Feds investigate nursing home giants’ HME business

Sunday, October 19, 2003

October 20, 2003

FORT SMITH, Ark. - Federal authorities subpoenaed nursing home giant Beverly Enterprises last month for more information regarding billing practices at its former HME subsidiary, MK Medical, based in Fresno, Calif.

Beverly disclosed the subpoena in a recent SEC filing.

Deficiencies identified by an internal investigation relate to inadequate documentation supporting Medicare and Medi-Cal (Medicaid) claims for reimbursement for drugs, wheelchairs, and other durable medical equipment distributed by MK Medical. Specifically, the review identified instances of missing or incomplete certificates of medical necessity, treatment authorization requests, prescriptions, and other documentation.

The nation's largest nursing home company acquired Fresno, Calif.-based $30-million MK Medical in 1998, but has since sold the HME. Beverly discovered the possible billing problem while assessing if it should sell or hold MK Medical.

Beverly has established an $18 million reserve to cover potential overpayments for the period from Oct. 1, 1998, to 2002.

“We are cooperating with the government’s information request,” Beverly stated in the SEC filing. “Our liability with respect to this matter could exceed the reserved amount. We can give no assurance of the final outcome of this matter or its impact on our financial position, results of operations and cash flows.