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By Modern Healthcare    October 3, 2011

Select Medical Holdings Corp., which operates 81 specialty and long-term acute-care hospitals in states across the country, has agreed to settle fraud allegations and enter a corporate integrity agreement. HHS’ inspector general’s office published the five-year integrity agreement, while records on file in the U.S. District Court in Columbus, Ohio, show the company has agreed to pay an undisclosed sum to resolve the allegations of a former employee, Beatrix Maitland.Maitland alleged in a False Claims Act lawsuit in 2007 that Select made clinical decisions on patients’ lengths of stays in rehabilitation hospitals based on weekly reports on patients’ insurance reimbursements, regardless of medical need. The government recently intervened in some of Maitland’s claims, but the court records that stipulate exactly which claims remained under seal.

The motion did not reveal the settlement amount. Neither the Justice Department nor the company would provide the agreement. In an August filing with the Securities and Exchange Commission, Select said it recorded a pre-tax charge of $7.5 million to establish a settlement reserve that represents the company’s “best estimate of a probable settlement.”

The company would not comment on the allegations. “We cannot discuss this issue, but we can say that we have a robust compliance program aimed at continuous improvement of our compliance practices,” company spokesman Edwin Bodensiek said in an e-mail.

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