Genesis to Pay $52.7 Million DOJ Settlement

Genesis Healthcare (NYSE: GEN) has become the latest major post-acute care provider to strike a settlement with federal authorities to resolve allegations of improper billing practices, this time to the tune of $52.7 million.

Kennett Square, Pennsylvania-based Genesis has been under four separate DOJ investigations, all of which will come to an end through the settlement that has been agreed to, the company announced Monday in a filing with the Securities and Exchange Commission (SEC).

“The Company has agreed to the settlement in principle in order to resolve the allegations … and to avoid the uncertainty and expense of litigation,” Genesis stated in the form 8-K.


Genesis expects to pay the federal government back over a period of five years. The company already has set aside about $39 million for a potential settlement, so now will record an additional $13.6 million contingency loss in the quarter ended June 30, The Philadelphia Inquirer reported.

Genesis subsidiaries provide rehabilitation services in 45 states, and the company has more than 500 skilled nursing and senior living communities nationwide, making it one of the largest post-acute providers nationally. Its peer companies also have been under DOJ investigation for similar reasons, with Kindred Healthcare (NYSE: KND) agreeing to an even larger, $125 million settlement in January 2016. And an ongoing DOJ investigation into billing practices at HCR ManorCare were one reason that real estate investment trust HCP Inc. (NYSE: HCP) decided to spin off its substantial portfolio of ManorCare properties into a whole separate REIT.

With regard to the specific allegations facing Genesis, one investigation focused on potential false claims filed by Creekside Hospice and three matters pertained to therapy practices, including false claims allegations against an outpatient therapy provider that furnished care at Georgia assisted living facilities.


Some of the issues dated to when these providers were operating under the Skilled Healthcare Group banner; Genesis acquired Skilled in a major transaction in 2014.

Since the Skilled acquisition, Genesis has seen its share price drop dramatically as it has faced not only the DOJ inquiries but various other headwinds, including operational and regulatory challenges. With the DOJ settlement determined, Genesis appears to be undertaking a significant push to right the ship. On the same day that the settlement was announced, news also broke that Genesis will be exiting certain markets and has put in place a new term loan.

Further details of the Genesis strategy are expected after the company releases its second quarter 2016 earnings later this week.

Written by Tim Mullaney

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