Grace Healthcare LLC, False Claims Act, Tennessee 2011

CHATTANOOGA, Tenn. – Chattanooga based nursing home chain Grace Healthcare LLC and its affiliate, Grace Ancillary Services LLC, have agreed to pay $2.7 million, plus interest, to resolve allegations that they violated the False Claims Act by knowingly submitting or causing the submission to the Medicare and TennCare/Medicaid programs of false claims for medically unreasonable and unnecessary rehabilitation therapy.

According to the settlement agreement, federal and state investigators alleged that from 2007 through June 2011, Grace pressured physical, occupational and speech therapy staff in at least 10 nursing home facilities owned or managed by Grace to increase the amount of therapy provided to patients in order to meet targets for Medicare revenue that were set without regard to patients’ individual therapy needs and could only be achieved by billing for a large amount of therapy per patient.

As part of the settlement, Grace has agreed to enter into a Corporate Integrity Agreement with the Inspector General of the Department of Health and Human Services that provides for procedures and reviews to be put in place to monitor and ensure Grace’s compliance with federal health care benefit program requirements.

“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 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.”

Defendant: Grace Healthcare LLC, $2.7 million, plus interest. Crime: Violating the False Claims Act. City and state: Chattanooga, Tennessee. Date: 2011. Outcome: Agreed to pay $2.7 million, plus interest. Exact charges: Knowingly submitting or causing the submission to the Medicare and TennCare/Medicaid programs of false claims for medically unreasonable and unnecessary rehabilitation therapy.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Secretary of the Department of Health and Human Services Kathleen Sebelius in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.

Grace Ancillary Services LLC provided the therapy in some of the skilled nursing facilities Grace Healthcare LLC owns and/or manages in Tennessee and elsewhere.

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