A federal judge in St. Paul this week gave a whistleblower the green light to begin gathering evidence in support of her allegations that the nation's largest nursing-home operator and contract physical therapy company have been submitting false Medicare and Medicaid claims for years.

The suit was filed under seal in 2008 by Ricia Johnson, an Elk River woman who formerly worked as an occupational therapy assistant for Aegis Therapies Inc. at Golden LivingCenter-Hillcrest of Wayzata.

It's uncertain how much money's at stake. If the case is limited to alleged billings at Hillcrest, it could amount to hundreds of thousands of dollars. But if the plaintiffs are allowed to pursue similar allegations at the defendants' other facilities nationwide, it could be many times that, said Jonathan Bye, an attorney with Linquist & Vennum in Minneapolis representing the plaintiffs.

Johnson and her current employer, Health Dimensions Rehabilitation, filed the case on behalf of the government, but if they're successful they would stand to share in any judgment.

The defendants are represented by Tom Heffelfinger, a former U.S. attorney for Minnesota who now heads the white-collar criminal and regulatory defense practice at Best & Flanagan. He declined to comment on the suit, but said his clients will vigorously defend themselves against what he called "meritless allegations."

The allegations

Aegis provides rehabilitation services at more than 1,000 nursing homes in 37 states and the District of Columbia. Golden Gate, based in Little Rock, Ark., operates more than 330 skilled nursing-care centers around the country, has 17 assisted-living centers in Minnesota and about 21 in other states.

Johnson alleges that the defendants billed the government for therapy services that weren't provided to the nursing home's residents while she worked at Hillcrest from October 2004 through March 2007.

"Except on a very sporadic basis, there were no physical therapists or occupational therapists in the Wellness Center with Johnson, and her work was not reviewed or supervised by a physical therapist or occupational therapist, except as part of occasional general job performance reviews," the suit alleged.

"In some instances, Johnson witnessed Aegis' physical therapists negotiating over who would get to claim Johnson's time as their own that day in order to meet Aegis-established individual productivity goals," the suit said.

It says Aegis improperly billed Golden Living for unsupervised, unskilled activities, and Golden Living filed for reimbursement from Medicare and Medicaid. It also alleges that the company improperly billed for group therapy that didn't qualify for reimbursement.

She said therapists were encouraged to arrange for more "therapy" than was medically necessary to keep the money coming. In some cases, she alleges, the therapy was so intensive that it actually harmed the patients.

The lawsuit also alleges that similar practices took place at eight other facilities in Minnesota, as well as the rest of their nursing homes nationwide.

Heffelfinger said that Health Dimensions is a competitor that was using the lawsuit in an attempt to gain a competitive advantage.

Johnson and her employer want the court "to approve a fishing expedition involving literally millions of documents at 333 facilities around the country, plus innumerable more in a centralized document retention facility that is the size of a Wal-Mart without any time limitations whatsoever," Heffelfinger argued at a hearing in December.

Bye acknowledged at the hearing that his clients don't know exactly how Golden Gate billed the government, as Johnson didn't work in the billing department. But he said her allegations raise a "plausible inference" that allegedly false claims were submitted, and that's all the law requires.

"I mean, she certainly had personal knowledge of what was going on. She was the person providing the services which she was not licensed to provide," Bye said.

Dan Browning • 612-673-4493