Thursday, Sep 20, 2018
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Justice dept. drops fraud case against HCR ManorCare


The U.S. Department of Justice is dropping its case against Toledo-based HCR ManorCare Inc., which the government had accused of knowingly collecting millions in false Medicare payments for treatments that were medically unjustified.

On Wednesday in U.S. District Court in Alexandria, Va., the Justice department and ManorCare filed a joint motion in which federal attorneys indicated they had informed the Toledo company of their intent to dismiss the case.

With 239 facilities that operate under the brand names Manorcare, Heartland, and Arden, HCR ManorCare is the nation’s second-largest operator of skilled nursing homes and assisted-living centers.

The lawsuit was filed in 2015 by a trio of whistleblowers who alleged ManorCare submitted over 1,200 false claims to Medicare from Oct. 1, 2006, to May 31, 2012. The government later joined the case under the Federal False Claims Act. Justice department testimony claimed ManorCare “knowingly and routinely submitted” false claims for unnecessary rehabilitation services.

But last week, U.S. Magistrate Judge Theresa C. Buchanan called the case a “house of cards” and a “huge waste of money.” She ordered the Justice department to pay the legal fees ManorCare spent defending itself. 

The judge also questioned the credibility of Rebecca Clearwater, the government’s expert witness, and ordered Ms. Clearwater’s testimony be excluded from the case.

In the joint motion filed Wednesday, ManorCare, which is owned by private equity firm the Carlyle Group, said it has advised the government that it won’t seek reimbursement for its legal costs. A hearing that was set for Thursday has been postponed indefinitely pending dismissal of the lawsuit.

Following the Justice department’s decision, ManorCare Chairman, President, and CEO Steve Cavanaugh sent a letter Thursday to the company’s 50,000 employees, including 1,700 in the Toledo area. In the letter, he said he always believed the lawsuit was without merit and unjust.

“We cooperated fully with the government’s investigation and were greatly disappointed that they chose to sue us. Today, we are vindicated,” Mr. Cavanaugh wrote.

“There are no words to adequately thank our employees, patients, families and business partners for their confidence, trust and support through this ordeal,” the letter added.

Contact Jon Chavez at or 419-724-6128.

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