Department of Justice Seal


THURSDAY, JUNE 18, 1998 (202) 616-2765

(318) 262-6618

TDD (202) 514-1888



WASHINGTON, D.C. -- North Louisiana Rehabilitation Hospital (NLRH) in Ruston, La., and its Medical Director have paid a total of more than $4,450,000 to settle allegations they submitted false Medicare claims, the Department of Justice announced today. The settlement is the largest health care fraud settlement ever reached with the United States in Louisiana.

United States Attorney Mike Skinner and Assistant Attorney General Frank Hunger said the settlement resolves claims that between 1988 and 1992, NLRH increased its Medicare payments by admitting patients whose medical conditions did not warrant inpatient rehabilitation or who could not benefit from inpatient rehabilitation due to their medical conditions. Many patients also were kept at the hospital longer than needed.

The settlement also resolves claims that NLRH and its Medical Director, Dr. Joseph Mitchell Smith, conspired with Dr. Rel Gray, who served as Program Director for General Medical Services at NLRH until 1992, to cover up fraud in Gray's Medicare billings for hospital patients. The alleged coverup involved altering more than 600 hospital patient files to list Gray as a second medical attending physician when he was only a consultant in order to justify claims that Gray had submitted previously.

Gray was convicted of mail fraud in 1996 for submitting false Medicare billings for hospital patients and served one year in prison.

As part of today's settlement, Horizon/CMS and Continental Medical Systems, Inc., the owners of NLRH, paid $4,212,920 and Smith paid $250,000. NLRH also entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services. Under the Corporate Integrity Agreement, NLRH has agreed to implement procedures to guard against future improper billings.

"Health care providers should be aware that this settlement is an example of how vigorously and thoroughly we investigate Medicare fraud," said U.S. Attorney Skinner. "Every dollar of medicare fraud is a dollar snatched away from sick and disabled people who are in need of health care."

"By holding both the hospital and the physician accountable, we are demonstrating our commitment to recovering Medicare overpayments from all types of health care providers," said Assistant Attorney General Hunger. "This extensive investigation was possible because of cooperation between the criminal and civil investigators, auditors, medical experts, and government lawyers."

The case was investigated by the Office of Investigations, Office of Inspector General of the Department of Health and Human Services and the Federal Bureau of Investigation.