Includes a $125 million payment to the government
LOUISVILLE, Ky. (Jan. 12, 2016) — Kindred Healthcare, Inc. today announced that it has entered into a settlement agreement with the U.S. Department of Justice regarding a previously disclose investigation of RehabCare Group, Inc., a therapy services company acquired by Kindred on June 1, 2011.
The settlement agreement, which relates to allegations that rehabilitation therapy services provided to patients in skilled nursing centers were not delivered or billed in accordance with Medicare requirements, includes a payment to the government of $125 million plus accrued interest from August 31, 2015, at the rate of 1.875 percent per annum. Kindred expects to make the payment during the first quarter of 2016. The settlement agreement resolves the DOJ’s review of RehabCare’s business practices, mostly involving conduct which occurred prior to Kindred’s 2011 acquisition of RehabCare.
Kindred previously recorded a loss reserve of $125 million related to this matter. Kindred has recorded an additional loss reserve of approximately $2 million in the fourth quarter of 2015 related to the settlement agreement and associated costs and, in connection with establishing the final terms of the settlement agreement, Kindred also intends to record an income tax benefit in the fourth quarter of 2015.
RehabCare has denied engaging in any illegal activity, but in order to provide clarity for contract customers, shareholders, and government oversight entities, RehabCare agreed to the settlement without any admission of wrongdoing. The settlement will serve to avoid the cost and distraction of protracted litigation.
Kindred believes that the settlement agreement fully and finally resolves the DOJ’s investigation of RehabCare previously described in Kindred’s periodic filings with the Securities and Exchange Commission (SEC). The settlement agreement has been approved by the DOJ and the Office of Inspector General of the Department of Health and Human Services (OIG). In connection with the settlement, Kindred has also entered into a Corporate Integrity Agreement with the OIG related to the provision of contract rehabilitation therapy services.