U.S. to Join Chemed Whistle-Blower Suit on Medicare Claim

The U.S. government is joining a whistle-blower lawsuit accusing Chemed Corp. (CHE)’s Vitas Healthcare unit of falsely certifying patients as hospice eligible to collect money from Medicare.

The allegations were first made in a 2012 lawsuit filed in Los Angeles by a physician who accused Vitas, the biggest for-profit hospice chain in the U.S., of “padding its profits at the expense of taxpayers.”

The Justice Department said it would intervene in a filing in federal court in Kansas City, Missouri, where the whistle-blower case was transferred and later unsealed on May 6. The U.S. on May 2 made similar claims its own lawsuit against Chemed and several of its Vitas units, including those in California, Illinois and Florida, accusing them of making false claims to Medicare. The U.S. said it seeks to consolidate the cases.

“These are all the same claims and we’ll vigorously defend,” Chemed Chief Financial Officer David P. Williams said today in a telephone interview.

Vitas also has operations in Texas, Virginia, Pennsylvania, Colorado, Michigan and Wisconsin, nine other states and the District of Columbia. It provided more than 5.1 million days of hospice care last year, according to its website. The company was founded in 1978 and acquired by Chemed in 2004. Besides Vitas, Cincinnati-based Chemed owns Roto-Rooter plumbing services.

Stock Declines

Chemed fell 4.7 percent to $63.90 in New York Stock Exchange trading today. The stock declined as much as 24.5 percent on May 3, the day after the government filed its case.

The hospice company generated revenue of about $271 million in the first three months of 2013, or about three-quarters of the company’s total, Chemed said on April 18.

“Chemed and Vitas have made significant investments in controls, systems and procedures to uphold the highest industry standards and to maintain compliance with all regulatory requirements,” Williams said on May 3 after the federal government sued. “Our compliance efforts are designed to ensure our services are provided only to eligible patients.”

The doctor who sued in Los Angeles, Charles Gonzales, worked there for Vitas from 2004 to 2011, according to this complaint.

False Claims

His lawsuit was filed under the federal False Claims Act, which prohibits presenting a false claim for payment or approval to an officer or employee of the U.S.

In his three-count complaint filed on behalf of the U.S., the doctor seeks civil penalties of $10,000 for each false claim allegedly made by Vitas Healthcare and its co-defendant in that case, Vitas Healthcare Corp. of California, plus triple the amount of damages sustained by the federal government. Gonzales has asked for a percentage of the total recovered by the government.

“Many of these patients remain on hospice care for years with little or no decline in health and require little in resources from Vitas,” Gonzales alleged in the complaint.

Hospices are supposed to enroll only people who they believe will be dead within 180 days. About 21 percent of patients stay longer, the U.S. inspector general responsible for Medicare reported in July 2011, and more than 200,000 are discharged alive each year.

The cases are U.S. ex. rel Gonzales v. Vitas Healthcare Corp., 13-cv-00344, U.S. District Court, Western District of Missouri (Kansas City) and U.S. v. Vitas Hospice Services LLC, 13-cv-00449, U.S. District Court, Western District of Missouri (Kansas City).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at

aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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