September 15, 2008

HEALTHESSENTIALS SOLUTIONS, INC. SENTENCED TO PAY RESTITUTION IN THE AMOUNT OF $3,105,931 FOR SUBMITTING FALSE STATEMENTS RELATING TO HEALTH CARE MATTERS
– HealthEssentials Solutions, Inc. Sentenced to a Fine for Submitting False Claims
to Medicare as a Result of Certain Actions by Its Former Officers and Employees
– Company Ordered to Pay Criminal Restitution of $3.1 Million

LOUISVILLE, KY - HealthEssentials Solutions, Inc. (“HealthEssentials”), a former Kentucky-based nationwide provider of geriatric care, was sentenced today to pay restitution in the amount of $3,105,931 for submitting false statements to Medicare according to U.S. Attorney David L. Huber of the Western District of Kentucky.

HealthEssentials’ Business

In May of 1998, HealthEssentials commenced operations as a Kentucky corporation. HealthEssentials primarily provided two types of healthcare services to Medicare beneficiaries: (1) primary care was 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”).

HealthEssentials was a healthcare provider in the Medicare program from 1999 through 2005. As a Medicare provider, HealthEssentials agreed to submit claims to Medicare that were not false or otherwise fraudulent. HealthEssentials’ Nurse Practitioner Business billed Medicare for services it provided. Services provided by HealthEssentials’ Nurse Practitioner Business were location-specific. The reimbursement rate was generally higher for services performed in a person’s home than for comparable services provided in an Assisted Living Facility.

Investigation

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. In these suits it was alleged that HealthEssentials and several individuals committed health care fraud against Medicare. 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.

During their investigation, agents determined that in December 2000, HealthEssentials’ officers had learned from a Washington D.C. law firm the appropriate way to bill the Medicare program for services provided to residents of ALFs. The officers 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.

Agents also determined that between December 2000 and January 2001, another former employee of the defendant company solicited information from third party billing experts to assist HealthEssentials with billing. The information received by the former employee from the third party billing consultant consisted of documents on how to bill the ALFs. Specifically, 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.

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. However, despite this guidance, certain officers and employees of HealthEssentials caused HealthEssentials to continue to submit false statements to Medicare by seeking payment for visits in ALFs as though they were home visits.

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 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.

Guilty Plea

On June 16, 2008, HealthEssentials entered a guilty plea for submitting false statements relating to health care matters in violation of 18 U.S.C. § 1035. HealthEssentials was sentenced today by Judge Thomas Russell to pay $3,105,931 in criminal restitution through the bankruptcy action. As noted above this case was investigated by the Department of Health and Human Services, Office of the Inspector General and the Federal Bureau of Investigation and has been prosecuted by Assistant United States Attorneys Lettricea Jefferson-Webb and Benjamin S. Schecter.

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