Date: November 30, 2012
Re: Government Lawsuit

Today, Life Care learned that the United States government has brought a civil suit against the Company in federal court. The lawsuit alleges that Life Care made false claims to Medicare for medically unnecessary rehabilitation therapy services. Life Care strongly disagrees with the allegations and will vigorously defend its therapy programs and the care provided by the medical professionals involved.

According to the allegations, Life Care provided more rehabilitation therapy than was necessary. Contrary to the government's allegations, Life Care's therapy programs improve patients' conditions and their quality of life. This belief is supported by medical literature, studies, and Life Care's first-hand experience in observing the progress of patients who receive high intensity therapy.

Based on data and information from its skilled nursing facilities where high intensity therapy is provided to patients, Life Care also believes that such therapy actually saves the government money. Life Care's analysis reveals that high-intensity therapy allows patients to reach their clinical goals and to be discharged from the nursing facilities more quickly than if the patients had not received this therapy, which ultimately reduces Medicare spending. Life Care's analysis of publicly available information regarding lengths of stay and corresponding payment information indicates that Life Care's practices have resulted in significant savings to the Medicare program - potentially $400 million for the time period 2006-2010.

This lawsuit's allegations second guess, after-the-fact, the trained medical professionals who prescribed the level of care provided to Medicare beneficiaries. Indeed, independent physicians order therapy services according to individualized treatment plans created for each patient in consultation with a patient's physical, occupational, and/or speech therapists. These independent physicians and therapists all are duly licensed by the state and are bound by ethical obligations. Life Care supports the decisions made by these professionals and stands by the care it has provided to residents.

The allegations in the government's lawsuit are similar to those included in a December 2010 report issued by the Department of Health and Human Services Office of Inspector General, titled "Questionable Billing by Skilled Nursing Facilities." Notably, the skilled nursing facility providers who were the focus of that report (Life Care was not included among them) challenged the report's allegations through the established administrative appeals procedures and the results significantly undermined and disproved the report's allegations.

This lawsuit against Life Care appears to be the latest attempt by the federal government to target companies that provide rehabilitation therapy services in the skilled nursing setting. The government is engaging in aggressive efforts to restrict health care costs, which in principle is a noble goal. However, instead of using administrative procedures established for this purpose, the government is relying upon procedural shortcuts and escalating policy disagreements to allegations of fraud.

Life Care is grateful for your continuing commitment to quality care in an environment of compassion.

Life Care Centers of America