Amedisys’ $150 million settlement finalized

Advocate staff photo by RICHARD ALAN HANNON -- Amedisys Inc. is headquartered in Baton Rouge on South Sherwood Forest Boulevard. Show caption
Advocate staff photo by RICHARD ALAN HANNON -- Amedisys Inc. is headquartered in Baton Rouge on South Sherwood Forest Boulevard.

The U.S. Department of Justice has finalized a $150 million settlement with Amedisys Inc. involving allegations that the Baton Rouge company submitted false home health care billings to the Medicare program.

The total includes more than $26 million to settle six whistleblower lawsuits in Pennsylvania and one in Georgia.

The whistleblowers were primarily former Amedisys employees, whose lawsuits are sealed.

Amedisys had set aside $150 million in 2013 in anticipation of a settlement. The company did not admit to any wrongdoing.

“This settlement demonstrates the department’s commitment to ensuring that home health providers, like other providers, comply with the rules and don’t misuse taxpayer dollars,” said Stuart F. Delery, assistant attorney general for the Justice Department’s civil division. “It is critical that scarce Medicare home health dollars flow only to those who provide qualified services.”

The settlement resolves a number of allegations.

The Justice Department alleged Amedisys billed Medicare between 2008 and 2010 for nursing and therapy services that were medically unnecessary or provided to patients who were not homebound, and misrepresented patients’ conditions to increase its Medicare payments.

The billing violations were alleged to be the result of management pressure on nurses and therapists to provide care based on financial benefits to Amedisys, rather than the needs of patients.

The Justice Department also alleged that Amedisys had improper financial relationships with referring physicians.

It said Amedisys employees coordinated patient care services at below-market prices for a Georgia oncology practice, a violation of federal laws that restrict the financial relationships home health care providers may have with doctors who refer patients to them.

Amedisys provides home health and hospice care to more than 360,000 patients each year, with operations in 37 states, Washington, D.C., and Puerto Rico, according to its website.

Amedisys reiterated its previous stance Wednesday on the settlement, saying it disagreed with the Justice Department allegations and settled to avoid the cost of a protracted legal battle. Amedisys said it operated according to “stringent policies” that require services be medically necessary.

In its settlement, Amedisys also is bound by an agreement that requires the company to implement compliance measures to avoid or promptly detect conduct similar to what prompted the settlement.

The company said Wednesday that it has made significant investments in its compliance program, which was designed to meet the guidelines of the Department of Health and Human Services’ Office of Inspector General.

CRT Capital Group LLC Managing Director Sheryl Skolnick, who tracks the company, said she expects things will get worse at Amedisys — operationally and financially.

“This fine, whether old news or new, is a crushing blow to AMED’s turnaround hopes in our view, especially as it comes in a low-volume, embattled home health and hospice reimbursement environment,” Skolnick said.

The $150 million settlement is a big number given Amedisys’ financial condition. The amount is five times what CRT estimates Amedisys will earn in 2014 before income taxes, depreciation and amortization.

Investors apparently shrugged off the settlement announcement. The company’s shares closed at $13.82, down 32 cents, in light trading.

Skolnick said most investors will view Wednesday’s settlement as confirmation of the previous announcement, already discounted into the stock price.

Brian Tanquilut, an analyst with Jefferies Group, said Wednesday’s announcement, most of which was already known, doesn’t change anything for Amedisys.

Amedisys operated under a corporate integrity agreement some time ago and has the knowledge and systems in place to abide by the agreement, he said.

The finalized settlement does put some stress on Amedisys’ balance sheet, which will prevent the company from making acquisitions at a time when there are buying opportunities, he said.

The home health industry is struggling with rate cuts, and it makes sense that the larger, more capable companies would take advantage of those opportunities.

Amedisys is having to do the reverse, he said. The company has been shedding underperforming locations.

Earlier this month, Amedisys said it is closing 29 home health and hospice centers and consolidating another 25 in places where its care centers are servicing the same markets.

Under the settlement, Amedisys will pay the $150 million, plus interest, in two installments.

The first, $115 million plus interest, must be paid by May 2. The second installment must be paid by Oct. 23.

The company also will pay $3.9 million for attorneys’ fees and expenses in whistelblowers lawsuits. Amedisys will record that charge in the first quarter of 2014.

Wednesday’s announcement comes on top of a whirlwind of activity in recent weeks and months in which an activist investment firm, which accumulated a 14.9 percent stake in Amedisys, got a member appointed to the board, while the company’s chief executive officer/founder and a senior financial officer resigned.

Amedisys also posted a fourth-quarter and annual loss earlier this month.

The investigation was conducted by the Justice Department’s Commercial Litigation Branch of the Civil Division. Federal prosecutors in Alabama, Kentucky, South Carolina and New York state worked on the case.

Others involved were the Department of Health and Human Services’ Office of Inspector General, Federal Bureau of Investigation, Office of Personnel Management’s Office of Inspector General, Defense Criminal Investigative Service of the Department of Defense and the Railroad Retirement Board’s Office of Inspector General.