Covenant to Pay $3.2 Million in Medicare Settlement

An Aliso Viejo firm that operates about three dozen nursing centers has agreed to pay the federal government $3.2 million to settle allegations of Medicare overbillings, authorities said Tuesday.

The U.S. Attorney’s Office in Los Angeles said Covenant Care Inc. billed Medicare for services provided to non-Medicare patients. Investigators also alleged that Covenant’s billings were based on hours of service that were inaccurate and could not be verified by audits.

Judith Waltz, an attorney for Covenant Care, said the company was settling because the case was “a drain on the company resources.”

Covenant did not admit any wrongdoing in settling the case, which stems from a 1998 “whistle-blower” suit filed by Michael C. McNall, a former controller at Covenant. The lawsuit covers billings made during 1995 through 1998.

Under the whistle-blower provisions of the False Claims Act, McNall could receive 15% to 25% of the settlement. Lawrence Heller, McNall’s attorney, said McNall was fired from Covenant after he complained about the practice to company officials. McNall currently works as a consultant to the health-care industry.

Covenant Care late last month made a payment of $1.6 million, and will pay the other half of the settlement within a year, the U.S. attorney’s office in Los Angeles said.

Covenant also agreed to implement a program that ensures the company and its employees comply with federal health-care requirements.

The settlement ranks among the largest in Southern California involving Medicare overbilling allegations, although there have been bigger cases nationally.