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March 8, 2013

Department of Justice

United States Attorney William C. Killian Eastern District of Tennessee


Grace Healthcare And Grace Ancillary Services Agree To Pay United States And State Of Tennessee $2.7 Million To Resolve False Claims Allegations

Government Alleges Companies Billed for Medically Unnecessary Therapy

CHATTANOOGA, Tenn. -- Chattanooga based nursing home chain Grace Healthcare LLC and its affiliate, Grace Ancillary Services LLC (collectively, Grace), 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. 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.

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.”

"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.”

Mr. Killian noted that this settlement resulted from a joint, comprehensive investigation conducted by the Department of Justice and Tennessee Attorney General’s Office in cooperation with the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) and the Tennessee Bureau of Investigation (TBI), and commended the efforts of all who played a role in the complex investigation, including TBI-Medicaid Fraud Control Unit Special Agent T.J. Battle, HHS-OIG Special Agent Tony Maffei, DOJ Trial Attorney Christelle Klovers, AUSAs Rob McConkey and Betsy Tonkin, HHS-OIG Senior Counsel Tonya Keusseyan, and Assistant Tennessee Attorney General Mary McCullohs. The investigation was prompted by a qui tam or whistleblower complaint filed in 2010. After investigators contacted Grace in early 2011 to request information and discuss the allegations, Grace cooperated with the investigation by providing documents as well as other information and making its personnel available for interviews.

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. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover $10.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14 billion, with recoveries by the U.S. Attorney’s Office for the Eastern District of Tennessee alone totaling more than $75 million during the same period.

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