Provider of Physical, Speech, and Occupational Therapy Services Agrees to $38,000,000 False Claims Act Settlement

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As announced in an recent press release, Extended Care Health Services, Inc. (“Extendicare”), an operator of skilled nursing facilities, and its subsidiary Progressive Step Corporation (“Pro Step”), a provider of physical, speech, and occupational rehabilitation services, entered into a settlement to resolve allegations that, in part, Pro Step billed Medicare for medically unreasonable and unnecessary rehabilitation services.  In addition to resolving allegations related to substandard skilled nursing services, the settlement resolves allegations that Extendicare provided medically unreasonable and unnecessary rehabilitation services to Medicare Part A beneficiaries, particularly during the patients’ assessment reference periods, therefor allowing Extendicare to bill Medicare a higher per diem rate for those patients.

In addition to the settlement agreement, Extendicare entered into a Corporate Integrity Agreement with the Office of Inspector General to promote compliance with Medicare, Medicaid, and other federal healthcare programs.  The Corporate Integrity Agreement (“CIA”) runs for a period of five (5) years and contains substantial obligations for Extendicare.  These obligations include requirements to establish a compliance program and name a compliance officer; appoint a compliance committee to, among other things, establish an internal quality audit and review program; establish a staff review committee; and develop a code of conduct and written policies and procedures, including extensive policies and procedures relating to the delivery, management, and oversight of rehabilitation therapy services.  Additionally, the CIA requires general training, training related to individual’s specific responsibilities, and periodic training on quality of care issues.  The CIA also requires that an independent review organization be engaged to perform independent and objective reviews of Extendicare’s compliance obligations, including those related to rehabilitation therapy systems.

The above case is yet another illustration of the importance of assuring that rehabilitation services are provided in compliance with all applicable federal laws and regulations.  It also serves as a good reminder of the need for rehabilitation providers to continually consider whether their compliance programs are sufficient to promote a culture of compliance and avoid regulatory scrutiny.

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Paul J. Welk

Paul is chair of Tucker Arensberg Attorneys Health Law/Health Information Technology Industry Group and focuses his practice on corporate and healthcare law. In this capacity, he represents physical therapists, physicians, dentists, not-for-profit organizations, professional organizations and other business corporations and entities.

Some of the recent transactions and clients he has worked on include the representation of:

  • Multiple state physical therapy professional associations on a variety of issues
  • Multiple physical therapy private practices with development and implementation of ownership succession plans
  • A venture capital company with the $13 million dollar stock acquisition of a target company
  • Multiple physical therapy providers in successful third party payer appeals
  • Multiple buyers of the assets and associated real estate of dental practices
  • Multiple physical therapy providers regarding the transfer of partial ownership interests and the negotiation of governance and shareholder documents
  • Multiple physical therapy providers with asset and stock acquisitions and divestitures
  • A manufacturing company with the successful negotiation of a shareholder dispute and stock purchase
  • A service provider with negotiation of a $5 million annual service contract
  • A publicly traded company regarding the merger of two wholly owned subsidiaries
  • Two publicly traded companies regarding the ongoing review of distribution, supply and service contracts
  • A seller of a skilled nursing facility and related real estate
  • Multiple regional rehabilitation provider networks on a variety of issues, including formation and ongoing operations
  • A large physician practice in its sale to a health system

Areas of Practice: Business and corporate law, health law, mergers and acquisitions

Articles and Presentations: Paul regularly lectures and writes on topics related to business and healthcare law and is the founding author of Legal Impact, a regular column in the American Physical Therapy Association Private Practice Section’s Impact Magazine.

Memberships and Activities: Paul is a member of the American and Pennsylvania Physical Therapy Associations and past Chair of the American Physical Therapy Association Committee on Risk Management and Member Benefits. He is also a member of the Bloomsburg Medical Supply Ethics Committee, the Duquesne University School of Physical Therapy Advisory Board, the Pennsylvania Bar Association, and the American Health Lawyers Association. He is an adjunct instructor at the St. Francis University School of Physical Therapy and a licensed physical therapist in the Commonwealth of Pennsylvania.

Jurisdictions: Paul is licensed to practice law in Pennsylvania.

Education and Background: Paul received his Bachelor of Science and Master of Physical Therapy degrees with honors from Duquesne University and his law degree with honors from the University of Pittsburgh. He served as associate editor of the University Of Pittsburgh School Of Law Journal of Law and Commerce and received the CALI Excellence for the Future and Esther F. Teplitz Awards for academic performance in the health law curriculum. Paul is a graduate of the University Of Pittsburgh School Of Law’s Health Law Certificate Program.

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