Comprehensive Healthcare backed out of multimillion dollar settlement in civil case

The embattled company whose executives are facing criminal charges of health care fraud agreed to settle a U.S. Department of Labor civil claim against it for $15 million before reneging on the deal in September, the federal agency said in a court filing.

Before walking away from the deal, Comprehensive Healthcare Management Services LLC told Labor Department attorneys that several of its facilities were financially “on the brink of collapse already.”

Comprehensive operates 15 nursing and rehabilitation facilities across Western Pennsylvania. They include Brighton Rehabilitation and Wellness Center in Beaver County, site of one of the nation’s deadliest covid-19 outbreaks, and facilities in Canonsburg, Cheswick, Greenville, Harmony, Irwin, Latrobe, Monroeville, Mt. Lebanon, Murrysville, New Castle, New Wilmington and Washington.

The Labor Department sued Comprehensive in 2018, accusing the company of violating the federal Fair Labor Standards Act.

In September, according to a series of emails attached to Labor Department court filings, attorneys for Comprehensive agreed to a $15 million settlement of that case — with $10 million to be paid out within 90 days and the rest to be paid quarterly over three years.

However, according to a Department of Labor filing from last month, Comprehensive backed out of the settlement agreement.

“It is clear from your email that defendants and their counsel negotiated with the (Labor Department) in bad faith, as a delay tactic,” Labor Department attorney Ryma N. Lewis wrote to Comprehensive in a Sept. 20 email.

Three attorneys representing Comprehensive Healthcare did not return messages seeking comment.

After backing out of the proposed settlement agreement, Comprehensive filed a motion to temporarily stop proceedings in the civil case while the criminal case against it is pending. In the motion, the company said the two cases are too closely intertwined, and that the defendants in the civil case can’t properly defend themselves because of the danger of self-incrimination.

On Thursday, U.S. District Judge William Stickman IV denied Comprehensive’s motion.

“It is difficult for the court not to view defendants’ motion to stay as anything other than a delay tactic,” he wrote. “Regardless of the amount of damages at issue, the court is of the firm opinion that the harm from further delay is significant.”

Stickman said the Labor Department case involves thousands of employees, thousands of patients and residents, and their families.

The department has said it is seeking full relief of $40 million, according to court documents.

The Labor Department said in its 2018 civil complaint that Comprehensive over the past four years had failed to pay employees at its facilities for working overtime or maintain accurate records of wages and hours worked.

While that case was pending, the FBI, the U.S. Department of Health & Human Services, the Pennsylvania Attorney General’s Office and the Internal Revenue Service were conducting their own criminal investigation into Comprehensive.

In February 2021, a federal indictment was returned against one employee, Susan Gilbert, the former nursing administrator at Mt. Lebanon Rehabilitation and Wellness Center Mt. Lebanon Rehab.

Then, in August, the U.S. Attorney’s office announced a superceding indictment in that investigation, charging four more defendants, including Comprehensive owner and CEO Sam Halper and managers at Brighton Rehab and Mt. Lebanon Rehab, in the case. The office accused them of engaging in two schemes to drive up profits, including manipulating time sheets and time clocks to make it appear that the facilities were meeting state and federally mandated staffing requirements.

They also were accused of manipulating patient treatment and medical records to obtain higher reimbursements than were owed.

Separately, state Attorney General Josh Shapiro confirmed an ongoing investigation into Brighton Rehab and its handling of the covid-19 pandemic. No charges have been filed. At least 76 residents and staff members died there in one of the country’s deadliest outbreaks.

Documents in the Labor Department’s civil case said the trial had been scheduled to get underway on Nov. 7, but the parties notified the court on Sept. 7 that they were involved in ongoing settlement discussions that included a monetary settlement.

Emails attached to a Labor Department filing showed the government offered a settlement figure of $19 million. Comprehensive attorney Catherine A. Cano countered in an Aug. 24 email with an offer of $14.2 million.

“Our primary concern is working out a deal that will allow (Comprehensive) to stay in business and make the payments outlined in any agreement. The facilities are struggling financially and have heavily relied on stimulus money to keep them afloat,” Cano wrote then.

“Several facilities are on the brink of collapse already,” Cano added. “The dollars that (Comprehensive) would be willing to pay in the near future as part of a settlement are unlikely to be available by the time we would have a final judgment in this case. We believe the facilities will be forced into bankruptcy if (the Labor Department) recovers the damages it seeks, and there will be minimal remaining dollars for collection.”

Cano said that even the settlement offers were “truly a stretch for (Comprehensive) and they are close to the breaking point, if not already there.”

In an Aug. 31 email, the Labor Department attorney Lewis summarized the settlement discussion to that point — including a Comprehensive settlement offer of $15 million.

The parties filed a joint motion to stay the case on Sept. 7, noting they had agreed to a monetary settlement. Stickman granted the stay through Sept. 21.

On Sept. 20, the Labor Department filed a motion alleging that Comprehensive was trying to retract the settlement agreement.

Attorneys for Comprehensive said in a Sept. 20 email to Labor Department attorneys that they thought it was “fundamentally unfair” for them to try to leverage the criminal case against the company to secure a settlement in the civil case. Comprehensive also accused the government of failing to disclose what it said would be “non-negotiable provisions” in the settlement agreement.

The Labor Department is seeking to move the case to trial.

“Justice would not be served by enabling (Comprehensive) to rely on their alleged criminal conduct to effectively shield themselves from civil liability,” the government wrote.