Tennessee Nursing Home Settles False Claims Act Lawsuit for $2.7 Million

According to an official announcement by the Department of Justice, a Tennessee nursing home manager and an affiliate have agreed to a settlement of $2.7 million, including accrued interest, in an effort to resolve charges of violating the False Claims Act.

The nursing home company, Grace Healthcare LLC, allegedly committed False Claims Act violations by knowingly and willingly submitting fraudulent medical claims for reimbursement to both the TennCare and Medicaid medical programs. Grace Healthcare submitted multiple false claims for medically unnecessary and unreasonable physical therapy services according to the Department of Justice.

Grace Healthcare LLC owns and/or operates healthcare facilities mainly located in the state of Tennessee. Their affiliate, Grace Ancillary Services LLC, provides the physical therapy services for all Grace Healthcare operations.

Details of the False Claims Act Lawsuit

According to the lawsuit, the DOJ alleged that from 2007 to June 2011, Grace Healthcare provided unnecessary physical, occupational, and speech therapy services  in 10 of their own facilities. The fraudulent services were performed in order to increase the already existing number of therapy treatments provided, thus allowing Grace Healthcare to meet their Medicare revenue goals. The facility’s Medicare revenue goals were pre-set without regard to patients’ individual therapy needs.

“The continued viability of our federal healthcare benefit programs depends, in large part, on the honesty and integrity of the program participants,” said U.S. Attorney for the Eastern District of Tennessee Bill Killian. “Health care providers must make decisions regarding the level of services to be provided based solely on individual patient need rather than a desire to increase the bottom line.   As this settlement demonstrates, when aggressive business practices cross the line into waste and abuse, we are committed to working with our federal and state partners to protect public funds.”

According to the settlement that was reached, Grace must enter into a Corporate Integrity Agreement (CIA) with the Inspector General of the Department of Health and Human Services. The CIA agreement will require Grace Healthcare to participate in additional procedures, planning and reviews in order to ensure the facility does not continue conduct of this nature.

“In today’s economic climate, it is more important than ever for the United States to make sure that Medicare and Medicaid funds are spent appropriately,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice. “The Department of Justice will not tolerate those who abuse government health care programs by providing services based on their own financial considerations, rather than the needs of their patients.”

Case Whistleblower

The False Claims Act lawsuit initially arose from a claim that was filed by a former Grace Healthcare employee under the qui tam, or whistleblower provisions, of the False Claims Act. Through the False Claims Act, private citizens are able to file suit on behalf of the United States government  and then share in any monetary recovery.

As a result of the case, officially known as The United States of America and State of Tennessee ex rel. Ottinger v. Grace Healthcare, LLC, Grace Ancillary Services, LLC, and John Does 1-5, No. 3:10-cv-83 (E.D. Tenn.), the whistleblower will receive a reward of $405,000 for coming forward.

Official Response to Medical Fraud

“Medicare does not pay for medically unnecessary rehabilitation services,” said Derrick L. Jackson, Special Agent in Charge at the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta. “The Inspector General is committed to identifying improper billing to Medicare and Medicaid and returning those dollars to the taxpayers.

This case resolution is a result of the government’s efforts and emphasis on combating health care fraud and is also a part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative.

Attorney General Eric Holder and Department of Health and Human Services Secretary Kathleen Sebelius announced in May 2009, HEAT has focused its efforts on reducing and preventing Medicare and Medicaid fraud.

The Justice Department has used the False Claims Act to recover $10.2 billion since January 2009 in cases involving fraud against federal health care programs. Total recoveries in False Claims Act cases since January 2009 are over $14 billion.

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