Civil and Administrative Settlement Agreement between the United States and Mariner Post-Acute Network, Inc. et al.
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This agreement is between the United States, represented by the Department of Justice and the Department of Health & Human Services, and Mariner Post-Acute Network, Inc., Mariner Health Group, Inc., and affiliated debtors. It resolves civil and administrative claims related to Medicare and Medicaid billing, including allegations under the False Claims Act. The agreement outlines the treatment of provider agreements in bankruptcy, payment obligations, mutual releases of claims, and conditions for continued participation in federal healthcare programs. It also includes provisions for dismissal of related legal actions and sets terms for future compliance.
EX-10.8 10 g77872exv10w8.txt CIVIL ADMINISTRATIVE SETTLEMENT Exhibit 10.8 CIVIL AND ADMINISTRATIVE SETTLEMENT AGREEMENT BY AND BETWEEN THE UNITED STATES OF AMERICA, ACTING THROUGH THE UNITED STATES DEPARTMENT OF JUSTICE, AND ON BEHALF OF THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH & HUMAN SERVICES AND MARINER POST-ACUTE NETWORK, INC. MARINER HEALTH GROUP, INC. AND AFFILIATED DEBTORS MARCH 25, 2002 TABLE OF CONTENTS
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CIVIL AND ADMINISTRATIVE SETTLEMENT AGREEMENT I. THE PARTIES This Civil and Administrative Settlement Agreement ("Agreement") is entered into between the following through their authorized representatives: A. The United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General ("OIG-HHS") of the Department of Health and Human Services ("HHS"), and the Centers for Medicare & Medicaid Services ("CMS") (formerly the Health Care Financing Administration), of HHS; (collectively the "United States"); and B. Mariner Post-Acute Network, Inc. ("MPAN"), Mariner Health Group, Inc. ("MHG"), and affiliated debtors as defined in paragraph II.A. below, (collectively "the Debtors"). The Parties agree that the Debtors' facilities and the Medicare provider agreements (each identified by a Medicare provider number), specified in Exhibits A, B, and C, and the Debtors' suppliers (identified by a Medicare supplier number), specified in Exhibit D, are the exclusive and all-inclusive listing of Debtors' Medicare providers and suppliers which are subject to this Agreement; and C. The following individuals and entities (collectively hereinafter "the Relators") (collectively, the complaints identified below are hereinafter "the Qui Tam Actions"): 1. Lewis Wesley Roberts, who has filed a qui tam complaint styled United States ex rel. Lewis Wesley Roberts v. Vencor, Inc., Vencare, Inc., Beverly Enterprises-Kansas, Inc., Living Centers of America, Chartwell Health Care, Inc., DSJ Health Care, Inc., Baker-Brame Skilled Nursing, Texas Health Enterprises, Kelly Bailey, Ann Nipp, and W. Bruce Lunsford, -1- Civil Action No. 3:97CV-349-J (W.D. Ky.) ("the Roberts qui tam"); 2. Cindy Lee Anderson Rutledge and Partnership for Fraud Analysis, who together have filed a qui tam complaint styled United States ex rel. Cindy Lee Anderson Rutledge and Partnership for Fraud Analysis ex rel. Paragon Health Network, Inc., ARA Group, Inc., ARA Living Centers, Inc., and Living Centers of America, Inc., Civil Action No. 97-6801 NS (E.D. Pa.)("the Rutledge qui tam"); 3. Rafael Rivera, who has filed a qui tam complaint styled United States ex rel. Raphael Rivera v. Restore Respiratory Care, Inc., Avante Group, Inc. and Mariner Health Group, Inc., Civil Action No. 1:98-cv-2960-HTW (N.D. Ga.)("the Rivera qui tam"); 4. Terri D. Carroll, who has filed a qui tam complaint styled United States ex rel. Terri D. Carroll v. Living Centers of America, Inc., American Pharmaceutical Services, Inc., Provider Affiliated Services, Unicare Health Facilities, Inc., and Unicare Homes, Inc., Civil Action No. 97-2600-CIV-T-17B (M.D. Fla.)("the Carroll qui tam"); 5. Edvin A. Nelius, Rose Marie Dickey, Deborah Lowman, Patricia Rocha and Helen Spence, who together have filed a qui tam complaint styled United States ex rel. Edvin A. Nelius, Rose Marie Dickey, Deborah Lowman, Patricia Rocha and Helen Spence v. Mariner Post-Acute Network, Inc., Mariner Health Group, Inc., Convalescent Services, Inc., Paragon Health Network, Inc., and Living Centers of America, Inc., Civil Action No. H-98-3851 (S.D. Tex.)("the Nelius qui tam"); 6. Teri S. Powell, who has filed a qui tam complaint styled United States ex rel. Teri S. Powell v. Paragon Health Network, Inc., Therapy Management Innovations, Inc. and Rehability Hospital Services, Inc., Civil Action No. CV-98-P-0630-S (N.D. Ala.)("the Powellqui tam"), and; -2- 7. Deborah J. Weatherford, who has filed a qui tam complaint styled United States ex rel. Deborah J. Weatherford v. Forum Health Investors of Georgia, Inc., Southwest Medical Center, Inc., Summit Institute of Pulmonary Medicine and Rehabilitation, Inc., Robert Cribb and Michael Fitzgerald, Civil Action No. 1:01-cv-0593-JOF (N.D. Ga.)("the Weatherford qui tam"). The United States, the Debtors and the Relators are collectively "the Parties." II. PREAMBLE As a preamble to this Agreement, the Parties agree to the following: A. Debtors. MPAN, a Delaware corporation, and certain of its direct and indirect subsidiaries and affiliated partnerships (collectively with MPAN, "MPAN Debtors") are debtors and debtors in possession in jointly-administered chapter 11 cases (case nos. 00-00113(MFW) through 00-00214 (MFW) inclusive) that are pending in the United States Bankruptcy Court for the District of Delaware ("Bankruptcy Court"). MHG, a Delaware corporation and a wholly-owned subsidiary of MPAN, and certain of its direct and indirect subsidiaries and affiliated partnerships (collectively with MHG, "MHG Debtors") also are debtors and debtors in possession in jointly-administered chapter 11 cases (case nos. 00-00215(MFW) through 00-00301(MFW) inclusive) that are pending in the Bankruptcy Court. The Debtors commenced their respective chapter 11 cases by filing voluntary petitions in the Bankruptcy Court on January 18, 2000 ("Petition Date"). The Debtors operate or have operated skilled nursing facilities, assisted living facilities, long-term acute-care hospitals, rehabilitation therapy providers, home health agencies, and institutional pharmacy providers. -3- B. Debtors' Claims Against the United States The Debtors contend that they have claims or causes of action against CMS for services rendered or products supplied to beneficiaries under Medicare up to and including the Petition Date, including but not limited to determined underpayments now in administrative freeze, claims on appeal and claims for services to Medicare beneficiaries disallowed under the "Prudent Buyer" principle and detailed in a separate settlement agreement at Exhibit E (the "Prudent Buyer Settlement"). The Prudent Buyer Settlement is incorporated herein by reference. Debtors may also have claims or causes of action against the United States relating to the Qui Tam Actions or the Covered Conduct (defined in paragraph II.G., below). C. CMS' Claims Against Debtors. CMS contends that it has (i) made determined, and may have made additional undetermined, administrative overpayments to the Debtors for services rendered or products supplied to beneficiaries under Medicare up to and including the Petition Date (the "CMS Overpayment Claims"), and (ii) determined civil monetary penalties which accrued up to and including the Petition Date pursuant to 42 U.S.C. ss.1395i-3(h)(2)(B)(ii) and 42 U.S.C. ss. 1396r(h)(2)(A)(ii) (the "CMS CMP Claims," and, collectively with the CMS Overpayment Claims, the "CMS Claims.") D. False Claims Act Claims Against Debtors. The United States further contends that it has claims or causes of action against Debtors asserted by or on behalf of the United States, or its agencies, departments, officers, agents, or by the Relators under 31 U.S.C. ss. 3730(b) or (d) (including any and all qui tam claims) seeking payments, damages, offsets, recoupments, penalties, costs, expenses of any kind, or other remedies of any kind: (i) under the False Claims Act, 31 U.S.C. ss.ss. 3729-3733, the Program Fraud Civil Remedies Act, 31 U.S.C. ss.ss. 3801-3812; -4- and/or other statutory or common law doctrines of payment by mistake, unjust enrichment, breach of contract, or fraud; (ii) for civil monetary penalties imposed pursuant to the Civil Monetary Penalties Law, 42 U.S.C. ss. 1320a-7a (not including CMPs imposed by CMS pursuant to 42 U.S.C. ss.ss. 1395i-3(H)(2)(B)(ii) or 1396r(h)(2)(A)(ii)); and (iii) for permissive exclusion from Medicare, Medicaid, and other federal health programs pursuant to the Civil Monetary Penalties Law, 42 U.S.C. ss. 1320a-7(b) (collectively, the "United States False Claims Act Claims"). E. Proofs of Claim. The United States False Claims Act Claims include, but are not limited to, all claims asserted in the proofs of claim filed in the Debtors' chapter 11 cases by the United States with respect to the United States False Claims Act Claims, relating to Medicare and/or Medicaid (federal portion only). The CMS Claims include, but are not limited to, all claims asserted in the proofs of claim filed in the Debtors' chapter 11 cases by CMS with respect to the CMS Claims. The proofs of claim referred to in this paragraph II.E. are, collectively, the "United States Proofs of Claim." The United States False Claims Act Claims, the United States Proofs of Claim and the CMS Claims are collectively the "United States Claims." F. Debtors' Participation in Medicare/Medicaid. Debtors submitted or caused to be submitted claims for payment to the Medicare Program, Title XVIII of the Social Security Act, 42 U.S.C.ss.ss.1395-1395ggg, and the Medicaid Program, Title XIX of the Social Security Act, 42 U.S.C.ss.ss.1396-1396v (collectively "the Medicare/Medicaid Programs"). G. The Covered Conduct The United States False Claims Act Claims and the Relators' claims allege the following conduct (hereinafter referred to as the "Covered Conduct"): 1. Roberts. As alleged in the Roberts qui tam, for fraudulent claims to Medicare -5- and Medicaid submitted during the years 1993 through 1996 by Living Centers of America, Inc., on behalf of the following skilled nursing facilities in the Dallas-Fort Worth area of Texas: Progressive Care Center, Pavilion Nursing Center, Gainesville Convalescent Center, Care Inn of Sanger and Care Inn of Abilene. These claims were false in that Medicare and Medicaid were billed for respiratory therapy supplies and services which were not medically necessary; 2. Rutledge. As alleged in the Rutledge qui tam, for fraudulent claims to Medicare and Medicaid submitted by Debtors during the years 1992 through 1999 which were false in that claims were submitted for Medicare and Medicaid services provided to patients when nursing facilities and/or skilled nursing facilities owned and operated by the Debtors were not in compliance with applicable federal and state regulations concerning the training and certification of nurse aides employed at the nursing facilities and/or skilled nursing facilities; 3. Rivera. As alleged in the Rivera qui tam, for maintaining false or fraudulent documentation of respiratory care services and for fraudulent claims to Medicare and Medicaid submitted by MHG during the years 1992 through 1999 which were false in that Medicare and Medicaid were over-billed for respiratory therapy services provided by Restore Respiratory Care, Inc; 4. Carroll. As alleged in the Carroll qui tam, for fraudulent claims to Medicare and Medicaid submitted by Living Centers of America, Inc. and Brian Centers Corp. during the years 1992 through 1999 which were false in that (1) Medicare and Medicaid were billed for medical supplies known as incontinent kits which were not medically unnecessary; (2) some items in the incontinent kits were not charged to the purchaser of the kit, and under the circumstances, this constituted an illegal kickback, and; (3) Living Centers of America, Inc. and -6- Brian Centers Corp. automatically waived the patient's co-insurance payment for Medicare claims for supplies; 5. Nelius. As alleged in the Nelius qui tam, for maintaining false or fraudulent documentation and for fraudulent claims to Medicare and Medicaid submitted by all of the Debtors' skilled nursing facilities from 1995 through 1999 which were false in that nurse and other nursing facility staff time was improperly allocated to Medicare cost centers when in fact the time so allocated was spent caring for non-Medicare or non-Medicaid patients. In addition, for fraudulent claims to Medicare and Medicaid submitted by all of the Debtors' skilled nursing facilities from 1995 through 1999 which were false in that (1) claims were submitted for Medicare and Medicaid skilled nursing services that were unnecessary, improper or incompletely performed, and fraudulent or false charts were maintained to support the cost of these services; (2) skilled nursing facilities were chronically understaffed resulting in sub-standard quality of care; (3) Medicare patients at skilled nursing facilities were improperly and unnecessarily provided physical and occupational therapy; (4) prescription drugs were inappropriately prescribed and billed to Medicare for patients at skilled nursing facilities; and (5) patients were unnecessarily referred to acute care hospitals in order to qualify them for Medicare extended care benefits; 6. Powell. As alleged in the Powell qui tam, for fraudulent claims to Medicare and Medicaid submitted by Paragon Health Network, Inc., d/b/a Fairview Nursing Home, in Leeds, Alabama, and Rehability Hospital Services, Inc., between February and May 1997, which were false in that they (1) represented that services had been provided to Medicare and Medicaid beneficiaries, when in fact such services had not been rendered; (2) were for services which were -7- not medically necessary, and; (3) were for therapy equipment that was improperly billed to Medicare Part A; 7. Weatherford. As alleged in the Weatherford qui tam, for fraudulent claims for reimbursement made on Medicare and Medicaid cost reports submitted for cost report years ending between 1992 and 1996 on behalf of Summit Institute of Pulmonary Medicine by Forum Health Investors, Inc., which falsely represented that payments of principal and interest had been made on a promissory note to American Medical International, Inc., when in fact no such payments were made; 8. Cambridge East, Sunny Hill and Catonsville. As discovered during other ongoing investigations conducted by the Department of Justice or HHS-OIG, for fraudulent claims submitted to Medicare and Medicaid by the Debtors' Cambridge East, Sunny Hill, and Catonsville skilled nursing facilities from 1997 until 2001, which were false in that they billed for services which were not rendered, or were deficient, inadequate, substandard, and were of a quality which failed to meet professionally recognized standards of healthcare; and 9. Rehabilitation Therapy. As discovered during other ongoing investigations conducted by the Department of Justice or OIG-HHS, for fraudulent claims to Medicare and Medicaid submitted by Debtors' Rehability subsidiary between 1996 and 1998, which were false in that they (1) were for services which were not medically necessary, and; (2) were for bad debts which were improperly claimed on cost reports filed by the Debtors' Rehability subsidiary from 1996 until 2000. H. Agreement Not an Admission. This Agreement does not constitute evidence or an admission by the Parties of any liability or wrongful conduct with respect to the Covered -8- Conduct, the allegations in the Qui Tam Actions and in the United States Claims, or any issue of law or fact. The Debtors deny the allegations of the United States as set forth in paragraph II.G., specifically including, without limitation, all of the allegations set out in the Qui Tam Actions identified in paragraphs II.G.1. through II.G.7. I. Corporate Integrity Agreement. The Debtors and OIG-HHS have executed a separate Corporate Integrity Agreement ("CIA"), which is incorporated herein by reference as Exhibit F. J Effective Date. The Parties agree that, except for the provisions of III.X., which shall become effective immediately upon execution by all of the Parties of this Agreement, the effectiveness of this Agreement will require the approval of the Bankruptcy Court. The date upon which the Bankruptcy Court enters an order approving this Agreement, including the CIA, shall constitute the effective date ("Effective Date") of this Agreement. To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the claims set forth above, the Parties hereby reach a full and final settlement of the respective claims pursuant to the Terms and Conditions set forth below. III. TERMS AND CONDITIONS NOW, THEREFORE, in reliance upon the representations contained herein, in consideration of the mutual promises, covenants, and obligations set forth below, and for good and valuable consideration as stated herein, the Parties agree as follows: A. Bankruptcy Treatment of Medicare Provider Agreements. 1. Assumed Agreements. Upon the Effective Date, Debtors shall assume the Medicare provider agreements of the facilities specified in Exhibit A. With the consent of the United States, Debtors have already assumed the provider agreements for the facilities specified in Exhibit B. -9- 2. Rejected Agreements. Upon the Effective Date, the Debtors will reject the Medicare provider agreements for the facilities specified in Exhibit C. The Debtors covenant not to acquire or contract to acquire the Medicare providers associated with these rejected provider agreements for a period of two (2) years after the Effective Date. 3. Suppliers. The suppliers listed on Exhibit D shall neither assume nor reject any agreement with CMS. 4. Scope. This Agreement, including but not limited to the releases and reservations herein, shall apply equally to all facilities on Exhibits A, B, C and D, except where otherwise specified. B. Treatment of CMS Claims. 1. Cure of Defaults in Provider Agreements a. CMS Offset. The Debtors agree that CMS may apply any claim which the Debtors release against CMS in this Agreement (including but not limited to pre-petition underpayments, amounts due under the Prudent Buyer Settlement (Exhibit E), except as specified in paragraph III.B.2.b., below, and administrative appeal claims) against any CMS Claim, even if the claims are not mutual as required by 11 U.S.C. ss. 553. b. Net Amount Due to Debtors. CMS and Debtors agree, for settlement purposes only, that CMS owes Debtors $29,290,363.00 net for pre-petition cost periods, after completing all offsets permitted by paragraph III.B.1.a., above. Such agreement may not be used against the United States or the Debtors for any other purpose or in any other litigation or forum. -10- 2. Mutual Release. a. Scope of Release. Debtors and the United States (on behalf of CMS) mutually release each other from all claims and causes of action in connection with services rendered to beneficiaries under Medicare for all fiscal periods, including partial fiscal periods, ending on or before the Petition Date or products supplied to beneficiaries before the Petition Date; provided, however, that the Debtors reserve as against CMS the right to collect $29,390,363 from such claims and causes of action, which CMS shall distribute as set forth in paragraphs III.C.1 and III.H. b. Release of Debtors' Claims Under Prudent Buyer Settlement. The Debtors also release all claims and causes of action arising under the Prudent Buyer Settlement (Exhibit E), for all fiscal periods, whether pre-petition or post-petition, except as set forth in this paragraph III.B.2.b. For purposes of determining the Debtors' skilled nursing facility prospective payment system ("PPS") rates for cost reporting periods ending 12/31/2001 and thereafter, the Debtors' Medicare allowable fiscal year 1995 costs shall be deemed to include all costs previously removed through prudent buyer disallowances, as set forth in Exhibit E. Thus, the Debtors' PPS rates, for cost reporting periods ending 12/31/2001 and thereafter, shall be computed as set forth in Exhibit E, as if all prudent buyer disallowances of speech therapy and occupational therapy costs for fiscal year 1995 were reversed in their entirety. 3. Treatment of CMS Overpayment Claims. a. Closure of Pre-petition Cost Years. All Medicare fiscal years ending before the Petition Date shall be closed with no further audit, appeal or reopening (except as otherwise provided in III.B.3.d., below). The Debtors shall, however, file all cost reports -11- required under Medicare, including for periods administratively closed pursuant to this Agreement. b. Treatment of Cost Years that Span the Petition Date. With respect to fiscal periods which span the Petition Date, the CMS Overpayment Claim shall be determined by pro-rating the total overpayment (determined via final settlement by a Medicare fiscal intermediary) according to the number of days in the fiscal year occurring before and after the Petition Date. The pre-petition portion is a CMS Overpayment Claim and shall be cured and released pursuant to this Agreement and shall not be subject to audit, appeal or reopening (except as provided in III.B.3.d., below). c. Overpayments Arising After the Petition Date. Debtors and CMS (except as specified in III.B.2.b., above) remain liable for any claims arising after the Petition Date (including the pro-rated post-petition amount of a fiscal period which spans the Petition Date) and reserve any rights (whether of appeal or otherwise) and defenses with respect thereto. The Debtors shall be entitled to seek reimbursement for the costs of preparing, submitting and processing their Medicare cost reports described in this section in accordance with applicable statutes and regulations. d. Reopening. CMS shall be entitled to reopen the Debtors' Medicare cost reports for fiscal periods ending prior to the Petition Date solely for the purpose of complying with any Act of Congress requiring CMS to rely upon settled cost reports for these years as a basis for adjusting federal payment rates to providers participating in Medicare; provided, however, that neither CMS nor the debtors shall use such adjustments to seek any further payments for periods prior to the Petition Date, and the CMS shall only use such adjustments to -12- adjust payment rates to the Debtors for post-petition fiscal periods (including partial periods) as part of adjustments in federal payment rates applicable to all similarly situated providers participating in Medicare. 4. Treatment of CMS CMP Claims. a. Preservation of Findings Relating to Quality of Care. With respect to CMS CMP Claims which accrue in full before the Petition Date, Debtors shall remain bound by any findings on a HCFA Form 2567, Statement of Deficiencies (or successor form) relating to such claims (except as provided for in any prior settlement agreement entered into by CMS and the Debtors on such findings). b. Accrual of CMPs. For the purposes of this Agreement, a CMP accrues on the date that a per instance violation occurs or, in the case of a per diem penalty, on each day that the facility is not in substantial compliance. Thus, for a per diem CMP that spans the Petition Date, the per diem penalty multiplied by the number of days out of compliance occurring before the Petition Date shall be treated as a pre-petition penalty (and is therefore a CMS CMP Claim), and the per diem penalty multiplied by the number of days out of compliance occurring on or after the Petition Date shall be treated as a post-petition penalty (and is therefore not a CMS CMP claim). c. Treatment of Post-petition CMPs. The Debtors shall remain obligated to CMS, and shall not be released from or receive a discharge for, any CMP accruing in whole or in part after the Petition Date (except as provided for in paragraph III.B.4.d.). Debtors and CMS reserve any rights (whether of appeal or otherwise) and defenses with respect thereto. d. Treatment of CMPs That Span the Petition Date. With respect to -13- CMPs which span the Petition Date, the Debtors remain liable for the post-petition portion of such CMPs, and the pre-petition portion is released pursuant to paragraph III.B.2.a. 5. Dismissal of Appeals. Within thirty (30) days following the Effective Date, the Debtors shall request dismissal with prejudice or withdraw with prejudice all challenges and appeals, in any fora, relating to the CMS Claims and claims under the Prudent Buyer Settlement released in this Agreement; provided, however, that Debtors may appeal CMS Claims which span the Petition Date; provided, further, however, that Debtors shall be entitled collect or reduce only the post-petition portion of such an appealed claim if their appeal succeeds. This Agreement shall not limit Debtors' right to pursue a timely and properly filed appeal or to challenge any overpayment arising or CMP accruing after the Petition Date. 6. Collection of Post-petition CMS Claims CMS reserves the right to collect post-petition overpayments and CMPs in accordance with applicable non-bankruptcy law, including but not limited to the rights to recoup or offset such claims, which rights shall not be impaired or affected by Debtors' Plan of Reorganization in the chapter 11 cases (the "Plan"). CMS's post-petition claims which accrue and are due prior to the Confirmation Date, and would otherwise be payable at that time had the Debtors not filed their chapter 11 cases, shall be paid as administrative expense claims in Debtors' chapter 11 cases; provided, however, that CMS may collect in accordance with applicable non-bankruptcy law any accrued post-petition CMP or post-petition overpayment that is not paid by the Effective Date of the Plan. 7. Claims under Rejected Provider Agreements. CMS's offset rights as set forth in paragraph III.B.1.a. shall constitute the sole recovery under the Plan for the CMS Claims relating to the rejected provider agreements; all pre-petition claims relating to the rejected -14- providers are mutually released herein, as set forth in paragraph III.B.2.a. 8. Claims Relating to Suppliers. CMS's offset rights as set forth in paragraph III.B.1.a. shall constitute the sole recovery under the Plan for the CMS Claims relating to the suppliers; all pre-petition claims relating to the suppliers are mutually released herein, as set forth in paragraph III.B.2.a. 9. Corporate Reorganization. CMS shall process in accordance with applicable Medicare law and procedure any change of ownership applications in connection with the transfer of any Medicare provider between the Debtors' legal entities under the Plan or any change of ownership as a result of a change of control of the Debtors under any such Plan. Terminating and short cost reports shall not be required on changes of ownership pursuant to this Paragraph which take place within twenty-four (24) months of the effective date of the Plan. C. United States False Claims Act Claims. 1. False Claims Act Payment. In consideration of the United States' release of the False Claims Act Claims in III.C.3., below, Debtors' agree that $26,290,363.00 of the claims it reserved as against CMS (as specified in paragraph III.B.2.a., above) shall be transferred by CMS to the Department of Justice on the Debtors' behalf (the "False Claims Act Payment"). Debtors' waive all further rights to this sum. 2. Release of Debtors' Claims Against the United States Relating to the False Claims Act. In further consideration of the releases set forth in paragraph III.C.3., below, the Debtors release the United States and each of its agencies, officers, agents, employees and contractors from all claims and causes of action (including attorneys fees, costs and expenses), adjustments, and set-offs of any kind relating to the Covered Conduct, including the -15- investigation of the Covered Conduct, as of the Effective Date. 3. Release of United States False Claims Act Claims Against the Debtors. In consideration of the False Claims Act Payment and the release in paragraph III.C.2., above, and subject to the exceptions set forth in paragraph III.C.5., below, the United States, on behalf of itself, its officers, agents, agencies and departments, agrees to release the Debtors from any civil or administrative monetary claim the United States has or may have for the Covered Conduct under the False Claims Act, 31 U.S.C. SS.SS. 3729-3733; the Civil Monetary Penalties Law, 42 U.S.C. ss. 1320a-7a (not including CMPs imposed by CMS pursuant to 42 U.S.C. ss.ss. 1395i-3(H)(2)(B)(ii) or 1396r(h)(2)(A)(ii)); the Program Fraud Civil Remedies Act, 31 U.S.C. ss.ss. 3801-3812; or the common law doctrines of payment by mistake, unjust enrichment, breach of contract and fraud. 4. Dismissal of Qui Tam Actions. With respect to the Qui Tam Actions, the United States agrees: a. to move to dismiss as against the Debtors with prejudice to the United States for the Covered Conduct; and b. to move to dismiss with prejudice as to the Relators for any and all claims in their entirety against any and all of the Debtors. Such motions shall be made within thirty (30) days after the Effective Date. 5. Reservations. Notwithstanding any term of this Agreement, specifically reserved and excluded from the scope and terms of this Agreement as to any entity or person, are any and all of the following: a. Any civil, criminal or administrative claims arising under Title 26, -16- U.S. Code (Internal Revenue Code); b. Any criminal liability; c. Except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal Health Care Programs (as defined in 42 U.S.C.ss. 1320a-7b(f)); d. Any liability to the United States (or its agencies) for any conduct other than the Covered Conduct, except as expressly provided in paragraph III.B. and III.D. of this Agreement; e. Any claims based upon such obligations as are created by this Agreement or by the CIA; f. Any express or implied warranty claims or other claims for defective or deficient products or services, including quality of goods and services, provided by the Debtors except as expressly set forth in the Covered Conduct; g. Any claims for personal injury or property damage or for other consequential damages arising from the Covered Conduct; h. Any claims based on a failure to deliver items or services due, except as expressly set forth in the Covered Conduct; and i. Any claims against any individuals, including directors, officers and employees, except as otherwise provided in paragraph III.E. below. D. OIG Permissive Exclusion Release. OIG-HHS agrees to refrain from instituting, directing or maintaining any administrative claim or action seeking exclusion from Medicare/Medicaid or other Federal Health Care Programs (as defined in 42 U.S.C. ss. 1320a- -17- 7b(f)) against the Debtors under 42 U.S.C. ss. 1320a-7a (Civil Monetary Penalties Law, except for CMPs imposed by CMS pursuant to 42 U.S.C. ss.ss. 1395i-3(H)(2)(B)(ii) or 1396r(h)(2)(A)(ii)), or 42 U.S.C. ss. 1320a-7(b) (permissive exclusion), for the Covered Conduct, as of the Effective Date. The Debtors acknowledge and agree that OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude the Debtors from Medicare/Medicaid or other Federal Health Care Programs (as defined in 42 U.S.C. ss. 1320a-7b(f)) under 42 U.S.C. Section 1320a-7(a) (mandatory exclusion) based on the Covered Conduct. Nothing in this Paragraph precludes OIG-HHS from taking action against entities or persons, or for conduct and practices, for which civil claims have been reserved in Paragraph III.C.5., above. E. Release By The Relators as to Debtors. In consideration of the obligations of the Debtors set forth in this Agreement, the Relators for themselves and for their heirs, successors, attorneys, agents, and assigns agree to release the Debtors and each of their current and former officers, directors, employees, agents, shareholders and attorneys from any and all civil claims they have from the filing of the Qui Tam Actions, or could have advanced under the False Claims Act, 31 U.S.C. ss.ss. 3729-3733, for expenses or attorneys' fees and costs under 31 U.S.C. ss. 3730(h), or under 31 U.S.C. ss. 3730(h) for employment decisions by Debtors and/or other statutory or common law doctrines of payment by mistake, unjust enrichment, breach of contract, fraud, or the like, and Relators covenant not to sue with respect to, and release, acquit, waive, and forever discharge Debtors, their current and former officers and directors, employees, agents, attorneys and shareholders from any and all rights, claims, expenses, debts, liabilities, demands, obligations, costs, damages, injuries, actions and causes of action of every nature, -18- whether known or unknown, suspected or unsuspected, in law or in equity, including those for attorneys' fees and costs arising prior to the effective date of the Plan. Within 30 days of the Effective Date, Relators, with respect to any state false claims act claim, shall dismiss with prejudice as to Debtors, their current and former officers, directors, employees, agents, attorneys and shareholders, any and all claims that Relators have filed in any state or federal court, and, as necessary, obtain such approval of any state authorities to do so. Relators agree that upon Bankruptcy Court approval of this settlement, any and all proofs of claim filed by Relators shall be deemed withdrawn, with prejudice (except proofs of claim for attorney's fees and costs arising under 31 U.S.C. ss. 3730(d)(1)), and that Relators shall file no other or further proofs of claim against any of the Debtors. To effectuate the foregoing, Relators shall execute and deliver to the Debtors a Withdrawal of Claim in the form attached hereto as Exhibit G. The Relators also agree to accept the terms and conditions of this Agreement as set forth in paragraph III.A. through III.X., including the amount of the False Claims Act Payment (defined in paragraph III.C.1., above), as being a fair, adequate and reasonable compromise of the United States False Claims Act Claims pursuant to 31 U.S.C. ss. 3730, and as a full and final settlement of any and all claims they may have or could have advanced against the Debtors. Payment of reasonable attorneys fees and costs, as provided for by 31 U.S.C. ss. 3730(d)(1), is not included in this Agreement, but will be the subject of separate agreements to be reached between the Debtors and some or all of the Relators, or resolved in separate proceedings and the Debtors reserve all of their rights and defenses with respect thereto. F. Release of Beneficiaries and Authorized Representatives. The Debtors will not seek -19- payment for any of the Medicare/Medicaid claims released by this Agreement from any Medicare or Medicaid beneficiaries or their authorized representatives. The Debtors waive any causes of action against these beneficiaries or their authorized representatives based on the claims released under this Agreement. G. Waiver of Certain Defenses. The Debtors waive and will not assert any defenses they may have to any criminal prosecution or administrative action relating to the United States Claims, to the extent such defenses are based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Agreement bars a remedy sought in any such criminal prosecution or administrative action. The Debtors agree that this Agreement is not punitive in purpose or effect. Nothing in this paragraph or any other provision of this Agreement constitutes an agreement by the United States concerning the characterization of this Agreement for purposes of the Internal Revenue Laws, Title 26 of the United States Code. H. Payment By CMS. CMS will pay the Debtors $3 million by electronic funds transfer in accordance with payment instructions provided by the Debtors within sixty (60) days following the Effective Date, which represents the difference between the $29,290,363 which CMS has agreed, for purposes of settlement, is due to the Debtors for the cost periods released and resolved herein (see paragraph III.B.1.b.), and the $26,290,363 which is the False Claims Act Payment (see paragraph III.C.1.). I. Unallowable Costs Defined. The Debtors acknowledge and agree that all costs (as defined in the Federal Acquisition Regulations ("FAR") 48 C.F.R.ss.31.205-47 and in Titles -20- XVIII and XIX of the Social Security Act, 42 U.S.C.ss.ss.1395-1395ggg and 1396-1396v, and the regulations promulgated thereunder) incurred by or on behalf of the Debtors, their present or former officers, directors, employees, shareholders, and agents in connection with: 1. The matters covered by this Agreement, including, the costs of negotiation of the CIA; 2. The United States' audit(s) and any civil and criminal investigation(s) of the matters covered by this Agreement; 3. The investigation, defense, and corrective actions undertaken in response to the United States' audit(s) and any civil or criminal investigation(s) in connection with the matters covered by this Agreement (including attorney's fees); 4. Obligations undertaken pursuant to the CIA to: (i) retain an independent review organization to perform annual reviews as described in Section III.D.2. of the CIA; (ii) retain and pay expenses and fees for the third party monitor pursuant to Section III.D.1. of the CIA; and (iii) prepare and submit reports to the OIG; 5. The negotiation and implementation of this Agreement; and 6. Any payments that the Debtors may make to Relators' attorneys; are unallowable costs on Government contracts and under the Medicare Program, Medicaid Program, TRICARE Program, and Federal Employees Health Benefits Program ("FEHBP") (collectively, the "Unallowable Costs"). The Debtors shall separately determine and account for these Unallowable Costs in a nonreimbursable cost center and shall neither charge such costs, directly, or indirectly, to any contracts with the United States or any state Medicaid program, nor seek payment for such Unallowable Costs through any cost report, cost statement, information -21- statement, or payment request submitted by the Debtors that includes postpetition periods to the Medicare, Medicaid, TRICARE, or FEHBP Programs (collectively, the "Post-petition Cost Reports"). Nothing in this paragraph I affects the allowability of costs not expressly enumerated herein. J. Unallowable Costs in Post-petition Cost Reports. The Debtors further agree that within sixty days (60) of the Effective Date, the Debtors shall identify to applicable Medicare fiscal intermediaries, carriers and/or contractors, and Medicaid fiscal agents, any Unallowable Costs included in the Post-petition Cost Reports, and will request, and agree, that the Post-petition Cost Reports, even if already settled, be adjusted to account for the effect of the inclusion of the Unallowable Costs. The Debtors agree that the United States will be entitled to recoup any overpayment as the result of the inclusion of such Unallowable Costs on the Post-petition Cost Reports. Any payment due as a result of the adjustments, after the adjustments have been made, shall be paid to the United States pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States reserves its rights to disagree with any of the Debtors' calculations submitted on the effect of inclusion of Unallowable Costs on the Post-petition Cost Reports. K. No Third Party Beneficiaries. This Agreement is intended to be for the benefit of the Parties and by this instrument the Parties do not release any claims against any other person or entity. L. Allowance of Proofs of Claim. As of the Effective Date, all of the United States Proofs of Claim shall be deemed to have been allowed and satisfied via the mutual consideration and covenants set forth in this Agreement. -22- M. Cooperation. The Debtors shall cooperate fully and truthfully with the United States' investigation of individuals and entities not specifically released by the United States pursuant to this Agreement. In this regard, upon reasonable notice, the Debtors will make reasonable efforts to identify, facilitate access to, and encourage the cooperation of, their directors, officers, employees, and other witnesses for interviews and testimony, consistent with the rights and privileges of such individuals, and will make available to the United States, upon reasonable requests, all nonprivileged documents and records in its possession, custody or control relating to the United States Claims. N. Fairness of Agreement. Pursuant to Bankruptcy Rule 9019, and any applicable federal, non-bankruptcy and state law, including, but not limited to 31 U.S.C. ss. 3730(c)(2)(B), this Agreement constitutes a good faith compromise and full and final monetary settlement of the United States Claims, which compromise and settlement is in the best interests of the Debtors, and this Agreement and each enumerated settlement amount are fair, adequate and reasonable under the circumstances. O. Defense of Agreement. Should this Agreement be challenged by any Relator, the United States and the Debtors agree that they will take all reasonable and necessary steps to resolve the challenge in a manner consistent with this Agreement. P. Each Party to Bear Its Own Costs. The United States and the Debtors will each bear their own legal and other costs incurred in connection with this matter, including the preparation and performance of this Agreement. Payment of reasonable Relators' attorneys fees and costs by the Debtors, as provided for by 31 U.S.C. ss. 3730(d)(1), is not included in this Agreement, and may be the subject of separate agreements between the Debtors and some or all of the Relators. -23- Q. Federal Law Governs. This Agreement is governed by the laws of the United States. The Parties agree that, except as specified below, the exclusive jurisdiction and venue for any dispute regarding interpretation or enforcement of this agreement arising between and among the Parties under this Agreement will be the United States Bankruptcy Court for the District of Delaware. The Parties further agree that the jurisdiction and venue for any dispute arising as to any of the Qui Tam actions under the FCA may also be in an appropriate United States District Court or, if applicable, another Federal Court of competent jurisdiction. Disputes arising under the CIA shall be resolved exclusively under the dispute resolution provision in the CIA. R. No Amendment Except in Writing. This Agreement may not be amended except by written consent of the Parties, provided, however, that only the Debtors and OIG-HHS must agree in writing to any modification of the CIA. S. Qui Tam Actions Treated as Unsecured Claims If Not Dismissed. In the event that any of the Qui Tam Actions is not dismissed with prejudice against the Debtors by the Relators, and with prejudice against the United States, by a final order of a United States District Court, the United States acknowledges that any claim asserted or judgment obtained by a Relator in such action shall be treated as a non-priority, prepetition general unsecured claim under the Plan. The subsequent resolution of any such Qui Tam Action not dismissed with prejudice against the United States shall have no effect on the obligations of the debtor hereunder. T. Incorporation of Prior Stipulations and Orders. The stipulation between the United States and Debtors approved by the Bankruptcy Court on January 18, 2000, and the stipulations and/or orders permitting the assumption of Medicare provider agreements for the facilities listed on Exhibit C, are hereby incorporated by reference; provided, however, that to the extent that -24- such stipulations and/or orders are inconsistent with this Agreement, this Agreement shall supersede them and shall govern the rights of the United States and the Debtors, and without limiting the foregoing, nothing contained in any such stipulation or order shall limit or otherwise modify the scope of any of the releases provided in this Agreement. U. Authority to Execute. The undersigned individuals signing this Agreement on behalf of the Debtors represent and warrant that they are authorized by the Debtors to execute this Agreement. The undersigned United States signatories represent that they are signing this Agreement in their official capacities and that they are authorized to execute this Agreement. V. Execution in Counterparts. This Agreement may be executed in counterparts, each of which constitutes an original and all of which constitute one and the same agreement. W. Binding on Successors. This Agreement is binding on, and shall inure to the benefit of, those who succeed the Debtors or take transfer of or accept assignment of the Debtors' rights on or after the Effective Date. X. Approval by the Bankruptcy Court. The Parties shall cooperate in seeking the approval of this Agreement by the Bankruptcy Court. Y. Discharge. Nothing contained in this Agreement shall be deemed to limit or modify the Debtors' right to a discharge or the scope and effect of the discharge under the Plan; provided, however, that the discharge shall not apply to the obligations which the Debtors have undertaken under this Agreement, and the Plan shall not release any individuals for any liability relating to the Covered Conduct. -25- THE UNITED STATES OF AMERICA ROBERT D. McCALLUM, JR. Acting Assistant Attorney General COLM F. CONNOLLY United States Attorney ELLEN W. SLIGHTS Assistant U.S. Attorney DATED: BY: -------------------------- -------------------------------------- J. CHRISTOPHER KOHN JAMES G. BRUEN, JR. JEANNINE LESPERANCE Commercial Litigation Branch Civil Division United States Department of Justice Tel: (202) 616-2236 Fax: (202) 514-9163 DATED: BY: -------------------------- -------------------------------------- LEWIS MORRIS Assistant Inspector General Office of Counsel to the Inspector General Office of Inspector General United States Department of Health and Human Services DEBTORS -26- DATED: BY: -------------------------- -------------------------------------- SUSAN THOMAS WHITTLE General Counsel and Executive Vice- President Mariner Post-Acute Network, Inc. Mariner Health Group, Inc. DATED: BY: -------------------------- -------------------------------------- THOMAS C. FOX Reed Smith LLP Counsel for Mariner Post-Acute Network, Inc. Counsel for Mariner Health Group, Inc. DATED: BY: -------------------------- -------------------------------------- SCOT T. HASSELMAN Reed Smith LLP Counsel for Mariner Post-Acute Network, Inc. Counsel for Mariner Health Group, Inc. RELATORS LEWIS WESLEY ROBERTS DATED: By: -------------------------- -------------------------------------- LEWIS WESLEY ROBERTS DATED: By: -------------------------- -------------------------------------- Counsel for Lewis Wesley Roberts CINDY LEE ANDERSON RUTLEDGE AND PARTNERSHIP FOR FRAUD ANALYSIS DATED: By: -------------------------- -------------------------------------- CINDY LEE ANDERSON RUTLEDGE -27- DATED: By: -------------------------- -------------------------------------- PARTNERSHIP FOR FRAUD ANALYSIS DATED: By: -------------------------- -------------------------------------- Counsel for Cindy Lee Anderson Rutledge and Partnership for Fraud Analysis DATED: By: -------------------------- -------------------------------------- Counsel for Cindy Lee Anderson Rutledge and Partnership for Fraud Analysis RAFAEL RIVERA DATED: By: -------------------------- -------------------------------------- RAFAEL RIVERA DATED: By: -------------------------- -------------------------------------- Counsel for Rafael Rivera TERRI D. CARROLL DATED: By: -------------------------- -------------------------------------- TERRI D. CARROLL DATED: By: -------------------------- -------------------------------------- Counsel for Terri D. Carroll -28- EDVIN A. NELIUS ROSE MARIE DICKEY DEBORAH LOWMAN PATRICIA ROCHA HELEN SPENCE DATED: By: -------------------------- -------------------------------------- EDVIN A. NELIUS -------------------------------------- ROSE MARIE DICKEY -------------------------------------- DEBORAH LOWMAN -------------------------------------- PATRICIA ROCHA -------------------------------------- HELEN SPENCE DATED: By: -------------------------- -------------------------------------- Counsel for Edvin A. Nelius, Rose Marie Dickey, Deborah Lowman, Patricia Rocha and Helen Spence TERI S. POWELL DATED: By: -------------------------- -------------------------------------- TERI S. POWELL DATED: By: -------------------------- -------------------------------------- Counsel for Teri S. Powell DEBORAH J. WEATHERFORD DATED: By: -------------------------- -------------------------------------- DEBORAH J. WEATHERFORD DATED: By: -------------------------- -------------------------------------- Counsel for Deborah J. Weatherford -29- EXHIBIT A ASSUMED/RETAINED PROVIDERS
MHG ASSUMED/RETAINED PROVIDERS
EXHIBIT B MPAN PROVIDERS ASSUMED AND ASSIGNED TO NEW OPERATORS:
MHG Providers Assumed and Assigned to New Operators:
EXHIBIT C REJECTED/TERMINATED PROVIDERS MPAN REJECTED/TERMINATED PROVIDERS:
MHG REJECTED/TERMINATED PROVIDERS
EXHIBIT D PART B MEDICARE SUPPLIER NUMBERS
Updated as of 11/15/99 AMERICAN PHARMACEUTICAL SERVICES, INC. MEDICAID PROVIDER NUMBERS
EXHIBIT E UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA MARINER HEALTH CARE OF NASHVILLE, ) INC., et al. ) ) Plaintiffs, ) ) v. ) CASE NUMBER 1:98CV02134 (WBB) ) DONNA E. SHALALA, Secretary, ) Department of Health and Human ) Services, ) ) Defendant. ) - ------------------------------------ STIPULATION OF SETTLEMENT AND DISMISSAL THIS STIPULATION OF SETTLEMENT AND DISMISSAL is made this _____ day of _______, 2000, between Donna E. Shalala, the Secretary of Health and Human Services (the "Secretary"); Plaintiff Mariner Health Care of Nashville, Inc. d/b/a Mariner Health of Arlington, Mariner Health of Bethany, Mariner Health of Northeast Atlanta, and Mariner Health of Cypresswood; Plaintiff Fort Worth Medical Investors, Ltd. d/b/a Haltom Convalescent Center ("Haltom"); Plaintiff Mariner Health Care of Florida, Inc. d/b/a Mariner Health of St. Augustine; Plaintiff Mariner Health Care of Orange City, Inc. d/b/a Mariner Health of Orange City; Plaintiff Blue Ridge Nursing Center of Martinsville and Henry County, Inc. d/b/a Blue Ridge Rehabilitation; Mariner Post-Acute Network, Inc. ("MPAN"); Mariner Health Group, Inc. ("MHG"); Liberty Health Care, Inc.; the MPAN Providers (as set forth in Attachment A hereto); the MHG Providers (as set forth in Attachment B hereto); Sun City Center -1- Associates Ltd. (L.P.) d/b/a Sun Terrace Health Care Center ("Sun Terrace"); and the Liberty Providers (as set forth in Attachment C hereto). All of the foregoing shall be referred to collectively herein as the "Parties." The MPAN Providers, the MHG Providers, the Liberty Providers, Haltom, and Sun Terrace will be referred collectively herein as the "Providers." RECITALS WHEREAS, Plaintiffs have brought suit in the Federal District Court of the District of Columbia, Civil Action No. 1:98CV02134 (WBB) (the "Action"), challenging the Secretary's final decision upholding prudent buyer disallowances for Medicare reimbursement purposes of speech therapy ("ST") and occupational therapy ("OT") costs incurred by the Plaintiffs. WHEREAS, Plaintiffs Mariner Health Care of Nashville, Inc., Fort Worth Medical Investors, Ltd., Mariner Health Care of Florida, Inc., and Mariner Health of Orange City, Inc. are (or were, during the relevant time periods) under the common ownership, control, or management of operating subsidiaries of MPAN or MHG or their predecessors. WHEREAS, Plaintiff Blue Ridge Nursing Center of Martinsville and Henry County, Inc. is (or was, during the relevant time periods) under the common ownership, control, or management of Liberty Health Care, Inc. ("Liberty") or its affiliates. -2- WHEREAS, the Providers have appealed prudent buyer disallowances similar to those at issue in the Action, such appeals (the "Appeals") being listed in Attachment D hereto. WHEREAS, Plaintiffs contend that the OT and ST costs at issue in the Action and the Appeals were reimbursable in their entirety. WHEREAS, the Secretary denies any liability to the Plaintiffs and the Providers. WHEREAS, the Parties wish to resolve the disputes which are the subject of the Action without the expense and commitment of resources that may be associated with protracted litigation. WHEREAS, the Parties wish to resolve the properly pending Appeals with no jurisdictional defects, on the same basis as the resolution of the Action. WHEREAS, the Parties also wish to resolve issues relating to the potential application of prudent buyer disallowances to OT and ST costs included in open cost reports other than and in addition to the cost reports that are the subject of the Action or Appeals, including cost reports for MPAN Providers, MHG Providers, and Liberty Providers that are not Plaintiffs. WHEREAS, on January 18, 2000, the MPAN and MHG Providers filed for protection under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware in cases numbered 00-113 and 00-215. -3- NOW THEREFORE, the Parties, intending to be legally bound, hereby enter into the following Stipulation of Settlement and Dismissal (the "Stipulation"), which the Court hereby enters: 1. As used in this Stipulation, the term, "prudent buyer disallowance(s)," shall refer to any Medicare reimbursement disallowance of OT or ST costs (together with any corresponding allocation of General Service costs to such OT or ST costs) on the basis of the "prudent buyer" principle, as set forth in 42 C.F.R. ss. 413.106 or in any manual provisions or directives implementing that regulation; or on the basis that the costs incurred by the provider were nonallowable under 42 C.F.R. ss. 413.9(c)(2) or any manual provisions or directives implementing that regulation; or on the basis that the process, criteria, or method by which the provider selected suppliers of OT or ST services were noncompliant with ss. 2103 of HCFA Pub. 151 or otherwise deficient or improper under that provision; or on the basis that the OT or ST services could or should have been provided by in-house salaried therapists; or on the basis that the provider could or should have attempted to hire inhouse therapists; or on the basis that the costs exceeded (or may have exceeded) the amounts that might have been paid to in-house salaried therapists; or on the basis that the provider otherwise failed to act as a prudent and cost conscious buyer of OT or ST services. -4- 2. The Secretary shall pay the Liberty Providers, and place in administrative freeze for the MPAN and MHG Providers, in accordance with the January 18, 2000 Stipulation in the bankruptcy cases the respective amounts set forth in the final column of Attachment D ,without interest. The aggregate total of such amounts shall be collectively referred to herein as the "Payments". The Payments equal the Medicare reimbursement effect of an eighty five percent (85%) reversal of the prudent buyer disallowances of OT and ST costs at issue in the Action and the Appeals (the "85% Computation"), plus an amount equal to the interest paid by the Providers pursuant to 42 C.F.R. ss. 405.378 on the basis of overpayment determinations resulting from prudent buyer disallowances. Except as provided in Paragraph 3 of this Stipulation, the Payments shall be in full and final satisfaction of the Action and the Appeals filed by the Providers. 3. The Parties acknowledge that notices of program reimbursement ("NPRs") may be or may have been issued that contain prudent buyer disallowances for which the time to file an appeal had not yet expired as of the Effective Date, defined in paragraph 15, of this Stipulation. The Providers shall advise their intermediaries in writing of such NPRs, with a copy to the Office of General Counsel of the Department of Health and Human Services, before the deadline for filing an appeal from the NPR has expired. If there would be no jurisdictional impediments to an appeal from -5- the NPR, the intermediary shall make payment to the affected Liberty Provider, or place an amount in administrative freeze with respect to the affected MPAN or MHG provider in accordance with the January 18, 2000 Stipulation in the bankruptcy cases, based upon the 85% Computation, without interest. Such payment or freeze shall be made within seventy-five (75) days of the intermediary's receipt of notice of the NPR. 4. The Parties acknowledge that certain of the Providers may have existing obligations to repay actual or alleged Medicare overpayments. The Secretary may recoup or offset, without being required to move for relief from the automatic stay at 11 U.S.C. ss. 362, any portion of such overpayments from the portion of the Payments that is attributable to such a Provider; that is, the Secretary may credit the portion of the Payment due to the Provider toward the overpayment obligation. For purposes of this Stipulation, Providers shall be distinguished by their Medicare provider numbers. 5. The Secretary may also: 1) recoup or offset overpayment obligations of any MHG Provider from the Payments due to other MHG Providers, without being required to move for relief from the automatic stay at 11 U.S.C. ss. 362; and 2) recoup or offset overpayment obligations of any MPAN Provider from the Payments due to other MPAN Providers, without being required to move for relief from the automatic stay at 11 U.S.C. ss. 362. -6- 6. Neither the Secretary nor her agents or intermediaries shall reopen or revise cost reports of the Providers for which a notice of program reimbursement was issued prior to the date of entry of this Stipulation to disallow OT or ST costs, on the basis of the "prudent buyer" principle, as described in paragraph 1 above. Nothing in this agreement shall be construed to prevent the Secretary from effecting a reopening or revision on the basis of fraud or similar fault. 7. Within thirty (30) days of receipt of the Payments (or administrative recordation), the Providers shall dismiss the Appeals to the extent that they involve prudent buyer disallowances of the Providers' ST or OT costs that were the subject of the 85% Computation. The Appeals may proceed with respect to issues other than such prudent buyer disallowances of ST or OT costs and with respect to other providers involved in those proceedings. 8. Effective upon receipt of the Payments by the Liberty Providers, and upon administrative recordation of the Payments for MPAN and MHG Providers in accordance with the January 18, 2000 Stipulation in the bankruptcy cases, the Providers release the Secretary and her agents from all Medicare reimbursement claims arising from the prudent buyer disallowances of ST and OT costs that were the subject of the 85% Computation. 9. The Secretary shall make the Payments to the Liberty providers within thirty (30) days after the receipt by the -7- undersigned agency counsel of the District Court's approval of this Stipulation. The Secretary shall administratively record the Payments to the MPAN and MHG providers within thirty (30) days after the undersigned agency counsel has received both the District Court's approval and the Bankruptcy Court's approval of this Stipulation. 10. Neither the Secretary nor her agents or intermediaries shall make any further prudent buyer disallowances of ST or OT costs to the Providers' Medicare cost reports for any cost reporting period beginning before July 1, 1998. Further, any prudent buyer disallowances of ST and OT costs reflected in NPRs for such cost reporting periods issued after the date this Stipulation is executed shall be reversed in their entirety and any monies recouped and interest paid relating to prudent buyer disallowances pursuant to such NPRs shall be refunded to the affected Providers (or placed in administrative freeze in accordance with the bankruptcy Stipulation if it is still effective) within thirty (30) days after the date such disallowance is brought to the attention of the intermediary, without interest. 11. For purposes of determining the facility-specific portions of the Providers' rates during the transition period described in 42 C.F.R. ss. 413.340, the Providers' Medicare allowable fiscal year 1995 costs shall be deemed to include all costs previously removed through prudent buyer disallowances. Thus, the -8- facility-specific portions of the Providers' transition period rates shall be computed as if all prudent buyer disallowances of ST and OT costs for fiscal year 1995 were reversed in their entirety. Adjustment of the Providers' transition period rates pursuant to this paragraph shall be retroactive to the beginning of each Provider's first cost reporting period beginning on or after July 1, 1998. The reimbursement due to the LIBERTY Providers pursuant to these retroactive adjustments shall be paid to the Liberty Providers within ninety (90) days after the receipt by the undersigned agency counsel of the DISTRICT Court's approval of this Stipulation without interest. The reimbursement due to the MPAN and MHG providers shall be recorded in administrative freeze without interest in accordance with the January 18, 2000 stipulation in the bankruptcy cases within ninety (90) days after the undersigned agency counsel has received both the District Court's approval and the Bankruptcy Court's approval of this Stipulation. 12. The Plaintiffs waive any entitlement that they may have to recover interest pursuant to 42 U.S.C. ss. 1395oo(f). 13. This Stipulation does not constitute an admission of fact or law by any of the Parties and shall not affect any rights, claims, duties or obligations the Parties may have with respect to any other issues not covered by this Stipulation. -9- 14. The Parties shall bear their own costs and attorneys' fees. 15. This Stipulation shall be effective on the date (the "Effective Date") on which both of the following are satisfied: (1) the Stipulation has been approved by the United States District Court for the District of Columbia; and, only with respect to the MPAN and MHG Providers, (2) the Stipulation has been approved by a final and non-appealable order of the United States Bankruptcy Court for the District of Delaware in cases numbered 00-113 and 00-215. Execution of this Stipulation by the undersigned counsel for the Plaintiffs shall constitute a dismissal of the Action with prejudice, effective upon the Effective Date, pursuant to Federal Rules of Civil Procedure 41(a)(1)(ii), except that the Parties to this Stipulation shall retain the right to bring or prosecute fully an action in this Court for breach of this Stipulation, or to enforce the terms of this Stipulation. In addition, the MPAN and MGH providers shall retain the right to reinstate this action, only with respect to the claims brought by those providers, in the event that this Stipulation is not approved by the United State Bankruptcy Court for the District of Delaware in cases 00-113 and 00-215. 16. The provisions of this Stipulation shall inure to the benefit of and shall be binding on the heirs, executors, administrators, assigns, or successors in interest of the Parties. -10- 17. MPAN represents and warrants that it has the authority to execute this Stipulation and to bind the MPAN Providers. MHG represents and warrants that it has the authority to execute this Stipulation and to bind the MHG Providers. Liberty represents and warrants that it has the authority to execute this Stipulation and to bind Plaintiff Blue Ridge Nursing Center of Martinsville and Henry County, Inc., Liberty, and the Liberty Providers. The general partner of Sun Terrace and Haltom represents and warrants that he has the authority to execute this Stipulation and to bind those Providers. The undersigned counsel for the Defendant represent and warrant they have the authority to execute this Stipulation and to bind the Department of Health and Human Services, including the Health Care Financing Administration and all Medicare intermediaries. Respectfully submitted, - ------------------------------------- ------------------------------------- MICHAEL H. COOK WILMA A. LEWIS Unified Bar No. 281097 D.C. Bar No. 358637 NIKOLAUS F. SCHANDLBAUER United States Attorney Unified Bar No. 434314 JENKENS & GILCHRIST a Professional Corporation 1919 Pennsylvania Avenue, N.W. Suite 600 ------------------------------------- Washington, D.C. 20006-3404 MARK E. NAGLE ###-###-#### D.C. Bar No. 416364 Counsel for Plaintiffs Assistant United States Attorney -11- - ------------------------------------- ------------------------------------- GLENN P. HENDRIX LAWRENCE J. HARDER Georgia Bar No. 346590 Health Care Financing Division ASHLEY M. STEINER Office of the General Counsel Georgia Bar No. 678211 United States Department of ARNALL GOLDEN & GREGORY, LLP Health and Human Services 1201 W. Peachtree Street C2-03-25, Central Bldg. Suite 2800 7500 Security Boulevard Atlanta, Georgia 30309-3450 Baltimore, Maryland ###-###-#### ###-###-#### ###-###-#### Counsel for Plaintiffs SONIA M. ORFIELD Health Care Financing Division Office of the General Counsel United States Department of Health and Human Services 330 Independence Ave., S.W. Room 5309, Cohen Building Washington, D.C. 20201 ###-###-#### Counsel for the Secretary Mariner Health Group, Inc. By: ---------------------------------- Its: --------------------------------- Mariner Post-Acute Network, Inc. By: ---------------------------------- Its: --------------------------------- -12- Liberty Health Care, Inc. By: ---------------------------------- Its: --------------------------------- Fort Worth Medical Investors, Ltd. By: ---------------------------------- Its: --------------------------------- Sun City Center Associates Ltd. (L.P.) By: ---------------------------------- Its: --------------------------------- This Stipulation of Settlement and Dismissal is hereby APPROVED this ______ day of ________________. United States District Judge -13-
