Whistleblower awarded $5.7 million settlement over illegal kickbacks from nursing home patient referrals

by Jay Pate

The U.S. Justice Department has announced that a settlement has been reached in a case alleging illegal kickbacks to gain access to Medicare and Medicaid patients in Missouri nursing homes. The settlement involves claims that a company made illegal payments to a nursing home chain in order to be granted a contract to provide therapy services for residents of the chain’s nursing homes.

The settlement has been reached with RehabCare Group Inc. and Rehab Care Group East Inc. and nursing home operator Health Systems Inc. Kindred HealthCare Inc. acquired RehabCare in 2011. RehabCare Group and Health Systems have agreed to pay $30 million to settle kickback allegations brought forward in a whistle-blower lawsuit.

The lawsuit was originally filed under seal by a whistleblower in Minnesota. After conducting an investigation, the Justice Department decided in December to join the lawsuit. The case was transferred to St. Louis because most of the relevant events took place in Missouri and key witnesses are located there.

The whistleblower who filed the suit was a RehabCare competitor, Minnesota-based Health Dimensions Rehabilitation Inc. The whistleblower will receive $5.7 million from the settlement for its efforts in filing and pursuing the claims.

Allegations in the case were based on a federal anti-kickback statute, which forbids paying others for referrals of Medicare and Medicaid patients. The suit accuses RehabCare and the other defendants of filing false Medicare and Medicaid claims and of making or using false records or statements to support those claims. For example, it was alleged that RehabCare charged Health Systems only 70 percent of the Medicaid reimbursement amount — while Health Systems billed the government for the full amount. Health Systems and Rehab Systems split the difference of the remaining 30 percent, according to the suit.

Thinking about blowing the whistle?

Anyone who has information that a business or person has knowingly submitted or caused the submission of false or fraudulent claims to any branch of the United States government can potentially help file and pursue a lawsuit under the False Claims Act. The “whistleblower” (called a “relator”) does not have to have been personally harmed at all. The relator just needs to be aware of the false or fraudulent conduct. If money is recovered—whether from a settlement between the parties or a court judgment—the whistleblower who helped initiate the lawsuit can potentially recover 10% to 30% of the total amount recovered.

The lawyers at Heygood, Orr & Pearson represent clients who have witnessed fraud first-hand and wish to file a “qui tam” or whistleblower lawsuit against the corporations or individuals who were responsible. For example, our lawyers successfully negotiated a $1.75 million award for a whistleblower in a large tax fraud case.

In addition, Heygood, Orr & Pearson is AV-rated, the highest legal and ethical rating available from the leading law firm rating service. Our partners Michael Heygood, Jim Orr, and Eric Pearson are all Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization. Mr. Heygood and Mr. Orr are additionally Board Certified in Civil Trial Advocacy Law by the National Board of Trial Advocacy. Our partners been voted by their peers as “Super Lawyers” in the state of Texas for several years in a row.*

The government has recovered billions as a result of False Claims Act lawsuits, and hundreds of millions have been paid to the private whistleblowers that made the lawsuits possible. If you have questions about how to pursue a claim under the False Claims Act, please let us know. You can reach us by calling our toll-free hotline at 1-877-446-9001, or by filling out our free legal consultation form on this website.


Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.