have agreed to enter into a settlement with the government – along with Select – to resolve the matter, as we are considered the ‘successor-in-interest’ to SMRS due to the acquisition,” the spokesperson pointed out.

Under the terms of the False Claims Act, Melissa Vail, the whistleblower who brought this case into the limelight, is now eligible for some part of the $8.4 million fine. It is unclear how much she will get, however.

For now, the fine seems to be the significant issue that SMRS will have to face. The Encore spokesperson confirmed that the company remains committed to its work with SMRS as a holding organization and that they will continue to work with government officials to ensure the best practices. Encore Acquisitions has also pledged to continue providing quality and effective care to patients and customers across the board.

Speaking on the case, Brian Boynton, the Acting Assistant Attorney-General of the Justice Department’s Civil Division, explained in a statement that the settlement shows the federal government’s continued focus on getting the highest value possible for citizens who pay their taxes.

“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. Contract rehabilitation therapy companies, like other healthcare providers, will be held accountable if they knowingly provide patients with unnecessary services that waste taxpayer dollars,” he added.


Steve Halperin

New York trial attorney Steve T. Halperin is a well-known litigator with extensive knowledge of whistleblower laws and the New York False Claims Act. He has 28 years of experience as one of New York’s top tier attorneys. From the Manhattan offices of HalperinBikel, Steve’s whistleblower cases can run the gamut from lawsuits against healthcare. Whistleblowers: A New Yorker’s Step By Step Guide systems and providers cheating on New York Medicaid to private companies providing worthless services, or false billings by government contractors. With hundreds of winning verdicts and favorable settlements in healthcare and corporate cases, attorney Halperin’s meticulous preparation, courtroom acuity, and client-centered professionalism create remarkable outcomes.

To contact Steve: [hidden email] or 929.290.1266
For media inquiries or speaking engagements: [hidden email]