Richard Cheng, general counsel of Senior Care Centers, says his new colleagues were perplexed when the company hired him last year.

It’s rare for long-term health-care companies to have in-house counsel, he explains — an irony since the industry is heavily regulated. Dallas-based Senior Care Centers is one of the few long-term care companies with a general counsel, Cheng says, so when he joined the team, his colleagues had to ask, “Why is he valuable?”

But now Cheng’s co-workers recognize the benefits that flow from the company’s first and only lawyer. He says they treat him as “a point person and a resource for all departments.” They can get answers to their legal questions any time, and they bounce business ideas off Cheng to get feedback from a legal perspective, he says.

“They have as much time as they want with me,” says Cheng, noting that he doesn’t bill per hour as did the outside counsel who previously helped with such questions.

Aside from being the No. 1 legal resource for the board of directors, company leadership and all departments, Cheng manages a medical appeals department that he created to appeal denied Medicare claims; drafts and reviews contracts; and works with insurance providers to oversee litigation in general liability, professional liability and employment cases.

Cheng earned a bachelor’s degree and master’s degree in occupational therapy from Texas Tech University in 1999. From 1999 to 2003, he worked as an occupational therapist at various companies in Dallas. He continued doing so part time while attending law school, earning his degree in 2006 from Nova Southeastern University Shepard Broad Law Center in Fort Lauderdale, Fla.

“I really didn’t see myself as an occupational therapist forever,” says Cheng. “Really, I wanted to go to law school to open up opportunities.”

Cheng moved to Minneapolis to become a staff attorney doing corporate due-diligence work at Thomson Reuters, a publication company, from 2006 to 2007. He and another staff attorney left in 2007 to form their own law firm, Hoss & Cheng. There, Cheng did business transactional work and commercial litigation.

After a larger firm bought out Hoss & Cheng, Cheng became an associate with that firm, Pearson, Randall, Schumacher & LaBore, defending businesses such as lumber and construction companies in litigation and representing plaintiffs in tort cases from late 2007 to 2009.

He returned home to Dallas and took a one-year break from the legal profession, serving as director of therapy health services at the Visiting Nurse Association. But an opportunity to merge his therapy and law backgrounds drew him in-house in 2010 to serve as general counsel for Century Rehab, which provides rehabilitation therapy services.

“That’s where I kind of made my mark in the health-care industry,” Cheng says, explaining he created a medical appeals department to appeal to denied Medicare claims.

But Century Rehab laid Cheng off in late 2010 due to the sluggish economy. The company delivered the news at 9 a.m., and Cheng says, two hours later, Senior Care Centers called because it wanted him to set up a medical appeals department there.

Cheng says it was an amazing opportunity to create a legal department from the ground up at a company with 4,600 employees and about $310 million per year in revenue.

Senior Care Centers’ profit margins have benefited from the medical appeals department Cheng launched, he says. When the company provides services to patients, it files claims with Medicare for payment. Medicare audits providers’ billings and sometimes denies payment, he says. Companies can appeal, but that first appeal is often “rubber-stamp denied,” says Cheng. Most companies just give up, but not Senior Care Centers.

“We appeal everything,” he says, even claims for $11. When an appeal reaches the third round, Cheng appears before an administrative law judge for a hearing via video conference or teleconference. Senior Care Centers usually wins then, Cheng says.

Bob Moos, a spokesman for the Centers for Medicare & Medicaid Services, writes in an email that Medicare conducts audits of health-care providers’ billings to make sure the providers’ services are covered, reasonable and medically necessary. When an audit “uncovers an erroneous payment,” Medicare denies the claim and recovers the payment. He notes there are five levels in the appeals process over a denied payment.

“We routinely encourage people to exercise their right of appeal, if they have concerns, and to follow the appeals process,” writes Moos.

In-House, Outside

Cheng says he also has saved his company a lot of money in outside counsel fees by bringing transactional and contract work in-house. He drafts and reviews contracts with medical-equipment suppliers, vending-machine vendors and wound-care service providers, among other vendors. He oversees contracts with other facilities that use his company’s rehabilitation therapy services, and he works with health insurers on managed-care contracts.

Cheng also serves as the liaison with insurers that provide general liability, professional liability and employment insurance for Senior Care Centers. Most of the company’s litigation arises in these areas, he says.

Cheng and the insurers make decisions about whether to hire outside counsel or for Cheng to handle a matter himself. Since the company’s insurance deductible is $100,000, “which is rarely met,” Senior Care Centers can save on out-of-pocket expenses when Cheng handles matters himself, he writes in an email. He’s handled initial responses to litigation and attended mediations or arbitrations to settle four cases. But since he spends much of his time on other duties, Cheng does frequently use outside counsel.

Two firm lawyers who have worked with Cheng on employment matters say he has unlimited energy and is passionate about his work.

Edel Cuadra, a partner in Constangy, Brooks & Smith in Dallas, says Cheng “demands a lot of himself” and extends those expectations to outside counsel.

Cheng is “a hard worker, and he has a very strong work ethic,” says Cuadra. “Nothing is too small for him to get involved in. That’s part of his personality of always being busy and moving forward.”

Merritt Quigley, an associate with Bell Nunnally & Martin in Dallas, says Cheng wanted to know “exactly what was going on with the assignments” he gave her, but he also “puts a lot of trust with people he works with.”

Quigley says, “I like the fact he’s really direct in what he needed. It felt almost like it was an attorney you were working with inside your own law firm.”

Cheng says he has enjoyed making Senior Care Centers’ GC position uniquely his own. The company’s newly minted legal department carries Cheng’s “fingerprints,” he says.

“There’s a sense of pride when you create things yourself,” says Cheng, adding, “Looking back, it just feels there’s a high sense of achievement and accomplishment here.”

From the Ground Up

Richard Cheng, general counsel of Dallas’ Senior Care Centers (SCC), created the company’s legal department as its first in-house lawyer. The company reached out to offer him the job in late 2010, just two hours after he learned he was laid off from his general counsel position with his previous employer, Century Rehab. Earlier in his career, Cheng was an occupational therapist before earning a law degree and working in-house and in private practice.

Texas Lawyer reporter Angela Morris emailed Cheng some questions about outside counsel and his work experience. Here are his answers, edited for length and style.

Texas Lawyer: For what types of matters do you typically hire outside lawyers, and why is it helpful having them in those cases?

Richard Cheng, general counsel, Senior Care Centers, Dallas: Typically, I mainly use outside counsel for general liability, professional liability and employment liability litigation matters. Additionally, outside counsel is brought in when we have a major change of ownership at a facility (e.g., acquiring a new long-term care facility from a prior operator). Lastly, I will occasionally use outside counsel for a serious CMS (Center for Medicare & Medicaid Services) or Department of Aging and Disability citation and it has risen to the Departmental Appeals Board (DAB).

TL: In a perfect world, what attributes or work habits would your outside counsel have?

Cheng: Ideally, outside counsel would be able to take a collaborative approach with in-house counsel to address legal matters strategically with a strong business mindset and understanding the nuances within the industry. Also, it is crucial for outside counsel to provide informed updates to prevent surprises, as surprises can have an impact on trust and the level of confidence of outside counsel. Lastly, being flexible and willing to negotiate on alternative billing would be a plus.

TL: For what types of litigation do you typically handle matters yourself, and why?

Cheng: Being the only legal counsel for a company of 4,600 employees and operating 37 long-term care facilities, I rarely handle litigation myself, since one simple case will eat up a lot of valuable time. However, since being at SCC, I have handled a handful of less complex general liability and professional liability cases involving injuries sustained by residents and/or family members. In addition, I have attended a handful of mediations, numerous administrative law judge hearings and respond[ed] to an EEOC charge without the assistance of outside counsel. However, since we are insured by a GL/PL [general liability/professional liability] carrier and an EPLI [employment practices liability insurance] carrier, my level of independence is dictated by their approval.

TL: Which skill from your previous legal experience helps you most in your position today?

Cheng: Again, being the only legal counsel for the company, I am literally involved with all legal matters within SCC. I started my legal career as a corporate attorney, which involved a lot of contractual work and due diligence for acquisitions. However, I joined a civil litigation firm and gained valuable experience with all phases of litigation. With civil litigation experience, it allows me to manage outside counsel better and in a more cost-effective manner, coupled with being able to dictate legal strategy. Conversely, my work as a corporate attorney allowed me to develop skill sets that complement my work on the transactional projects at SCC.

TL: What’s been the single most satisfying thing about being GC for Senior Care Centers?

Cheng: Being able to start both the legal and medical appeals departments from the ground up. It gives me a sense of pride and satisfaction that I “branded” these products, which ultimately benefits other departments and the company as a whole.

Other GC profiles:

GIG ‘EM, Longhorn: A&M System GC Runs the Ball in Aggies’ Move Out of Big 12
Team Player: Self Professed “Sports Nut” Relishes Role as GC of Academy Sports + Outdoors
Counsel and the Cause: Mona Patel Appreciates the Personal and Professional Rewards of Being Livestrong’s GC
Maximum Overdrive: $14 Billion Spinoff + $3.5 Billion Acquisiton = Busy Year for Marathon Oil GC
Body of Work: Robert F. Corrigan’s Health Law Expertise Comes in Handy at Baylor College of Medicine
Texans at Work: In Midst of Recession, Paul Jones Became GC of Texas Workforce Commission
For Stratford Land GC Matthew N. Hudnall, Negotiating Is the Name of the Game
Thinking Big: General Counsel Lays Firm Foundation for Construction Company
Two For One: Lawyer for Financial Holding Company, Bank Advises Both Boards
Extra Credit: There’s No Typical Day at the Office for Alan M. Utay
Music to His Ears: Classic Rock, Hip-Hop on Heavy Rotation in Office of DMX Inc. General Counsel
Adman: Austin Native’s Company Places Out-of-Home Marketing in Malls, Airports
GC of Financial Services Company Knows Ins and Outs of Purchasing Annuity Payments
Location, Location, Location: GC Guides Texas Real Estate Commission
He Knows the Drill: It’s an Interesting Time to Be in the Houston Oil Industry
Cutting Edge: GC’s Company Designs and Markets Medical Devices
Animal House: GC’s Transactions Involve Cattle, Chickens and Pigs
Hitting The Brakes: Ending Drunk Driving Is GC’s Goal
Bonds, State Bonds: Texas Public Finance Authority GC Susan Durso Makes a Career Out of State Service
Crafting a Career: Michaels Stores General Counsel Enjoys Piecing It All Together
Come Hell or High Water: Belo Corp. Assistant GC Toni Nguyen Reflects on Her Trials and Triumphs
Growth Industry: GC of Behavioral Health Company Says Seeing Kids Flourish Is Best Part of His Job
Digging Deep: Despite Tanking Economy, Business for Service-Sector Franchise Company Hums
The Nitty-Gritty of Governing
Checking In: GC Has No Reservations About How He Works With Outside Counsel
Third Time’s the Charm: Three Is a Magic Number for The Woodlands Development Co.