The Justice Department confirmed yesterday that it is joining a whistle-blower lawsuit charging Medicare fraud against Integrated Health Services, the Sparks-based nursing home chain now in bankruptcy reorganization.
The original suit was filed last year by a social worker at an IHS facility in Dallas, alleging that the facility admitted patients who did not need its level of care and billed Medicare for services that were never delivered.
Thelma Quince Colbert, lead assistant U.S. attorney for civil enforcement in Fort Worth, Texas, said yesterday that her office filed notice Friday that it was intervening in the case in U.S. District Court in Dallas. The original complaint was sealed until the Justice Department decided to intervene.
Bonny Harbinger, the lawyer for the whistle-blower, said she believed that the fraudulent claims could run into the "tens of millions of dollars."
Colbert said the amount of money involved is "something we're still looking at." She said auditors working with her office were still reviewing records, "and we're trying to define the damages."
She also said investigators had not yet determined how many other IHS facilities might be involved besides the one in Dallas where the whistle-blower, Carolyne Gray, worked in 1998. IHS has more than 350 facilities nationwide.
John Bentivoglio, who was the Justice Department's health fraud chief until July and is now an attorney with Arnold and Porter in Washington, said the department intervenes in only one-fourth to one-third of fraud cases.
"It means the department has looked at it and believes it has merit," he said. "Usually, they don't pursue it unless they feel it's a solid case." All big health-fraud cases in recent years, he said, started with whistle-blower claims.
The intervention means that the Justice Department will take over the case. Gray, who initially brought the charges, stands to receive between 15 percent and 25 percent of any amount the government recovers.
IHS officials and attorneys declined to comment. Glenn B. Rice, a New York lawyer representing the creditors' committee in the bankruptcy case, said he was not familiar with the fraud claims.
Harbinger said Gray will not comment while the case is being litigated.
Harbinger said Gray had "tried every way she knew" to report the fraud before turning to Harbinger's firm, Phillips & Cohen - described on its Web site as "the nation's only law firm that is dedicated solely to representing whistle-blowers" suing under the federal False Claims Act.
According to Gray's complaint, the Dallas facility inflated patient problems to justify admission to the institution, which is designed to provide a level of service more intensive than a nursing home but less than a hospital. For example:
One patient, according to records, "was admitted because of a fractured hip, a stroke and a motor vehicle accident that caused chest trauma. According to the family, the patient was in the accident 20 years previously and had the stroke two years ago."
"An elderly woman was admitted for pulmonary complications. During her hospitalization, she never had a pulmonary consult and would leave for daily outings with her husband."
"Therapists from different specialties would work together on a patient, then each would charge for a full hour of skilled therapy, regardless of the actual time spent or the type of service provided the patient."
Harbinger said the claims would have to be resolved as part of the bankruptcy reorganization. "They [IHS] want to make the government feel pleased with the result, because they're the ones with the big hammer," she said.
Another bankrupt nursing home chain, Vencor Inc., filed a reorganization plan in September that called for paying $129.5 million in settlement of $1.3 billion in Medicare overbilling claims. That plan is still being reviewed by the court - by the same judge presiding in the IHS case.
