The Department of Justice recently announced a $48 million settlement in an important case over the accuracy of the information healthcare providers give to Medicare. In three separate cases, multiple whistleblowers came forward. They revealed that the largest operator of inpatient rehabilitation facilities in the country, HealthSouth, was misrepresenting its patients’ diagnoses to Medicare. HealthSouth, now known as Encompass Health, did this to keep certain facilities qualified as “Inpatient Rehabilitation Facilities” and to receive higher reimbursement rates for patients.

Patient diagnoses are important to Medicare. They not only determine the reimbursement rate, but they also determine whether a facility qualifies as an Inpatient Rehabilitation Facility. HealthSouth was falsely diagnosing patients with disuse myopathy and reporting those diagnoses to Medicare. These deliberate misdiagnoses allowed HealthSouth locations that would not have otherwise qualified as Inpatient Rehabilitation Facilities (IRF) to maintain that designation.

The brave whistleblowers, who brought forth these allegations, received collectively received $12.4 million.


In the case, United States ex rel. Simon et al. v. HealthSouth Corp, the government alleged that beginning in 2007, HealthSouth engaged in fraudulent practices. In order to ensure compliance with Medicare’s rules regarding classification as an Inpatient Rehabilitation Facility and increase reimbursements from Medicare, the company began falsely diagnosing patients.

Whistleblower complaints also allege that Encompass IRFs admitted patients who were too sick to even benefit from the rehabilitative therapies they provided. They did this so that they could bill Medicare for reimbursements.

These allegations were brought to light in three separate lawsuits filed by three separate employees:

  • Emese Simon M.D. was a former contract physician at an IRF facility in Sarasota, Florida.
  • Melissa Higgins was a former Director of Therapy Operations at an IRF in Arlington, Texas.
  • Darius Clarke was a former Medical Director at an IRF in Richmond, Virginia.

These lawsuits were filed under the qui tam provisions of the False Claims Act. This Act permits private citizens to file lawsuits on behalf of the U.S. government, exposing false claims and fraud. In doing so, whistleblowers are entitled to a share of the settlement obtained because of their actions.

Encompass said that they believed these allegations were without merit. They stated that they relied on the medical judgment of independent physicians when coding the diagnoses. They denied any wrongdoing and also stated that a seven-year investigation provided no evidence of wrongful conduct. However, they agreed that it was best to reach a settlement with the DOJ to end the litigation.


One of the ways healthcare providers engage in Medicare fraud is through making a false diagnosis. In many cases, a diagnosis must be rendered before Medicare will pay for care or services. With this type of Medicare fraud, the healthcare provider gives patients false diagnoses so they can continue to bill Medicare for their treatment. In the case against HealthSouth, they diagnosed patients to be able to keep certain credentials and receive reimbursements.

False diagnosis is just one of the ways healthcare providers can engage in Medicare fraud. Some of the other examples of Medicare fraud include unbundling services, receiving kickbacks, performing unnecessary services, billing for more expensive services, and billing for services never received.


At Price Armstrong, we have successfully represented whistleblowers in numerous Medicare fraud cases under the False Claims Act. We help maximize recovery for whistleblowers, and our track record of success speaks for itself. We know that whistleblowers face an uncertain future when exposing crimes and fraudulent activity. As such, we work tirelessly to protect whistleblowers along the way.

We offer confidential and complete legal services and work on a contingency basis. Contact us today for a free case evaluation.