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Government bails on fraud case against ManorCare

The U.S. Department of Justice dropped a major whistle-blower case against HCR ManorCare Inc. after a magistrate judge excluded a key witness and sanctioned the government.

HCR ManorCare Inc.escaped at Medicare fraud case when the U.S. Justice Department agreed to drop the case Thursday.
HCR ManorCare Inc.escaped at Medicare fraud case when the U.S. Justice Department agreed to drop the case Thursday.Read moreHCR ManorCare Inc.

The U.S. Department of Justice has scored hundreds of millions in settlements from nursing homes for allegations of fraudulent billing for therapy, but those efforts faltered Thursday in a whistle-blower case against HCR ManorCare Inc., one of the largest companies in the industry.

Government lawyers, after being ordered this week to pay ManorCare's attorneys the cost of a single filing in a dustup over a government witness, notified U.S. District Court for the Eastern District of Virginia that they were in agreement with ManorCare to dismiss the case.

"This was one of the biggest health-care fraud cases that the justice department had in litigation, certainly the biggest against nursing homes," said Jeffrey J. Downey, a McLean, Va., attorney for whistle-blower Christine A. Ribik, who filed her case against ManorCare in 2009. "Their philosophy is to jettison a case the first adverse ruling they get?"

A trial was scheduled for January. Damages were estimated in the $500 million to $700 million range.

Downey said he told government lawyers that he and Ribik would not agree to a settlement under the False Claims Act that merely gets the government off the hook for fees and expenses, with no compensation to taxpayers or Ribik.

Ribik, as a whistle blower, is entitled to a hearing on whether the settlement is "fair and reasonable and adequate," Downey said.

In a bid to avoid such a hearing, justice department attorneys are referring to an "understanding" with ManorCare, rather than a settlement, Downey said.

By avoiding a hearing on summary judge that had been scheduled for Thursday morning, the government also made it very difficult for Ribik to appeal, Downey said.

In an internal document, ManorCare emphasized that there was no settlement. "To be perfectly clear, we are not settling the case — the government is dismissing it fully and finally," wrote ManorCare's chairman, president, and chief executive officer, Steve Cavanaugh.

The justice department did not respond to a request for comment.

As recently as last week, the government argued that ManorCare, which has about a dozen nursing homes in the Philadelphia region, pursued a strategy from 2006 to 2012 to "game the Medicare system, by pressuring and manipulating its employees into providing thousands of hours of unnecessary and useless therapy, so that ManorCare could reap millions of dollars in improper reimbursements."

Ribik, who had worked at three ManorCare nursing home facilities in Northern Virginia and alleged that she was pushed out after she started complaining about company Medicare-billing practices, said she was devastated by the actions of government attorneys.

"They didn't have the dignity to show up and face me," Ribik said, referring to an anticipated hearing today that was canceled after the government and ManorCare filed their joint motion to dismiss the case.

Since the beginning of last year, the federal government settlements with nursing home operators include those with Genesis HealthCare Inc. for $54 million, Reliant Care for $8.3 million, Life Care Centers of America for $145 million, and RehabCare for $125 million. There were also additional settlements in earlier years.