False Claims Case to Proceed Against Hospice Provider Southerncare

A federal False Claims Act case against hospice provider Southerncare Inc. is moving forward in the Southern District Court of Mississippi. Whistleblowers associated with the company have alleged that Southerncare submitted hospice claims to Medicare for patients who were not eligible, billed for services it did not provide and terminated an employee who raised concerns about these practices.

These cases often hinge on the question of patient eligibility for hospice care based on a six-month terminal prognosis. The Southerncare proceedings centers around a qui tam complaint. This occurs occurs when a whistleblower, called a “relator” by the courts, files a False Claims Act suit in concert with the government and possibly receives a portion of any funds recovered by the government via the lawsuit, typically ranging from 15% to 25%.

The relator in this case is former Southerncare nurse Rhonda McClinton, who alleges that she was fired after confronting her superiors in the organization about these accusations.

“McClinton claims that from February 2012 to the present, Southerncare knowingly and purposely admitted patients who did not quality for hospice services under Medicare and billed Medicare for these services by encouraging physicians to alter their diagnosis to meet the Medicare criteria and in part by misrepresenting the nature of hospice services to patients and their families,” court documents obtained by Hospice News indicated.

Southerncare filed a motion to dismiss the suit, which Judge Carlton W. Reeves in part denied. The judge dismissed one claim related to false records as well as one claim that Southerncare failed to make payments due to the government. The court upheld the remaining allegations. The matter of Southerncare’s culpability has not been decided, but these decisions will allow the case to move forward.

This is not the first time Southerncare has been involved in a False Claims Act suit. The company paid close to $6 million in 2018 to settle similar allegations. They settled a 2009 fraud case for $24.7 million. 

“Our investigation showed a pattern and practice to falsely admit patients to hospice care who did not qualify and to bill Medicare for that care,” said Alice H. Martin, U.S. Attorney for the Northern District of Alabama, regarding the 2009 settlement. “This resulted in taxpayers bearing inappropriate costs.”

Southerncare is a subsidiary of hospice provider Curo Health Services. Humana Inc. (NYSE: HUM) and private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe acquired Curo in July 2018 for $1.4 billion. Curo had purchased Southerncare in 2014 for an undisclosed amount. Most of the alleged fraudulent activity in the 2018 and 2009 cases occurred prior to Curo’s ownership.

Curo is currently involved in a separate False Claims Act Suit involving another subsidiary, Avalon Hospice.

A February report from Bass, Barry, and Sims shows that a leading cause of fraud involves hospices billing Medicare for services for which patients were not eligible. This resulted in several multi-million dollar settlements during 2020, with amounts ranging from $1 million to $5.25 million.