Annual report pursuant to Section 13 and 15(d)

Commitments And Contingencies

Commitments And Contingencies
12 Months Ended
Dec. 31, 2011
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

10. Commitments and Contingencies


The Company is involved in various legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, management believes the outcome of pending litigation will not have a material adverse effect, after considering the effect of the Company's insurance coverage, on the Company's consolidated financial statements.

On May 12, 2010, the Company received a letter from the United States Senate Finance Committee in response to an April 26, 2010 article in The Wall Street Journal entitled "Home Care Yields Medicare Bounty." The letter from the Senate Finance Committee asked the Company to provide documents and data related to the issues referenced in The Wall Street Journal article. On June 25, 2010, the Company completed its response to the Senate Finance Committee's letter. On October 3, 2011, the Senate Finance Committee issued a report with its findings. At this time, the Company is unable to predict whether any further actions will result from this matter.

On July 16, 2010, the Company received a subpoena from the Securities and Exchange Commission ("SEC") that included a request for documents related to the Company's participation in the Medicare Home Health Prospective Payment System, as well as the documents and information produced in response to the Senate Finance Committee's investigation set forth above. The Company produced the documents requested by the initial subpoena, produced additional documents requested by the SEC as part of its review, and continues to cooperate with the SEC's review. The Company cannot predict the outcome or effect of this investigation, if any, on the Company's business.

On October 17, 2011, the Company received a subpoena from the Department of Health and Human Services Office of Inspector General (the "OIG"). The subpoena requests documents related to patients who received service from two of our locations in the State of Oregon and some additional documents related to our agencies in Oregon, Washington and Idaho. The Company will produce the requested documents and will cooperate with the OIG's review in this matter. The Company cannot predict the outcome or effect of this review, if any, on the Company's business.

Except as discussed above, the Company is not aware of any pending or threatened investigations involving allegations of potential wrongdoing.

Settlement Agreement with the United States of America

On September 30, 2011, the Company announced that it had entered into a settlement agreement with the United States government to resolve an investigation the Company first announced on July 13, 2009. The investigation resulted from a qui tam complaint filed by a relator against the Company under the whistleblower provisions of the False Claims Act, 31 U.S.C. sections 3729-3733 (the "False Claims Act"). Pursuant to the settlement agreement, the Company paid the United States $65 million ("settlement amount") in a single lump sum payment. In exchange for the payment of the settlement amount, the United States and the relator released the Company from any civil or administrative monetary claim under the False Claims Act for the covered conduct. The released covered conduct includes claims involving home health services rendered by the Company from 2006 to 2008 with regard to whether such home health services were either not medically necessary or were delivered to patients who were not homebound. The OIG also agreed to release and refrain from instituting, directing or maintaining any administrative action seeking to exclude the Company from Medicare, Medicaid and other federal health care programs with respect to the covered conduct described above.


The government did not find that all aspects of the relator's complaint deserved intervention, including homebound and medical necessity claims for 2005 and coding related claims for 2005 through 2008. The Company reached an agreement in principle to settle these non-intervened claims for $1.0 million with the relator and the government. Upon final approval of the agreement in principle, the Company expects to enter into a settlement agreement with regard to these non-intervened claims. In connection with this settlement, the Company recorded an accrual of $1.0 million in the current quarter.

Effective September 29, 2011, the Company entered into a five year Corporate Integrity Agreement ("CIA") with the OIG. The CIA formalizes various aspects of the Company's already existing ethics and compliance programs and contains other requirements designed to help ensure the Company's ongoing compliance with federal health care program requirements.

Joint Venture Buy/Sell Provisions

Most of the Company's joint ventures include a buy/sell option that grants to the Company and its joint venture partners the right to require the other joint venture party to either purchase all of the exercising member's membership interests or sell to the exercising member all of the non-exercising member's membership interest, at the non-exercising member's option, within 30 days of the receipt of notice of the exercise of the buy/sell option. In some instances, the purchase price is based on a multiple of the historical or future earnings before income taxes and depreciation and amortization of the equity joint venture at the time the buy/sell option is exercised. In other instances, the buy/sell purchase price will be negotiated by the partners and subject to a fair market valuation process. The Company has not received notice from any joint venture partners of their intent to exercise the terms of the buy/sell agreement nor has the Company notified any joint venture partners of its intent to exercise the terms of the buy/sell agreement.


The laws and regulations governing the Company's operations, along with the terms of participation in various government programs, regulate how the Company does business, the services offered and its interactions with patients and the public. These laws and regulations and their interpretations, are subject to frequent change. Changes in existing laws or regulations, or their interpretations, or the enactment of new laws or regulations could materially and adversely affect the Company's operations and financial condition.

The Company is subject to various routine and non-routine governmental reviews, audits and investigations. In recent years, federal and state civil and criminal enforcement agencies have heightened and coordinated their oversight efforts related to the health care industry, including referral practices, cost reporting, billing practices, joint ventures and other financial relationships among health care providers. Violation of the laws governing the Company's operations, or changes in the interpretation of those laws, could result in the imposition of fines, civil or criminal penalties, and/or termination of the Company's rights to participate in federal and state-sponsored programs and suspension or revocation of the Company's licenses. The Company believes that it is in material compliance with all applicable laws and regulations.