LHC Group has reached a $65 million settlement agreement with the feds that brings closure to a civil inquiry involving Medicare reimbursement for home health services from 2006 to 2008.

The settlement was reached in conjunction with a lawsuit brought against the home health provider by the U.S. District Court for the Western District of Louisiana. The suit, filed by an individual who worked for a regional consulting firm LHC Group previously used to support the company’s quality initiatives, was based on a complaint regarding how LHC Group determined “medical necessity,” the legal justification for the coverage of certain medical services.

Prompted by a Wall Street Journal investigative story in early 2010, the U.S. Senate Finance Committee began looking into whether home health providers intentionally increase the number of therapy visits to trigger higher reimbursements. When they visit patients 10 times, the companies are reimbursed an additional $2,200 per patient. A Securities and Exchange investigation also was initiated.

LHC Group cooperated fully with investigators and says the settlement agreement reflects that the company disputes the government’s claims and includes no admission or determination of wrongdoing. The government did not question LHC Group’s quality of patient care, and there were no findings that the company billed or received payments for services not rendered.

LHC Group is one of the nation’s largest providers of home health and hospice services with 312 locations in 19 states. The company’s stock price has taken a beating in the last year, a decline that started after SEC investigations into two of its competitors, Amedisys and Almost Family, were confirmed. Now trading at about $17 a share, LHC Group’s shares traded as high as $37.36 on April 20, 2010.

LHC Group says it chose to settle to avoid the disruption and expense of a multi-year legal dispute with the government, which is both a regulator and the primary payer for health care services provided to elderly and disabled patients. The settlement includes a release from the government for any claims for the period of 2006 to 2008 related to home health services, including skilled nursing visits, therapy visits and home health aide visits.

As part of the settlement, LHC Group has entered into a corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services, a common requirement of these types of settlements. The corporate integrity agreement incorporates the company’s existing corporate compliance program and reinforces long-standing policies and practices at LHC Group.

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