By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, Ma.
A Health Care Provider Defense and Compliance Firm

The U.S. Attorney’s Office, in collaboration with the Massachusetts Attorney General’s Office, has filed a lawsuit under the federal and Massachusetts False Claims Acts against RegalCare Management Group, LLC, RegalCare Management 2.0, LLC, and 19 skilled nursing facilities (SNFs) in Massachusetts and Connecticut. The complaint also names RegalCare’s owner, Eliyahu Mirlis; executive, Hector Caraballo; and consulting firm, Stern Therapy Consultants (Stern) as key defendants in a scheme that allegedly defrauded Medicare and Medicaid of millions of dollars.

The Allegations: Profit Over Patient Care

From 2017 to 2023, RegalCare allegedly billed for unnecessary skilled rehabilitation therapy services, prioritizing high reimbursement rates over patient need. The scheme involved:

• Inflating therapy hours to bill Medicare for the highest-level services—often without regard for whether patients needed or benefitted from them.
• Pressuring therapists to provide unnecessary care.
• Falsifying medical records to justify higher billing levels.
• Directing billing companies to submit claims for incomplete and undocumented services.
• Engaging in improper arrangements with a therapy consultant (Stern) to maximize fraudulent claims.

RegalCare is accused of manipulating clinical documentation, coercing therapists, and billing Medicare before necessary documentation was completed. The systemic fraud allegedly resulted in millions in false claims to Medicare and Medicaid.

The Government’s Case

The False Claims Act prohibits submitting or causing the submission of fraudulent claims to the government. The complaint asserts that RegalCare’s executives directed a deliberate scheme to exploit the reimbursement system. Among the most serious allegations:

• Mirlis and Caraballo directed billing at the highest reimbursement level, regardless of patient needs.
• Caraballo altered patient records to increase reimbursement, even when documentation did not support it.
• Stern Therapy Consultants pressured therapists to comply with unnecessary treatments, threatening job security.

In some instances, when therapists refused to provide medically unnecessary services, Stern allegedly retaliated by threatening their employment.

Regulatory Violations and Consequences

The complaint alleges violations of the federal and Massachusetts False Claims Acts, which could lead to:

• Treble damages (triple the amount of fraudulent claims)
• Civil penalties for each false claim submitted
• Possible criminal liability

If found liable, RegalCare and its executives could face tens of millions in financial penalties and be excluded from federal healthcare programs.

The Government’s Message: Accountability Matters

U.S. Attorney Leah B. Foley emphasized that this type of fraud does not just cost taxpayers money—it puts vulnerable patients at risk:

“These defendants drained Medicare and Medicaid of millions of dollars and put vulnerable patients at risk—making them undergo unnecessary, and sometimes painful, services.”

Massachusetts Attorney General Andrea Joy Campbell added:

“My office will continue to work aggressively to protect our elders and hold companies accountable that seek to harm them or violate our false claims laws.”

HHS-OIG echoed the government’s commitment to preventing fraud in skilled nursing facilities.

A Call to Action for SNFs and Healthcare Providers

This case serves as a stark warning to skilled nursing facilities, therapy providers, and healthcare executives. Fraudulent billing practices carry severe legal, financial, and reputational consequences. Here’s what providers should take away from this case:

• Audit Your Billing Practices: Ensure all services billed to Medicare and Medicaid are medically necessary and properly documented.
• Train Staff on Compliance: Educate employees on False Claims Act violations and whistleblower protections.
• Implement Internal Safeguards: Use independent audits to review claims before submission.
• Encourage Ethical Reporting: Establish a compliance hotline for employees to report fraudulent activity without fear of retaliation.

Ensure Compliance Before It’s Too Late

If you’re a healthcare provider, SNF operator, or therapy consultant, now is the time to review your compliance policies and medical records to assure compliance with payer mandates. Don’t wait for the government to knock on your door.

At Parrella Health Law, we help providers navigate compliance challenges and avoid costly legal battles. If you have questions about billing practices, regulatory compliance, or fraud prevention, contact us today at 857.328.0382 or Chris directly at cparrella@parrellahealthlaw.com.