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News > Companies
Olsten settles fraud case
July 19, 1999: 7:31 p.m. ET

Healthcare provider admits to bilking Medicare program, pays $61 million fine
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WASHINGTON (CNNfn) - The Justice Department Monday fined the Olsten Corp. and its subsidiary Kimberly Home Health Care Inc. $61 million as part of a home healthcare Medicare fraud settlement in Florida, Georgia, and New York.
     The whistle-blower who brought the case, former Olsten Vice President Donald McClendon, will receive $9.8 million of the settlement.
     The case does not resolve related allegations against Columbia/HCA, the largest health care services provider in the nation. Officials announced the Justice Department is joining a suit against Columbia also brought by McClendon.
     Under the settlement, Kimberly will plead guilty to conspiracy, mail fraud, and violating the Medicare Anti-Kickback statute. The firm will pay more than $10 million in criminal fines in connection with its scheme to defraud the Medicare program in Florida and Georgia.
     The parent company, Olsten, has reached a civil settlement with the government, and will pay nearly $51 million stemming from the same fraud schemes and an additional scheme in Brooklyn, N.Y. officials said.
     The firms own and operate management and staffing services for home health agencies in several states.
     "Health care fraud schemes disguised as legitimate business arrangements divert million of dollars away from patient care each year," Attorney General Janet Reno said in a statement announcing the settlement.
     Reno said officials would "ensure that ill-gotten gains are returned to the Medicare Trust Fund".
     The settlement resolves allegations that Olsten defrauded Medicare in connection with its agreement to sell its home health agencies to Columbia/HCA in 1995 and 1996, and to assist Columbia in obtaining other home health agencies.
     The government alleged that Olsten and Columbia/HCA caused the taxpayers to foot the bill for Columbia's acquisition of the agencies by passing on part of the purchase costs to Medicare disguised as management fees charged by Olsten. Medicare does not pay for most acquisition costs, but it does pay for legitimate management fees.
     The settlement also resolves allegations Olsten charged Medicare for sales and marketing activities that are not reimbursable under Medicare rules.
     Ten million dollars of the $50 million civil settlement resolves Olsten's liability in an unrelated case in Brooklyn. The U.S. alleged that Olsten filed fraudulent cost reports which sought Medicare payment for non-reimbursable costs including personal expenses of corporate executives.
     The lawsuit against Columbia joined by the Justice Department was unsealed Monday. It alleges among other things that Olsten and Columbia/HCA acted together to disguise the costs associated with Columbia's purchase of home health agencies.
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