Nursing Home Accused of Medicare Fraud Sues Allegedly Responsible Contractor

Bethany Lutheran Home in Council Bluffs, Iowa has been accused of engaging in Medicare fraud that cost the Medicare program $3 million. The nursing home, in turn, has sued the contractor it claims is responsible for the Medicare fraud, according to the Des Moines Register. The nursing home is suing Kindred Healthcare and its predecessor, RehabCare Group based on negligence and breach of contract. Bethany Lutheran’s claims against RehabCare arise from allegations made by federal prosecutors against Bethany Lutheran last year.

Medicare Billings Skyrocketed when Nursing Home Contracted with Therapy Provider


Federal authorities alleged that Bethany Lutheran hired RehabCare Group to handle physical, occupational and speech therapy for the nursing home’s residents. After contracting with RehabCare, Bethany Lutheran’s  Medicare billing for these therapies skyrocketed, largely because the number of residents for whom Bethany Lutheran was charging “ultra high” level rehabilitation services—services which pay at the highest rates — went up dramatically, as shown below.

  • In 2004, Bethany Lutheran did not bill for a single day of “ultra-high” therapy.
  • In 2006, after RehabCare contracted with Bethany Lutheran, Bethany Lutheran submitted claims to Medicare for 1,685 days of “ultra high” rehabilitation services.
  • In addition to be an inexplicable increase over Bethany Lutheran’s historical practice, this level of submissions was seven times higher than the average Iowa nursing home.
  • This increased level of Medicare billings continued through 2009, so that prosecutors allege Bethany Lutheran gained “windfall profits.”

Federal prosecutors allege that when Bethany Lutheran hired RehabCare Group, the contractor assured the nursing home during contract negotiations that Bethany Lutheran’s revenue from providing rehabilitation services would double from working with RehabCare Group. RehabCare more than met its target, as Bethany Lutheran’s annual Medicare Part A reimbursements increased immediately from $243,000 to nearly $887,000. Over a single year, Bethany Lutheran’s profit increased by 377 percent.

The dramatic rise in Medicare claims by Bethany Lutheran sparked a federal investigation of Bethany Lutheran Home. Through sampling medical records at Bethany Lutheran, federal investigators found that the therapy being billed for did not match the residents’ actual need for physical, occupational and speech therapies.

Prosecutors claim that the sampling revealed $672,000 in fraudulent billings, and by extrapolating from the sample size, authorities estimate that the total amount of overbilling was $3,045,153.

Bethany Lutheran Home settled with the Justice Department to resolve the allegations. Bethany Lutheran will pay the federal government $675,000 and commit to a “corporate integrity agreement.” The agreement requires that the nursing home submit to additional oversight and that it provide additional staff training regarding the services that can legally be billed to the Medicare Program.

Whistleblowers Partner with Federal Authorities in Fighting Medicare Fraud


Whistleblowers are partners with federal authorities when they share information that assists the government in fighting Medicare fraud. Information provided by whistleblowers is so important to federal authorities that the qui tam provisions of the False Claims Act provide that whistleblowers can file suit against wrongdoers and share in a portion of any money recovered.

Whistleblowers should know their rights under the False Claims Act. The attorneys at Waters & Kraus have decades of experience in working with whistleblowers and can help you in the process. Contact us or call our whistleblower attorneys at 800.226.9880 to learn more about our practice and how we can assist.

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