Justice Dept. Seeking $1 Billion from Vencor in Fraud Investigation

The Justice Department said Monday that it is entitled to recoup $1 billion from Vencor Inc., accusing one of the nation’s largest nursing-home companies of knowingly defrauding the government since 1992.

But Vencor, like several big nursing home chains, is operating under the protection of a federal bankruptcy court. So it is unclear how much taxpayers could recover even if the Justice Department prevails in its civil claims. The government might have to stand in line to collect along with other creditors.

Justice spokesman Charles Miller wouldn’t explain the department’s case. But he said it involves “the knowing submission of false claims to the government” and “fraudulent schemes between 1992 and the present.”

Vencor executives didn’t return repeated phone calls to the company’s Louisville headquarters Monday.

The Vencor case illustrates a predicament the government faces as it attempts to recoup money it believes was defrauded from federal health insurance programs such as Medicare. In some cases, a Chapter 11 bankruptcy can impede its efforts; in others the financial weakness of the companies can force the government to accept less than full repayment.

Last month, Beverly Enterprises Inc., the nation’s largest operator of nursing homes, settled charges that it defrauded Medicare by agreeing to pay $175 million--most to be deducted from future Medicare payments. The government said it settled for less than half the alleged loss to taxpayers to avoid causing “financial hardship” for the company. Though troubled, Beverly has not filed for bankruptcy protection.

Vencor issued a statement in January saying it was the subject of Justice Department investigations “into various Medicare reimbursement issues.” Those included costs Vencor hospitals had reported to the government, billing practices for ancillary services--such as therapy and other care--and “various quality-of-care issues in its hospitals and nursing centers.”