Monday, April 20, 2009

Physical Therapy Company Settles Federal Qui Tam Lawsuit And Pays Over $200,000

On April 13, 2009, after a settlement was reached, the government moved to dismiss a qui tam, or “whistleblower,” lawsuit with Interstate Rehabilitation LLC, a Glendale physical therapy company that contracts with Southern California Hospitals to operate hospital therapy departments and its owner/operators James Pietsch, Sandra Pietsch and Beth Celo. Interstate Rehabilitation and the other defendants agreed to pay the settlement of $233,345 to the government without admitting any wrongdoing to settle allegations in a “whistleblower” lawsuit that they caused the submission of false claims to Medicare.

The background of the case is as follows. A lawsuit was filed against Interstate Rehabilitation under the qui tam, or whistleblower, provisions of the False Claims Act in 2002. The complaint alleged that the company improperly billed Medicare for services that were supposed to be provided by licensed physical therapists, when in fact the services were not.

The lawsuit was filed by former Interstate Rehabilitation employees Janine Gostel and Sonia Sarmiento, who will split 16 percent of the settlement.

According to the lawsuit, from mid-1998 through the end of 2002, Interstate Rehabilitation violated Medicare rules by using clerical employees and other non-professional staff to provide physical therapy services without the presence of a licensed physical therapist. The services were allegedly provided to patients at skilled nursing facilities at area hospitals, which caused the facilities to submit false claims for payment to Medicare.

The affected facilities included California Hospital Medical Center, Community Hospital of Gardena, East Los Angeles Doctors Hospital, Memorial Hospital of Gardena, VitalCare Skilled Nursing Facility, Bay Harbor East Hospital, Bay Harbor West Hospital, Santa Teresita Hospital, Hemet Valley Medical Center, St. Vincent Medical Center, and Doheny Villa Skilled Nursing Facility.

On April 3, United States District Judge Stephen V. Wilson unsealed the whistleblower case. On April 13, 2009, the government moved to dismiss the lawsuit pursuant to the settlement.

Attorney Comments: Small to medium-sized providers often are concerned about potential criminal investigations without thinking about the potential for qui tam cases. There are both federal and state qui tam statutes. For these providers, prevention is an essential element of any False Claims Act strategy. Companies and individuals that regularly submit billings, invoices or reimbursement requests to the government should have a top-notch compliance program to try to avoid the submission of a potentially false claim.

A company that is the target of a False Claims Act investigation should examine its compliance program to see if it needs updating, particularly if there is a white collar investigation and/or a suspension and debarment proceeding. A state-of-the-art compliance program, or an upgrade to an existing program, may go a long way to persuade the government not to take drastic measures, such as indicting the company or its owners/operators or debarring it from receiving future government contracts.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, businesses and licensed professionals in civil, business, administrative and criminal proceedings, with a specialty in health care providers and defense of qui tam cases.


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