Watermark Retirement Communities to Pay $4.25 Million for Allegedly Receiving Kickback in Violation of the False Claims Act

NEWARK, N.J. – The Arizona-based operator of a senior living community has agreed to pay $4.25 million to resolve allegations that it violated the False Claims Act by soliciting and receiving a kickback from a nationwide home health agency (HHA) operator in order to facilitate referrals from Watermark retirement homes.

Watermark Retirement Communities LLC is a senior living community operator based in Tucson, Arizona, that manages 79 retirement homes across the country. The United States alleged that the HHA operator purchased two of Watermark’s HHAs in Arizona to induce referrals of Medicare beneficiaries living in Watermark residential communities.

The scheme was designed around eight Watermark retirement homes in five states (Arizona, Connecticut, Delaware, Florida, and Pennsylvania), where the two companies had overlapping operations. The United States alleged that from Jan. 1, 2014, through Oct. 31, 2020, Watermark caused the HHA operator to submit false claims for payments to Medicare for services provided to Medicare beneficiaries referred as a result of the kickback transaction. The Antikickback Statute prohibits parties who participate in federal health care programs from knowingly and willfully soliciting or receiving any remuneration in return for referring an individual to, or arranging for the furnishing of any item or services for which payment is made by, a federal health care program.

“It is imperative that decisions about the care provided to federal health care beneficiaries are not undermined by the payment of kickbacks,” Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, said. “Today’s resolution demonstrates that the Department is committed to holding accountable not only those who offer kickbacks but also those who receive them.”

The settlement announced today includes the resolution of claims brought under the qui tam, or whistleblower, provisions of the False Claims Act by David Freedman, who was the former director of strategic growth for the HHA operator between 2009 and 2016. The qui tam provisions permit a private party to file an action on behalf of the United States and receive a portion of any recovery. As part of today’s resolution with Watermark, Freedman will receive approximately $765,000. In September 2021, the HHA operator entered into a $17 million settlement with the United States to resolve the claims against it arising out of the same transaction, meaning that the qui tam has resulted in recoveries exceeding $21.25 million.

The resolution obtained in this matter was the result of a coordinated effort between the United States Attorney’s Office for the District of New Jersey, and the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, with assistance from the U.S. Department of Health and Human Services Office of Inspector General. 

The investigation and resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The matter was handled by Assistant U.S. Attorney Jordann Conaboy of the U.S. Attorney’s Office for the District of New Jersey, as well as Trial Attorneys Daniel Meyler and Samson Asiyanbi of the Fraud Section.

The case is docketed as United States ex rel. Freedman v. Bayada Home Health Care, Inc., Civ. No. 17-6267 (D.N.J.).

The claims resolved by the settlement are allegations only and there has been no determination of liability.