Medical necessity is foundational to payment by government payers (Medicare, Medicaid, Tricare, FEHBP) for health care services. If services are not medically necessary, any claims filed constitute false claims. In a recent DOJ False Claims Act (FCA) case, a civil settlement of a whistleblower action was reached in resolution of allegations that over a more than six-year period, a rehabilitation therapy contractor violated the FCA by causing the submission by 12 skilled nursing facilities (SNFs) of false claims for “medically unnecessary, unreasonable, and/or unskilled rehabilitation therapy services.” Under the Settlement Agreement, the rehabilitation therapy provider agreed to pay $8.4 million to resolve the matter.
BACKGROUND ON SNF REIMBURSEMENT
In order to understand the case, it is important to understand (at least at a basic level) SNF reimbursement. This case arises during the time period 2010-2016 when SNFs were paid by Medicare under the Resource Utilization Groups (RUGs). By way of background, RUGs are a prospective payment model which includes a system of grouping a SNF’s residents according to their clinical and functional statuses which information derives from the minimum data set (MDS) assessment for the resident. Soon after adoption, many SNFs and rehabilitation therapy providers adjusted their model of care delivery to increase the level of reimbursement. The methodology created an incentive to deliver more therapy than skilled nursing services since those RUGs were reimbursed at a higher rate.read more