Two Nursing Home Chains Pay $14M to Settle Kickback Probe

Atlanta-based Mariner Health Care Inc., subsidiary SavaSeniorCare Administrative Services LLC, and their principals will pay the federal government and several states $14 million to settle kickback allegations, the Justice Department has announced.

Federal prosecutors alleged that the defendants solicited kickback payments from pharmacy giant Omnicare in exchange for agreements by Mariner and Sava to continue using Omnicare's pharmacy services for 15 years. In November, the federal government, several states, and Omnicare entered into a $98 million settlement that resolved Omnicare's civil liability in the investigation, according to the Justice Department.

"The allegations raised by the government concern a transaction that occurred before SavaSeniorCare commenced operations, and well before the current operations management team was in place," said SavaSeniorCare in a statement. "SavaSeniorCare did not contribute to the settlement amount. The company remains committed to providing quality care and services to more than 18,000 individuals every day."

Federal investigators alleged in a whistleblower suit filed last year that Omnicare, Mariner, Sava, and principals Leonard Grunstein, Murray Forman, and Rubin Schron arranged for Omnicare to pay Mariner and Sava $50 million in exchange for the right to continue providing pharmacy services to the nursing homes, which together constituted one of Omnicare's largest customers, according to the government.

They allegedly tried to disguise the kickback as a payment to acquire a small Mariner business that had two employees and was worth far less than $50 million. Investigators said Omnicare paid $40 million before acquiring the Mariner business. At the same time, Omnicare obtained 15-year pharmacy contracts from Mariner and from Sava, a new nursing home chain that Grunstein and Forman created from the Mariner chain, according to the Justice Department.

Prosecutors alleged that Grunstein and Forman illegally tied the new pharmacy contracts to Omnicare's purchase of the small Mariner business unit, and that the total $50 million purchase price for the business unit actually was a kickback by Omnicare to keep the future business of Mariner and Sava, according to the feds.

Approximately $7.84 million of the settlement will go to the federal government, while $6.16 million has been allocated to several state Medicaid programs that the federal government did not identify.

Federal prosecutors also alleged that after the government issued subpoenas about the transaction in 2006, the defendants created backdated documents to hide the kickback. "Kickbacks in all forms are insidious because they distort medical decisions affecting Medicare and Medicaid beneficiaries," said HHS Inspector General Daniel R. Levinson. "We will vigilantly scrutinize attempts to disguise kickbacks as legitimate business transactions and work to hold payers and recipients of kickbacks accountable."

Mariner has entered into a corporate integrity agreement with HHS, which retains the authority to exclude Sava, Grunstein, Forman, and Schron from participating in Medicare, Medicaid, and other federal healthcare programs.