Staff Builders pays $4.7M in MA settlement; OH judge drops claims
July 12, 1999 3 minutes read
Staff Builders pays $4.7M in MA settlement; OH judge drops claims
By KAREN PIHL-CAREY
HHBR Staff Writer
Staff Builders (Lake Success, NY) knocked out two potential courtroom headaches last week.
Just as the company settled with Massachusetts over payments mistakenly billed to the state, an Ohio judge dismissed allegations that the company was depriving franchisees of their legal rights.
In the first case, the company has agreed to repay Massachusetts $4.7 million for payments mistakenly billed to the state Medicaid program instead of the federal Medicare program. It originally billed $8.5 million, state officials told the Wall Street Journal. But the state could only recoup the amount that it could have recovered under a Medicare review and appeals process. Still, it is the state’s largest recovery since it began auditing healthcare providers for such mistakes in 1989.
Connecticut is also auditing the company for the same reason, and it’s possible there are others. Staff Builders’ annual report said that in the quarter ended Nov. 30 it had set aside $11 million for state liability payments, but it did not say for which states. The report also said that the company may owe the federal government $17 million, and the company’s auditors expressed doubt that the company could remain in business.
"The company’s losses from operations, working capital deficiency and non-compliance with the terms of its secured credit facility raise substantial doubt about its ability to continue as a going concern," stated Deloitte & Touche (New York) in a letter attached to the annual report.
The company’s corporate office did not return phonecalls, and its spokeswoman, Anne Gregory, told HHBR that Staff Builders officials will not issue any statements or comment on the settlement. But the company’s annual report suggests that company officials believe the erroneous billing has to do with different interpretations of confusing reimbursement rules.
"As a home healthcare provider, the company is subject to extensive and changing state and federal regulations relating to the licensing and certification of its offices and the sale and delivery of its products and services," it stated. "The federal government and Medicare fiscal intermediaries have become more vigilant in their review of Medicare reimbursements to home healthcare providers generally, and have become more restrictive in their interpretation of those costs for which reimbursements will be allowed to such providers."
Staff Builders will repay Massachusetts in increments, allowing Medicaid to reduce payments by 25%.
In the Ohio case, a U.S. District Court judge dismissed virtually all claims in a lawsuit brought against the company by 6100 Cleveland Inc. The judge dismissed the federal Racketeer Influenced Corrupt Organizations Act claims and all claims against individual corporate officers, eliminating $75 million in claims for treble damages.
The Ohio federal court previously had dismissed wrongful termination claims by 6100, denying an application for a temporary restraining order to prevent Staff Builders from terminating certain franchise agreements and taking over operations of offices in Cleveland and Columbus, OH.
Other Ohio companies, former franchisees Orsinger Enterprises and First Choice Medical Staffing, have filed similar lawsuits against the company seeking to recover damages alleging unpaid royalties, wrongful terminations, breach of contract, and other damages.
"Staff Builders has appropriately pursued its contractual rights under the franchise agreements," said Staff Builders Vice President/General Counsel Renee Silver, who added that there is no basis for these claims. In response to the judge dismissing 6100’s claims, Silver said: "We expect that the other lawsuits alleging similar claims will have the same result."
Staff Builders now plans to pursue sanctions and counterclaims against the plaintiffs and their attorneys.
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