The Ensign Group announced that it has reached a settlement agreement in principle with the U.S. Department of Justice to resolve and conclude the previously disclosed investigation and ancillary claims which have been pending since 2006. In connection with the settlement, Ensign expects to enter into a corporate integrity agreement with the Office of Inspector General-HHS, and make a single lump-sum payment to the government to resolve allegations that Ensign was overpaid by federal healthcare programs. In anticipation of the settlement, the company recorded a $15M charge in Q4, and will increase its reserve by an additional $33M in Q1, representing a total reserve of $48M to satisfy the tentative settlement obligation. The company expects to remit the alleged settlement amount to the government in Q2 or Q3. Ensign has denied engaging in any illegal conduct, and has agreed to the settlement amount without any admission of wrongdoing in order to resolve the allegations and to avoid the uncertainty and expense of protracted litigation. The company does not expect the settlement and remittance to have a material adverse effect on the company's long-term financial position, business plan or prospects; however, the resolution will have an impact on the company's GAAP results of operations and cash flows for FY13.
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