The Justice Department on Jan. 16 filed a False Claims Act complaint against Priority Hospital Group LLC, three long-term care hospitals it manages, and a physician, accusing them of keeping patients in hospitals longer than medically necessary to boost Medicare payments and of arranging payments to induce referrals in violation of the Anti-Kickback Statute and Stark Law.
The complaint targets Priority Hospital Group LLC and three PHG-managed long-term care hospitals, plus a doctor, alleging schemes that produced false claims to Medicare by prioritizing payment incentives over clinical need. The suit says some stays were extended and transfers delayed so the facilities could qualify for higher Medicare reimbursement tied to longer inpatient stays. Federal prosecutors assert those practices violated the False Claims Act and applicable anti-referral rules.
Long-term care hospitals specialize in inpatient care for patients with complex medical needs who require extended hospital stays and tailored programs of care, and Medicare reimburses many of those hospitals in part based on the length of a patient’s stay. That reimbursement structure creates powerful financial incentives tied directly to how long a patient remains classified as an inpatient. Federal investigators say those incentives were exploited when providers kept patients longer than clinically necessary.
The complaint alleges PHG and the named LTCHs delayed discharges even after a patient’s treatment course was finished or when a transfer to a lower level of care was appropriate, because doing so produced higher Medicare payments. Prosecutors say those delays were not driven by medical necessity but by reimbursement calculations. If true, the conduct would represent billing for care that federal law does not authorize.
The filing also claims that Riverside Hospital of Louisiana entered into medical directorship agreements and provided other remuneration to a physician with the intent of inducing patient referrals to Riverside, conduct that federal law bars. The Anti-Kickback Statute forbids offering, paying, soliciting, or receiving remuneration in exchange for items or services paid for by Medicare and other federal programs. The Stark Law separately prohibits certain billing for services referred by physicians who have financial ties to the hospital.
Those statutes exist to protect clinical decision-making from undue financial influence and to make sure patient care is based on medical need rather than payment schemes. Prosecutors emphasize that both statutes are designed to preserve trust in federal health programs and to prevent providers from putting profit ahead of patients. Enforcement actions seek to unwind arrangements that shift clinical judgments toward revenue generation.
“Medicare patients deserve to receive care based on their clinical needs, not the financial interests of a hospital or doctor,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. The Department has intervened in the case after an initial qui tam filing, indicating it will lead the government’s prosecution of the claims. The complaint seeks remedies available under the False Claims Act, which can include treble damages and penalties if liability is proven.
The LTCHs named in the United States’ complaint are: Riverside Hospital LLC and Riverside Hospital of Louisiana, Inc. (collectively doing business as Riverside Hospital); Post Acute Enterprises, LLC (doing business as Mid Jefferson Extended Care Hospital); and New Lifecare Hospital of North Louisiana, LLC (doing business as Ruston Regional Specialty Hospital). The lawsuit was originally filed under the qui tam or whistleblower provisions of the False Claims Act by Michaela DeVos, a former employee of Riverside Hospital. Under the False Claims Act, private parties may bring actions on behalf of the United States and recover a share of any recovery, and the government may intervene and take over the case.
“Billing federal healthcare programs for medically unnecessary treatment undermines the viability of those programs and exploits our most vulnerable citizens,” said U.S. Attorney Zachary A. Keller for the Western District of Louisiana. “Our Office will continue to combat fraudulent billing by unravelling these schemes and holding the perpetrators accountable.” The Department of Justice and HHS investigators stress that protecting program integrity is a top priority when allegations suggest profits were placed over patient welfare.
“Schemes that involve false claims and unlawful referrals erode the integrity of federal health care programs and betray the trust placed in providers,” said Acting Deputy Inspector General for Investigations Scott J. Lampert at the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG). HHS-OIG said it will continue to work with the Department of Justice and U.S. attorney offices to pursue matters where financial incentives distorted care. Tips and complaints about potential fraud, waste, abuse, and mismanagement may be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).
The Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Western District of Louisiana are handling the matter with assistance from HHS-OIG, and the case is being prosecuted by Trial Attorney Emily Bussigel of the Civil Division and Assistant U.S. Attorney Melissa Theriot for the Western District of Louisiana. The filing marks another example of federal enforcement efforts focused on long-term care billing and physician referral relationships, and the agencies involved say they will pursue recoveries where improper billing and unlawful financial relationships are proven.
