Sunday, December 17, 2017

DOJ Drops ManorCare Suit

The Carlyle Group breathed a sigh of relief after AG Jeff Sessions' Department of Justice dropped a False Claims Act lawsuit against HCR ManorCare with potential damages over $500 million. 

Carlyle purchased ManorCare for $6.3 billion in 2007.  Carlyle sold the buildings in 2010 to HCP for $6.1 billion, which then spun them off to QCP in 2016 to isolate its shaky portfolio.   

ManorCare has been on life support.  Two months ago it owed over $300 million in late rent to QCP.  How much will the DOJ's dropping of the suit help ManorCare's finances?  Will it enable Carlyle to salvage something from ManorCare's nearly lifeless husk?  The Carlyle Group, a private equity underwriter (PEU), shows ManorCare as a current investment on its website.

Whistleblower Attorney Jeff Downey wrote of his disappointment in DOJ's action:

"DOJ had obtained compelling evidence of fraud. Defendants had admitted to a 100% increase in their Ultra high billing level, the most expensive level of therapy services billable to Medicare. ManorCare had produced documents which showed that their administrators improperly attempted to influence the billing levels of therapists, with one stating, “if they have a pulse, they can get an RU” (the highest level of reimbursement). One Regional managers explained that “everyone should be an RU when they come in.” ManorCare even had training that depicted Medicare as a series of credit cards being handed to ManorCare and portrayed a fictional superhero named “Super RU.” 
Former AG Eric Holder would not pursue cases against banks as their failure would add to unemployment and harm the economy.  Did Session's "Just Us" Department do likewise for an imploding ManorCare and its "more than 50,000 employees"?

Surely Carlyle pulled billions more from ManorCare in special dividends, management and deal fees which contributed to its current predicament.  ManorCare CEO Paul Ormond received nearly $200 million when it sold to Carlyle.  How much more did he take from the company in the last decade before he stepped down?

Ethically QCP should go after Carlyle and Ormond for back rent, given their profitgasm deals.  However, the law is set up to protect Super PEUs.  The federal wallet exists to enrich the stinking rich, even on the backs of senior citizens with a pulse.

Nearly one year ago, Carlyle co-founder David Rubenstein met with President elect Donald Trump.

President-elect Donald Trump met Wednesday (12-28-16) with financier David Rubenstein.  The meeting at Trump’s Mar-a-Lago resort in Florida was among several post-holiday conversations between Trump and health care executives and agriculture secretary candidates.
Did Trump tell Rubenstein when punched to punch back twice as hard?  ManorCare did just that by asking the DOJ to pay its legal fees.  Did David ask Donald to make the ManorCare suit disappear?

Whatever happened, the suit is gone and ManorCare is financially better off as a result.

Correction 12-18-17:  ManorCare's number of employees has been corrected from 30,000 to "more than 50,000."  ManorCare serves 30,000 patients.  My apology for this error.