Bloomberg News

AseraCare Hospice Defrauded Medicare, U.S. Says in Joining Suit

January 06, 2012

Jan. 4 (Bloomberg) -- AseraCare Hospice was accused by the U.S. of submitting “false and fraudulent” claims for payment to the federal government and misspending millions of dollars in Medicare money meant for the care of terminally ill patients.

The Justice Department said yesterday it joined a whistle- blower case against AseraCare in federal court in Birmingham, Alabama, accusing the closely held company of seeking to cheat Medicare for the hospice care of patients who weren’t terminally ill. The U.S. is seeking three times the damages and a penalty of $5,500 to $11,000 per claim.

“Medicare benefits, including the hospice benefits, are intended only for those individuals who are appropriately qualified,” U.S. Attorney Joyce White Vance in Birmingham said in an e-mailed statement. “We must protect the public welfare and tax-funded benefits programs.”

AseraCare, based in Fort Smith, Arkansas, runs 65 hospice centers in 19 states, according to the lawsuit. It is owned by Fort Smith-based Golden Living, one of the largest nursing home chains in the U.S. Golden Living used to be called Beverly Enterprises, before it was purchased in 2006 by the private equity firm Fillmore Capital Partners of San Francisco.

The federal complaint is part of a crackdown on suspected hospice fraud by the Justice Department and the Office of the Inspector General at the U.S. Department of Health and Human Services, which oversees the Medicare program.

Extracted Settlements

The two agencies have extracted settlements and so-called corporate integrity agreements from two hospice operators in Texas and Alabama, are suing a third in Kansas, and are investigating the nation’s largest hospice provider, Chemed Corp.’s Vitas Healthcare, for “an extensive scheme” to defraud the government of “hundreds of millions of dollars,” according to a Justice Department filing in U.S. District Court in Dallas.

The AseraCare case stems from a whistle-blower suit filed in 2009 by two former employees who will receive a portion of any recovery. They alleged in their complaint that Golden Living used its various subsidiaries “to recruit and fraudulently enroll elderly patients who are then fraudulently referred between organizations in whatever manner would result in the highest possible Medicare reimbursements.”

AseraCare, as a result, received an influx of hospice recruits who weren’t really dying, the plaintiffs alleged. These ineligible patients were kept on hospice to maximize Medicare reimbursements, and then discharged when AseraCare couldn’t make any more money on them, the whistle-blowers alleged. As proof, the plaintiffs alleged that from 36 percent to 79 percent of all of AseraCare’s patients at three of its southern Alabama branches from 2005 through 2009 were discharged alive, which would have been “hardly plausible” if the patients were really dying, according to the complaint.

AseraCare ‘Disappointed’

David Beck, AseraCare’s general counsel, said in an e- mailed statement that the company was “disappointed” by the Justice Department’s decision to intervene in the case and that the allegations have no merit.

The president of AseraCare Hospice, David Friend, said in the statement, “Each one of our hospice patients is in our care because two independent physicians have certified his or her eligibility and because the individual has made a decision to focus on care and comfort when a cure is not possible.”

To be eligible for Medicare hospice benefits, a patient must have a medical prognosis of six months or less to live.

“AseraCare, through its reckless business practices, admitted and retained individuals who were not eligible to receive Medicare hospice benefits, because it was financially lucrative -- and did so even after AseraCare’s auditor alerted AseraCare to troubling problems,” according to the government’s lawsuit, which was unsealed on Dec. 22.

The U.S. alleges false claims were submitted for payment since at least January 2007.

“We are pleased that the U.S. Department of Justice, after thorough investigation and in consideration of the fact that these corporations have a history of abusing the Medicare system, has elected to intervene in this action,” Henry Frohsin, a partner at Frohsin & Barger LLC who represents the former AseraCare employees, said in an e-mail.

The case is U.S. v. Golden Gate Ancillary LLC, 09-00627, U.S. District Court, Northern District of Alabama (Birmingham).

--Editors: Peter Blumberg, Michael Hytha

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Peter Waldman in San Francisco at pwaldman@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net: Gary Putka at gputka@bloomberg.net


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