(CN) - Extendicare, one of the nation's largest nursing home chains, agreed to pay $38 million to settle claims it inappropriately billed Medicare for unnecessary physical therapy, while providing dramatically substandard care to its residents, the Justice Department said.
Extendicare owns about 150 nursing homes in 11 states. Federal prosecutors said they first learned of gross lapses in care at many of these homes as the result of a federal whistleblower lawsuit filed in Ohio.
A second whistleblower suit was later filed against the company in Pennsylvania.
A subsequent investigation revealed that Extendicare failed to hire enough trained nurses to care for patients in 33 of its homes, and that these staff shortages led to pervasive problems, including patients suffering falls from which they should have been protected, and others developing bed sores.
At its worst the care was so bad at some of these homes that patients became malnourished and dehydrated and developed other conditions that required hospitalization.
"Our seniors rely on the Medicare and Medicaid programs to provide them with quality care, ensuring that they are treated with dignity and respect when they are most vulnerable," said Acting Associate Attorney General Stuart Delery.
"It is critically important that we confront nursing home operators who put their own economic gain ahead of the needs of their residents. Operators who bill Medicare and Medicaid while failing to provide essential services or bill for services so grossly substandard as to be effectively worthless will be pursued for false claims."
Prosecutors said about $10 million of the settlement will be used to resolve claims that the company greatly overstated the amount of therapy patients needed in an effort to boost their Medicare reimbursements.
Under the terms of the settlement, Extendicare agreed to independent monitoring of its entire network of nursing home, particularly as regards staffing levels and steps the company is taking to improve patient care.
Extendicare, headquartered in Milwaukee, Wis., is the nation's seventh-largest nursing home operator.
In a statement, Tim Lukenda, the company's chief executive, said, "We are very proud of the care and services we provide and have demonstrated our commitment to quality care through our ongoing quality improvement efforts.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.