Qui tam cases against once-notorious rehab hospital chain result in $48 million settlement, lots of spin.

The Department of Justice announced last week that Encompass Health Corporation, formerly known as HealthSouth Corporation, has agreed to pay $48 million to resolve allegations that it was enrolling patients in its program and charging Medicare whether they would benefit from rehab or not. The DOJ called the company nation’s largest operator of inpatient rehabilitation facilities.

The qui tam cases were brought by a former company physician in Florida, the head of therapy at a Texas facility and the medical director at a Virginia hospital.

From the DOJ press release:

The government alleged that beginning in 2007, in order to ensure compliance with Medicare’s rules regarding classification as an (inpatient rehabilitation facility) IRF, and to increase Medicare reimbursement, some Encompass IRFs falsely diagnosed patients with what they referred to as “disuse myopathy” when there was no clinical evidence for this diagnosis. Additionally, Encompass IRFs allegedly admitted patients who were not eligible for admission to an IRF because they were too sick or disabled to participate in or benefit from intensive inpatient therapy.

In its own press release, Encompass Health notes that the Company “fully cooperated with the government’s investigation, producing voluminous documentation and submitting to over thirty depositions.” They also note that the DOJ declined to join the qui tam case.

Then, they blamed their doctors:

DOJ’s investigation focused on certain diagnoses made by independent physicians at Encompass Health hospitals. Encompass Health relied on the medical judgment of these independent physicians to code the diagnoses. 

In a separate press release from one of the whistleblower’s attorney, Robert Magnanini described his client as “a conscientious former Encompass (HealthSouth) employee who blew the whistle primarily because of her concerns about patient safety and fraudulent diagnosis/billing practices.”

Prior to changing its name and streamlining its holdings, HealthSouth was notorious for accounting, Medicare fraud and bribery scandals. Health South CEO Richard Scrushy was acquitted by a jury of the accounting charges in 2005, but later sued by investors and ordered to repay his company $2.8 billion. He was later convicted in a bribery case that landed both Scrushy and former Alabama Gov. Don Siegelman in jail.

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