Beverly Enterprises Inc. pleaded guilty Thursday to criminal charges that it defrauded Medicare as part of a $175 million settlement of federal investigations into its Medicare billing. Under the agreement, which has been expected for months, Beverly Enterprises-California Inc., a unit of the nursing-home operator, pleaded guilty to mail fraud and false-statement charges and agreed to pay a $5 million criminal fine. Beverly will sell 10 nursing homes in California, Kansas, Washington, Georgia and South Carolina.
Fort Smith-based Beverly, the nation's largest nursing-home chain, will also pay a $170 million civil penalty over the next eight years. Under a "corporate integrity agreement" that's part of the settlement, the company's reporting and compliance practices will be subjected to heightened supervision for at least the next five years by the U.S. Department of Health and Human Services.
The settlement resolves criminal and civil investigations into the company's Medicare billing practices by the Department of Justice, the United States Attorney's Office for the Northern District of California, and the Department of Health and Human Services.
The $175 million total is by far the largest nursing-home settlement in U.S. history, according to Alwyn Cassil, a spokesman for the Office of Inspector General at the Health and Human Services Department. "Nothing else even comes close," she said. But it is far less than the $460 million the government claims Beverly defrauded Medicare through phony cost reports. "The reason why the government agreed to the lesser amount was essentially Beverly's ability to pay," Cassil said. "We agree to do this when an entity is able to document to our satisfaction that imposing a higher settlement amount would threaten their ability to operate."
The government alleges that from 1992-98 Beverly improperly charged Medicare for the salaries of nurses caring for non-Medicare patients. At the 10 nursing homes owned by Beverly-California and at other Beverly facilities, the company filed cost reports that "falsely inflated the number of hours attributable to Medicare patients," the government said. The fake cost figures were backed by false documents such as "phony nurse sign-in sheets," according to the government.
Beverly Enterprises and its corporate officers and directors were not charged with any criminal wrongdoing. Spokesman Dan Springer said the company is paying the price for mistakes made by a "small number of people at a few facilities who took actions that were not approved by anyone." Springer said the criminal charges related to 10 cost reports that made up 0.2 percent of the 4,680 cost reports filed by the company from 1992-98. In court documents, the government claimed that Beverly in 1992 came up with a "scheme to defraud the Medicare program."
Assistant U.S. Attorney Leslie Caldwell, who prosecuted the case, said the government viewed the policy as one that came from the "top down." Beverly's Springer denied the involvement of top executives. Caldwell declined to comment on why no charges were filed against top officials at the company. "This is just where we ended up at the end of the day," she said.
Beverly released basic terms of a tentative agreement last August as part of its second-quarter earnings report. The company took a $199 million pretax charge for the quarter to pay for the settlement. Investors had already factored in the cost of the settlement. Shares of Beverly closed Thursday at $3.81 a share, up 19 cents, on a volume of 970,600 shares, about twice its three-month average. Nancy Weaver, an industry analyst with Little Rock investment bank Stephens Inc., said Thursday's announcement surprised nobody. "There's no change from the original announcement," said Weaver, who continues to rate the stock a "buy." "There may be some short-term public relations questions they have to answer."
The settlement requires Beverly to wire $25 million of the fine to the Department of Justice within 30 days. The balance of the settlement will be deducted every two weeks from the company's Medicare payments in the amount of $697,115. The entire payment plan should take eight years. Beverly must have contracts to sell the 10 nursing homes within 120 days. Springer said the company was required to submit a list of potential buyers for government approval before a settlement could be reached. None of those potential buyers has been contacted about the facilities, Springer said. He declined to identify the companies.
As part of the "corporate integrity agreement," Beverly will have to undergo internal and external auditing of its compliance procedures and submit regular reports to the Office of Inspector General for the next five years. "We will be a part of their lives for the foreseeable future," Cassil said.
Cha-chinggggggg!
The critical difference between Clinton and Bush, however, is that Clinton delivered favors to Enron through Comerce Secretary Ron Brown and others. The Bush Administration denied favors to Enron through the Secretaries of Commerce and Treasury, because it was the wrong thing to do.
That's one more reason why it's good to have adults back in charge.
Congressman Billybob