Select Medical Corporation and Encore GC Acquisition LLC will pay $8.4 million to settle federal allegations in violation of the False Claims Act, the Department of Justice announced Friday.

Pennsylvania based Select Medical Rehabilitation Services Inc. contracted with 12 SNFs in New York and New Jersey between January 2010 and March 2016 to provide rehabilitation therapy services. The government alleged SMRS violated the act when it knowingly caused the facilities “…to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary or skilled.”

Selection Medical Corporation was SMRS’ prior parent company. The alleged conduct occurred before Encore GC Acquisition LLC became its successor-in-interest, according to the release. 

An Encore spokesperson said in a statement, “On March 31, 2016, Encore Rehabilitation Services acquired Select Medical Rehabilitation Services, Inc. (SMRS), a wholly owned, direct subsidiary of Select Medical Corporation (Select) offering contract rehabilitation therapy services to skilled nursing facilities across the country.

For several years, Encore has cooperated with a government inquiry related to alleged conduct by Select and SMRS. The conduct at issue concerned 12 facilities serviced by SMRS and occurred prior to Encore’s acquisition of SMRS.

While Encore had no involvement in the alleged conduct, we have agreed to enter into a settlement with the government – along with Select – to resolve the matter, as we are considered the “successor-in-interest” to SMRS due to the acquisition. The payments required under the terms of the settlement agreement with the government were not made by Encore or any of our affiliated entities, and there have been no administrative obligations or requirements imposed upon Encore in connection with the settlement of the matter.

We remain fully committed to complying with industry laws and regulations, as well as closely adhering to Encore’s rigorous Code of Conduct that guides our business practices, decisions and behaviors. Going forward, Encore will continue to provide comprehensive, quality care and service to our patients and dedicated customers.”

Under the qui tam provisions of the False Claims Act, whistleblower Melissa Vail will receive $1.51 million of the total settlement, according to the agreement.

“Sticking taxpayers with a hefty bill for unnecessary health care services will never be tolerated,” HHS-OIG Special Agent in Charge Scott J. Lampert said in a statement. “Working closely with our law enforcement partners, we will tirelessly pursue unscrupulous health care companies to protect patients and federal health care programs.”

As part of the agreement Select Medical did not admit fault and the federal government did not formally determine liability.

The Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the District of New Jersey, with assistance from HHS-OIG, worked together in the investigation.

Select Medical’s communications team did not return a request for comment.