Therapy, Medicare Fraud, Extendicare: Lessons for SNFs

In mid-October,  the Justice Department announced a $38 million settlement with the SNF chain Extendicare, resolving a series of Medicare False Claims Act violations. The violations involved improper billing for services supposedly provided, provided unnecessarily, or for care that was substandard.  This series of violations included allegations of inappropriately billed therapy services; care billed for but not properly substantiated either by assessment or other documentation.  The settlement with Extendicare is the government’s largest to date with any SNF organization and evidence of a clear enforcement trend and pattern in the industry.

As a reminder, it is a violation of the False Claims Act for any Medicare provider to (most common);

  • Knowingly submit a claim for money to the government for services/care not provided.
  • Knowingly submit a claim for money to the government for services/care provided that is sub-standard.
  • Knowingly submit a claim for more money that the care or service is ordinarily worth or compensated (up-coding).
  • Creating (knowingly) a series or system of events, documentation, etc. to generate claims to Medicare for unnecessary or unwarranted care or services.

Fundamentally, the majority of the Extendicare case involved sub-standard care as a result of inappropriate staffing levels and adequacy of training. As alleged, the care across (at least) 33 facilities in multiple states was so deficient as to lead to infections, unnecessary hospitalizations, falls with head injuries and bed sores/decubiti.  The genesis of the investigation is a Whistleblower claim filed in Ohio (the genesis of most False Claims Act cases, known as Qui Tam).

As the title of this post proclaims, there are some lessons for providers in this tale of Extendicare woe.  First and foremost is the increasing enforcement activity of the Federal government with regard to Medicare activity in SNFs.  I have written about this before.  Second, SNF administrators and executives need to be aware of the False Claims Act triggers and steps for prevention.  Third, executives and administrators need to understand the intricacies of billing Medicare, their organizational revenue model and where the risks lie.  Specifically, and frequent readers have seen these points before, the following steps are fundamentally required to mitigate fraud and billing risks under Medicare.

  • Monitor and review your submitted claims by RUGs against regional/local utilization patterns.  A facility’s utilization should not be fundamentally different than any other facility’s utilization within a region unless the facility is unique such as a specialty provider, attached or affiliated with a hospital, etc.  Additionally, I recommend that all facilities use an outside consultant (not affiliated with the organization) to periodically audit claims against the facility documentation.  The biggest risk providers run today is that the MDS and the resultant RUGs billed are not corroborated by the care provided and the documentation thereto, especially nursing.  I forgot how many times I have seen therapy RUGs billed at Ultra High C or B levels and found the resident noted as fundamentally ADL independent.  I also lost track of how many times I talked with a system executive and/or facility administrator about these issues and got a blank stare back (the classic “no clue” look).
  • Monitor and review your sub-contractors incident to care provided, especially therapy contractors. Any contractor that provides care, documents care and participates in any way in determining the service levels billed to Medicare must be separately monitored and audited.  Remember, the SNF holds 100% of all fraud/False Claims Act liability under Medicare, even in the activity was perpetrated by a contractor.  The government holds the provider with the Medicare provider agreement 100% responsible to accurately bill the program and to monitor the services provided by any contractor.  Again, I recommend facilities/organizations utilize an outside entity to review claims and to review the activity of contractors.  Having your contractors agree to and enter into, a compliance and facility level integrity agreement is also a “best practice”. For those who need more information here, contact me directly at or comment to this post providing a valid e-mail for contact.
  • Get your organizational/facility level QAPI working and fast.  Providers need to monitor their care outcomes and address quality deficiencies.  See my related posts regarding QAPI on this site.  I recommend that providers monitor key risk areas such as hospitalizations, falls, infections, pressure sores, ADL decline, weight loss/dehydration, resident/family complaints, etc.  I also recommend extremely broad participation by discipline including staff CNAs, RNs, etc.  A strong QAPI program will keep leadership abreast of care outcomes and demand reviews and system improvements which help identify risk areas and proactively correct problem areas before systemic poor care occurs.  Again, I recommend using some outside resources as part of the process to assure integrity.  The resources don’t have to be paid consultants.  Again, anyone wanting more insight here and additional information, contact me directly.
  • Develop an audit and review system that is impartial and virtually blind to the organization.  Keep the schedules and structure at the very top, blind to almost any and all players that are part of the care provided/care billed system.  Boards and senior management must require independent risk analysis and assessments on a regular basis to assure billing and program integrity.  Remember, you cannot audit yourself!

On a concluding note.  Extendicare just announced a sale of it’s North America (U.S.) operations to a private investment group.  The reasons provided?  Unfavorable environment, Obamacare, too much regulation, poor reimbursement, etc.  The organization has been in decline for quite some time, especially in the U.S., predominantly due to a failed business model that emphasized total profitability above all other things – like care.  Unfortunately today, profitability and care go hand in hand or in other words, bad care equals no profit.

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