HEALTHESSENTIALS SOLUTIONS, INC. AGREES TO PLEAD GUILTY TO SUBMITTING FALSE STATEMENTS RELATING TO HEALTH CARE MATTERS
– HealthEssentials Solutions, Inc. admits to submitting false claims to Medicare as a result of certain actions by its former officers and employees
– Company agrees to criminal restitution of $3.1 million
– Company agrees to civil claims of $117 million

LOUISVILLE, KY - HealthEssentials Solutions, Inc. (“HealthEssentials”), a former Kentucky-based nationwide provider of geriatric care, agreed today to plead guilty to submitting false statements to Medicare, U.S. Attorney David L. Huber of the Western District of Kentucky announced today.

Background

On October 13, 2004, agents with the Federal Bureau of Investigation and the Department of Health and Human Services, Office of the Inspector General executed search warrants on HealthEssentials’ corporate headquarters in Louisville, Kentucky and two other offices. The United States has been and is continuing to investigate whether the defendant company and/or certain individuals associated with HealthEssentials engaged in, among other things, a scheme to commit health-care fraud.

The United States’ investigation, in part, began in 2003 and 2004 with the filing of three different whistle-blower lawsuits by four former employees of the defendant company. The lawsuits, which were kept under seal until March 2005, alleged that HealthEssentials and several individuals committed health care fraud against Medicare, Medicaid, and other federally subsidized health care programs. The lawsuits charged that HealthEssentials engaged in upcoding – the practice of improperly assigning a billing code to a patient that is not supported by the medical record for the purpose of obtaining a higher level of reimbursement. In April 2007, the United States intervened in these whistle-blower lawsuits, which charged violations of the federal False Claims Act, 31 U.S.C. §§ 3729-3733 (“FCA”).

HealthEssentials had grown from approximately $15 million in revenue in 2001 to over $53 million in 2003. This rapid growth had made the company attractive to investors. The defendant company had hoped to issue a $57 to $59 million Initial Public Offering, or IPO, to raise additional capital for growth. Several weeks after the execution of the search warrant, the defendant company withdrew its plan for a public offering. According to public sources, the defendant was providing primary care to about 60,000 patients in nursing homes and made house calls to an additional 10,000 patients.

Bankruptcy

Almost six months after the search warrant was executed, on March 1, 2005, HealthEssentials filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Western District of Kentucky (“Bankruptcy Court”). On September 22, 2006, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Third Modified Joint Plan of Liquidation (the “Joint Plan”).

HealthEssentials’ Business

Beginning in May of 1998, HealthEssentials commenced operations as a Kentucky corporation. HealthEssentials generally provided two types of healthcare services to Medicare beneficiaries, which comprised the bulk of the defendant company’s revenues: (1) primary care provided by nurse practitioners to geriatric patients in non-acute, residential settings such as nursing facilities, homes, and facilities deemed to be assisted living facilities (“ALFs”) for purposes of Medicare reimbursement (hereinafter the “Nurse Practitioner Business”), and (2) general home health care services (hereinafter the “Home Health Business”). Between 1999 through 2005, HealthEssentials was a healthcare provider in the Medicare program. As a Medicare provider, HealthEssentials agreed to submit claims to Medicare that were not false or otherwise fraudulent. HealthEssentials’ Nurse Practitioner Business billed Medicare primarily for Evaluation and Management (“E&M”) services by using billing codes based on the American Medical Association’s Current Procedural Terminology coding system (“CPT”). The CPT code groups most frequently used by HealthEssentials’ Nurse Practitioner Business were location-specific. Thus, the defendant company’s personnel had to select the CPT code from the group that accurately reflected the location where the Nurse Practitioner Business services were being provided.

Medicare reimbursement for evaluation and management services provided in a patient’s home using CPT codes 99341 - 99350 was generally higher than reimbursement for comparable services provided in an ALF (CPT domiciliary codes 99321 - 99333) or a nursing facility (99301 - 99313) which provided increased revenue to the business.

Plea Agreement

HealthEssentials has agreed to enter into a plea for submitting false statements relating to health care matters in violation of 18 U.S.C. § 1035. Pursuant to the plea, among other things, HealthEssentials will acknowledge the following conduct:

In late October 2000, a former officer of HealthEssentials, with the knowledge of at least one other former HealthEssentials’ officer, requested that HealthEssentials’ Washington D.C. law firm determine the Center for Medicare and Medicaid Services' ("CMS") position concerning the appropriate CPT Codes that should be used when submitting claims to the Medicare program for services provided to residents of ALFs. In December 2000, HealthEssentials’ Washington D.C. law firm advised these individuals that, based on conversations with CMS and its review of certain Medicare Program rules and regulations, that certain visits in ALFs should be billed as domiciliary visits using CPT codes 99231-99333; in other words, that ALFs could not be billed as home visits which were reimbursed at a higher rate. These former officers, however, did not disclose the law firm’s findings to the members of HealthEssentials’ Board of Directors, and also kept these findings concealed from others within HealthEssentials.

Between December 2000 and January 2001, another former employee of the defendant company solicited information from third party billing experts to assist HealthEssentials. This person received information from a third party billing consultant in January 2001 concerning the ALF issue. The third party billing consultant told the HealthEssentials’ employee that visits in ALFs could not be billed as home visits and, instead, must be billed as domiciliary visits, using CPT codes 99321 - 99333.

Despite this guidance, i.e., that visits in ALFs could not be billed as home visits, certain officers and employees of the defendant company, without knowledge of certain outside members of the Board of Directors, failed to implement adequate controls to ensure certain of its billings and revenue were accurate and not false. As a result, HealthEssentials was caused to submit false statements to Medicare by billing ALF visits as though they were visits performed in a patient’s home.

During the entire time period that HealthEssentials’ Nurse Practitioner Business was in operation, CMS consistently maintained that evaluation and management services performed in Assisted Living Facilities should be billed as domiciliary visits using CPT codes 99321 - 99333 and should not be billed as home visits using CPT codes 99341 - 99350. However, despite this guidance, certain officers and employees of HealthEssentials caused HealthEssentials to submit false statements to Medicare by seeking payment for visits in ALFs as though they were home visits (using CPT codes 99341 - 99350).

The Bankruptcy Court must still approve the authority of HealthEssentials’ representatives to enter into the plea agreement. Upon approval from the Bankruptcy Court, the plea will be tendered before the United States District Court for the Western District of Kentucky for approval and sentencing. The United States will recommend, and HealthEssentials has agreed to pay, $3,105,931 in criminal restitution. HealthEssentials has also agreed to allow, pending approval by the Bankruptcy Court, the United States’ remaining civil FCA claims which total approximately $117 million. However, given the financial state of HealthEssentials, and certain priority creditors ahead of the United States, it is doubtful that the United States will recover any proceeds in satisfaction of its claim.

The investigation, which is ongoing, is being prosecuted by Assistant United States Attorneys Lettricea Jefferson-Webb, Benjamin Schecter, and Eric Long. It is being investigated by the Department of Health and Human Services, Office of the Inspector General and the Federal Bureau of Investigation.

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