Melville, N.Y. Olsten Corp. and its home health management subsidiary will shell out $61 million to settle criminal and civil charges in a Medicare fraud investigation, according to the United States Department of Justice. The department had alleged that Olsten defrauded Medicare by selling its home health agencies to Columbia/HCA at below-market rates, and then shifting part of the purchase costs to Medicare by disguising them as management fees charged by Olsten.

Olsten Kimberly Home Health Care will pay $10 million in criminal fines and plead guilty to three felony counts filed in Florida and Georgia-conspiracy, mail fraud and violating the Medicare anti-kickback law. In addition, Olsten Corp. will pay a civil settlement for $51 million for the same fraud scheme, as well as another one in Brooklyn, N.Y. That settlement resolves allegations that Olsten improperly charged Medicare for sales and marketing, department officials said.

Medicare will permanently bar Olsten Kimberly from program participation, as required by federal law when a company pleads guilty to a felony relating to health care fraud in a criminal case, department officials said. However, the subsidiary accounts for less than 1 percent of Olsten's revenue, so its removal from the Medicare program will have little impact on the $4.6 billion company.

Olsten president and chief executive officer Edward Blechschmidt called the settlements "a welcome conclusion of a difficult period in our company history."

As part of the settlement, Olsten and Kimberly agreed to cooperate with the government in its continuing investigation "of others involved in these schemes," department officials said. The department had said earlier this year that it was in settlement negotiations with Columbia/HCA.

A major part of the settlement, $40.92 million, involves allegations stemming from a whistle-blower lawsuit filed in April 1997 by Donald McLendon, a former Olsten Corp. vice president. He will receive $9.8 million of the settlement.