Diversicare Formally Ends Eight-Year DOJ Investigation with $9.5 Million Settlement Deal

Diversicare Healthcare Services (OTC: DVCR) on Wednesday announced that it has formally closed the book on a Department of Justice investigation that has stretched for nearly eight years.

The Brentwood, Tenn.-based skilled nursing provider will pay out the $9.5 million throughout the next five years to resolve a False Claims Act case regarding its therapy practices, and may be mandated to make more payments if the company sells any of its health care properties during that time.

The DOJ initially filed the false-claims case in July 2012, alleging issues with the company’s rehabilitation services, as well as the filing of paperwork with Medicare and TennCare, Tennessee’s Medicaid program.

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“The final settlement resolved allegations related to the Company’s practices and policies for rehabilitation and other services, for preadmission forms required by TennCare, and for Pre-Admission Screening and Resident Reviews required by the Medicare program,” Diversicare wrote in a statement announcing the deal.

In addition to the payment hit, the Office of the Inspector General — the Department of Health and Human Services’ (HHS) top watchdog arm — has required Diversicare to enter into a Corporate Integrity Agreement for the next five years.

As is common in DOJ settlements related to health care investigations, Diversicare denies the content of the government’s claims, but has agreed to the settlement in order to avert more legal costs — ending the nearly decade-long saga to focus on the company’s future.

Though the ruling was not yet final, CEO Jay McKnight initially reported the settlement on an August 2019 earnings call.

During the call, McKnight pointed to a first-time $500,000 payment, and mentioned the five-year payout plan to resolve allegations of administrative wrongdoing.

Back in 2018, the company disclosed the payment of $6.4 million in legal fees related to the case in a single quarter — which contributed to a $7.4 million loss during the third quarter of that year.

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