The pharmaceutical company Omnicare is a company largely in the news as it relates to accusations and allegations of fraud against taxpayers by the nursing homes and long-term care facilities with which it does business. These has stemmed largely out of claims under the False Claims Act, which allows the government to recoup money and penalties from a person or entity that takes federal dollars on the basis of fraud. In the healthcare sector this is an unfortunately common scenario, and typically occurs through fraudulent billing by health care providers for reimbursement through Medicare and Medicaid for services not rendered or provided, or not adequately provided. We have observed before how Omnicare has faced claims of bribery of health care providers to steer business its way which would ultimately be paid for largely through these federal programs. In the last year or so it has already settled with the Justice Department in one case. Now, Omnicare finds itself on the other side of the coin, this time as it sues another nursing home operating for more than $28 million.
New Nursing Home Company Lawsuit
Omnicare Inc. recently filed suit in Illinois against nursing home facilities owned and operated by Eric A. Rothner for failing to pay for purchase contracts. These purchase contracts apparently include Omnicare’s supply of medications, supplies and other nursing home-related services for the relevant facilities, some of which Mr. Rothner has asserted he no longer controls. The company, however, has argued that rather than no longer failing under his ownership or control, some of these facilities simply have changed ownership to other entities owned by Mr. Rothner in an attempt to avoid paying outstanding debts they owe to Omnicare.
Omnicare maintains that the debts accrued when the entities for under his control, and that merely moving control of them did not change the fact that they owe Omnicare on the purchase contracts. Omnicare has reportedly gone after this debt for nearly a decade, having filed suits against more than four dozen nursing home facilities across Illinois, Indiana and Ohio. In 2011, Mr. Rothner and the nursing facilities he owns had agreed to pay $125,000 per week to maintain those purchase contracts while the two sides tried to work out a resolution to the dispute. According to a Law360 article, those weekly payments decreased without agreement. The $28 million sought by Omnicare include the costs of goods and services as well as overdue payment penalties and financing charges. Omnicare, which itself has faced accusations of fraud in the past, has also accused the nursing homes in question of reporting drug and supply costs to Medicaid that they did not actually incur. Reporting false costs to the government for reimbursement through Medicare or Medicaid is a fraudulent act subject to the False Claims Act.
It remains to be seen how this litigation will play out. Besides the deep questions of breach of contract and unjust enrichment, this case demonstrates the tangled web of business in the health care industry. Some of the accusations involved directly implicate the lawful functioning of nursing homes, which can be of concern to citizens and the nursing home consumers themselves.
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