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Vencor to settle charges of fraud

The nursing home company and its landlord will pay $219-million to resolve Medicare and Medicaid abuse allegations.

Vencor Inc., a nursing home operator emerging from bankruptcy, and its landlord agreed to pay $219-million to settle allegations of Medicare and Medicaid abuse, the government said Monday.

The settlement includes $104.5-million to resolve civil claims that Vencor knowingly submitted false claims to Medicare, Medicaid and the military's health care program, the Justice Department said. That amount represents the second-largest settlement in a nursing home case under the False Claims Act, a department spokesman said.

Acting U.S. Assistant Attorney General Stuart E. Schiffer said the settlement with Vencor and Ventas, a real estate investment trust that owns the facilities, was a victory in the government's fight against fraud in federal health care programs.

The case was originally filed by private Fort Lauderdale attorney Kenneth J. Nolan. Tampa-based Assistant U.S. Attorney Jay Trezevant later filed the government's complaint in the Middle District of Florida, which includes Pinellas and Hillsborough counties. Of the $104.5-million, $54.7-million represents the settlement for Vencor's violations at its three facilities in the Middle District.

The settlement was part of Vencor's reorganization plan, entered Friday in U.S. Bankruptcy Court in Delaware.

Vencor filed for bankruptcy protection in September 1999 after amassing huge debts that it blamed on sharp cuts in the amount of money it was paid by the U.S. Health Care Financing Administration under Medicare.

The cuts were part of the Balanced Budget Act of 1997, which changed the way nursing homes are paid.

A federal judge in Delaware recently approved Vencor's financial reorganization plan, clearing the way for a new start as Kindred Healthcare Inc.

As part of the settlement, Vencor agreed to structural changes designed to improve care at its facilities, said Michael Mangano, acting inspector general for the Department of Health and Human Services.

Vencor must hire an independent monitor to oversee those efforts. Vencor also will hire independent groups to review its audits, claims submissions and other practices, Mangano said.

"This case should put the long-term care industry on notice that we will hold accountable those institutions that care for our nation's most vulnerable citizens, even where the institution has filed for bankruptcy," Mangano said in a statement.

More than $20-million of the settlement stems from claims that some patients received inadequate care, the Justice Department said. Those allegations included inadequate staffing at the facilities and failure to meet dietary needs of some residents.

More than $54-million related to improper claims made on Vencor's hospital Medicare cost reports, and $24-million stemmed from overbilling for respiratory care services and supplies, the department said.

Vencor operates 295 nursing homes in 31 states and 56 hospitals in 23 states, caring for 35,000 patients with 53,000 workers. Ventas was spun off from Vencor in 1998 to own nursing homes and hospitals operated by Vencor. Both companies are based in Louisville, Ky.

The two companies agreed to pay another $25-million to resolve other Medicare overbilling, the department said. Vencor also is reimbursing Medicare for other overpayments totaling about $90-million, the department said. About a third of that amount has been paid.

Vencor is expected to emerge from bankruptcy in 15 to 45 days, Ventas officials said. Vencor did not immediately return phone calls seeking comment.

_ Times staff writer Graham Brink and Bloomberg News contributed to this report.