Kindred Healthcare Inc. has agreed to a $125 million settlement with the United States Department of Justice over an investigation in the therapy services company it acquired in 2011.

Kindred is the largest provider of post-acute services in the country which has availed RehabCare Group Inc. RehabCare is known to have contracted with more than 1,000 nursing homes in 44 states to provide rehabilitation therapy to their patients and since the acquisition in 2011, the company has been operating under Kindred.

Now, Rehabcare is facing a lawsuit for allegedly violating the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit claims to Medicare for rehabilitation therapy services that were not reasonable, necessary, or that never occurred.

As per Business Insurance, two whistleblowers filed the original lawsuit against RehabCare: Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare.

In the lawsuit, it was stated that RehabCare scheduled therapies to achieve maximum reimbursement regardless of the clinical needs of its patients. Some of which that purportedly took place was that RehabCare reported for therapy even after patients' treating therapists had recommended their discharge. Skilled therapy had also been provided to patients who were sleeping or otherwise unable to go or benefit from therapy. Furthermore, this scam placed patients the highest therapy reimbursement levels rather than determining their levels of care based on individualized evaluations, Modern Health Care reports.

As such, customers had to submit improperly inflated bills to Medicare that included unnecessary services done by RehabCare.

Facing all these federal charges, Kindred has stepped up to assist in taking responsibility of its subsidiary. The company expects to make the payment on the settlement during the first quarter of this year. RehabCare, though having reached the settlement, remains adamant in denial on engaging in any illegal activities.

Meanwhile, as in successful whistleblower cases, whistleblowers are entitled to a portion of the money recovered by the government. Purportedly for this case, Halpin and Fahey will receive a total of nearly $24 million.