Post Acute Medical, LLC (PAM), a Pennsylvania-based operator of more than 30 long term care and rehabilitation hospitals in several states, has agreed to pay the federal government, Texas, Louisiana, and an employee whistleblower $13.1 million to resolve allegations that it knowingly submitted claims to Medicare and Medicaid that resulted from illegal kickbacks to physicians for patient referrals.

Since it was founded in 2006, PAM entered into numerous physician services contracts on behalf of its hospitals which, according to the DOJ, violated the Anti-Kickback Statute and Physician Self-Referral Law.

According to the DOJ’s press release, “[a]lthough the purpose of these contracts was ostensibly to retain physicians as medical directors or in other administrative or medical roles, the United States alleged that in reality the company’s payments under these contracts were intended to induce the physicians to refer patients to PAM’s facilities.”

The company allegedly further violated the Anti-Kickback Statute by entering into what it called “reciprocal referral relationships” with unaffiliated healthcare providers such as home health companies. Pursuant to those arrangements, PAM allegedly referred patients to those providers with the understanding that they would refer other patients to PAM’s facilities.

In addition to the monetary settlement, PAM has entered into a five-year Corporate Integrity Agreement with the OIG.

In a statement posted on its website on August 15th, PAM denied any wrongdoing and said it agreed to “an amicable resolution” of the matter “in the interest of moving forward and avoiding continued expense.”  The company also asserted that many of the physician relationships in question were already in place at the facilities long before PAM acquired them. This reinforces the importance of acquiring entities conducting the due diligence necessary to minimize exposure to liability.

The case is United States ex rel. Johnson v. Post Acute Medical, LLC et al., Civil Action No. 17-cv-1269 (M.D. Pa.), and the settlement agreement can be found here. The DOJ press release is available here.