Feds Decide to Sit Out Fraud Case Against ManorCare Hospice Arm

The U.S. government declined to intervene in a False Claims Act (FCA) case brought against HCR ManorCare’s hospice division, though it asked to be kept updated on pleadings in the case.

The decision to not intervene marks another victory in FCA cases for ManorCare; in November, a Medicare fraud case against the Toledo, Ohio-based skilled nursing provider was dismissed. But it’s not necessarily out of the woods yet; the government declining to intervene doesn’t mean an FCA case won’t go forward, one attorney told Bloomberg BNA last year.

Even so, the government opting to sit out is a bit of good news for the skilled nursing provider, which recently entered Chapter 11 bankruptcy so it could be taken over by its landlord, Quality Care Properties (NYSE: QCP), after a long run of financial difficulties.


A whistleblower accused Heartland Hospice, which is owned by HCR ManorCare, of “a corporate-wide pattern of conduct that has resulted in the submission of thousands of false claims and statements.” The case was filed in the U.S. District Court of the Northern District of Ohio in 2010.

Heartland Hospice allegedly falsified patients’ life expectancies to qualify them for hospice reimbursement and maintained them on hospice care after their medical condition stabilized. The complaint also said that Heartland’s auditors were instructed to review only the most recent benefit period for audited patient files, rather than the whole time of treatment.

“In those instances where it is determined that a non-qualifying patient should be removed from hospice and money refunded to the Government, Heartland refunds only the amount paid for the last benefit period, that being the only period audited, rather than the amount paid by Medicare for the entire length of time Heartland has been receiving payment for that patient from Medicare,” the complaint alleged.


The government decided not to intervene in the action, according to a notice filed March 1 that was obtained by Skilled Nursing News. As a result, the qui tam plaintiff, Kathi Holloway, is the sole plaintiff, though the order noted that the government could decide to intervene “upon the showing of a good cause.”

The bulk of funds recovered by the federal government in FCA cases come from instances where the government intervenes, but yearly recoveries for cases without intervention have been increasing, Bloomberg BNA reported. This is because whistleblowers are increasingly willing to pursue their claims after even after the Department of Justice (DOJ) declines to intervene.

In addition, the DOJ deciding not to intervene does not technically reflect on the merits of a case from a legal standpoint. However, the disparity between the recoveries in non-intervened versus intervened FCA actions does suggest that the government tends to intervene in cases where the underlying allegations have strong merit.

Written by Maggie Flynn

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