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The Justice Department announced today that it has intervened in a whistleblower lawsuit claiming that HCR ManorCare engaged in a nationwide scheme designed to bilk millions of dollars from Medicare. Kansas-based HCR ManorCare, which operates hundreds of skilled nursing and rehabilitation facilities across the country, allegedly submitted over 1,200 false claims for Medicare reimbursement worth millions between 2006 and 2012.

hcrmanorcareAccording to the Toledo Blade, HCR ManorCare is accused of subjecting patients to treatment that was medically unnecessary and in some cases harmful, all in the name of increasing Medicare reimbursement rates. Company executives allegedly put pressure on facility staff to meet corporate quotas for billing by increasing the number of patients that met top Medicare reimbursement rates.

The lawsuit claims that in October of 2006, HCR ManorCare billed Medicare at the ultra high level for nearly 40 percent of rehab days. Then in November of 2009, the company billed at the same ultra high level for 80 percent of rehab days. According to the Justice Department, the drastic upswing in ultra high billing levels was not the result of the company’s patient population.

In one example cited in the lawsuit, an 85-year-old man was admitted to an HCR ManorCare facility in Florida solely for hospice care. Even though the patient wasn’t supposed to receive rehab services, the facility provided speech-language pathology services, physical therapy and occupational therapy at the ultra high level, even going so far as to provide 75 minute physical therapy sessions for the first week of the patient’s stay.

If the allegations prove to be true, HCR ManorCare will have based treatment decisions on profit rather than the health and wellbeing of their patients. HCR ManorCare has denied any wrongdoing, saying it views the lawsuit as a billing dispute and plans to fight the lawsuit.


It used to be a given that whistleblowers—especially employees of government contractors—would be the victims of retaliation and likely fired if their employers discovered that they had blown the whistle. Employees were previously covered by anti-retaliation protections only if they were investigating an actual False Claims Act action which their employer knew about, and then became the victim of retaliation because of their investigation.

That changed dramatically in May of 2009, when Congress enacted the Fraud Enforcement and Recovery Act (FERA) in an effort to expand the reach of the False Claims Act, FERA was designed to enhance protections for whistleblowers who tell their employers and/or the government about company fraud or misconduct by expanding retaliation protections to cover not just employees, but also independent contractors, agents and “associated others.” It also increased covered actions and created a three year statute of limitations from the date of the employer retaliation.

According to the National Law Journal, the protections in FERA allow for prevailing plaintiffs to recover damages, including reinstatement, two times back pay plus interest and compensation for ‘special damages’ sustained from the retaliation. This last part is especially important because ’special damages’ may include pain and suffering.

Due to the broadened reach of retaliation claims now afforded to whistleblowers post-FERA, it is very likely that we will see more employer retaliation cases brought under the False Claims Act (either accompanying a qui tam claim or not). It is also likely that employer retaliation cases will yield higher awards, especially when claims incorporate expert testimony on emotional distress (for which there is no cap on damages).

While some scattered courts across the country continue to follow pre-FERA precedent, most continue to rule in a manner consistent with Congress’ clear intent to provide whistleblowers with more anti-retaliation protection. The bottom line: employers that retaliate in violation of the False Claims Act have a lot more to lose, which is good news for whistleblowers.

South Florida Doctor Indicted in Medicare Fraud Scheme Worth Over $100 Million

April 14, 2015

A doctor in the North Palm Beach area was hit with a 76-count indictment today for his participation in a Medicare fraud scheme worth over $100 million. Dr. Salomon E. Melgen, a 61-year-old ophthalmologist and retina specialist, was charged today with 46 counts of health care fraud, 19 counts of making false and fraudulent claims [...]

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Washington Jury Awards Hospital Billing Manager $1.4 Million for Retaliation and Wrongful Termination

April 7, 2015

When Lori Cook was hired in 2011 as a billing manager at Harrison Home Care—a subsidiary of Harrison Medical Center—she inherited an extensive backlog of Medicare billings. But with 37 years of hospital experience under her belt, she was up to the task. Soon after she began trying to pare down Harrison’s backlog, however, Cook [...]

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SEC Scores Win for Whistleblowers

April 6, 2015

Engineering and procurement giant KBR, Inc. has long been called a bully in the corporate world. Fortunately, the Securities and Exchange Commission (SEC) scored a win last week that hits back at KBR and other companies seeking to stop would-be whistleblowers from coming forward with information of possible securities violations. KBR previously required employees to [...]

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New York Doctors Stand Accused of Using Homeless People to Defraud Medicaid

March 31, 2015

“At the heart of this health care fraud scheme was the exploitation of poor people.” — Kenneth P. Thompson, Brooklyn D.A. Nine doctors were among 23 people that were indicted on Tuesday for their roles in a scheme that used homeless people as a means to defraud New York’s Medicaid program for millions of dollars. [...]

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New York Pharmacist Sentenced to 36 Months Behind Bars, Will Forfeit $7.5 Million Over Health Care Fraud Scheme

March 30, 2015

The Justice Department announced last week that a New York pharmacist will serve three years in prison and forfeit over $7.5 million for his role in a scheme designed to defraud Medicare, Medicaid and the New York state-funded AIDS Drug Assistance Program (“ADAP”). Purna Chandra Aramalla, owner and operator of Quality Drug Inc. in the [...]

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A Former Bechtel Employee Sentenced to 42 Months Behind Bars, Will Forfeit $5.2 Million in Connection with Kickback Scheme

March 25, 2015

The former principal vice president of Bechtel and the general manager of a joint venture between Bechtel and an Egyptian utility company was sentenced to 42 months in prison on Monday for his role in a kickback scheme designed to rig the competitive bidding process for state-run power and energy contracts in Egypt. Bechtel is [...]

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Fireman’s Fund Insurance Company Settles False Claims Allegations for $44 Million

March 23, 2015

Fireman’s Fund Insurance Company will pay $44 million to settle claims that it violated the False Claims Act by falsifying documents and issuing insurance policies that were ineligible for coverage under the U.S. Department of Agriculture’s federal crop insurance program. Fireman’s Fund is a subsidiary of Allianz SE with headquarters in Novato, California. The company [...]

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University of North Carolina Pays $335,000 to Settle Whistleblower Claims of Fake Classes for Student Athletes

March 17, 2015

The University of North Carolina has agreed to settle a whistleblower lawsuit claiming the school was involved in one of the biggest academic fraud scandals in the history of the National Collegiate Athletic Administration (NCAA). UNC agreed to pay former literacy councilor Mary Willingham $335,000 to settle claims that the school set up fake classes [...]

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