FOR IMMEDIATE RELEASE                                         CIV
FRIDAY, AUGUST 1, 1997                             (202) 616-2765
                                               TDD (202) 514-1888

   The Largest Healthcare Fraud Settlement in Nebraska History

     WASHINGTON, D.C.,    Under an agreement reached with the
Justice Department and the State of Nebraska, Nashville-based
Vendell Healthcare, Inc, has agreed to a $1.3 million settlement
to resolve claims it fraudulently overcharged Medicaid.

     Assistant Attorney General for the Civil Division Frank
Hunger and U.S. Attorney Tom Monaghan of Nebraska, said that
Vendell filed fraudulent Medicaid billings on behalf of Rivendell
of Nebraska, a psychiatric hospital for children and adolescents,
that was owned by Vendell in Seward, Nebraska.

     The settlement, which was approved by the Bankruptcy Court
in Nashville, requires Vendell to pay more than $654,000 and drop
approximately $680,000 in bills which were pending against the
State of Nebraska at the time the facility closed.  This
healthcare fraud settlement is the largest in Nebraska history.
     "This case is an excellent example of teamwork between 
federal and state investigators and auditors who worked together
on this lengthy Medicaid fraud investigation," said Hunger.

     The case against Vendell arose after audits of Rivendell's
Medicaid billings from 1987 until June 30, 1995, uncovered
$4,060,394 in overpayments.  Nebraska Medicaid paid Rivendell on
a daily rate based upon the costs Rivendell claimed it incurred
to run the Seward hospital.   The case was settled for $1.3
million because of Vendell's March 1997 bankruptcy. 

     "It is critical that the United States and the State of
Nebraska enforce the integrity of the Medicaid program to protect
the interests of our taxpayers," said Monaghan.  "We intend to
continue our efforts at every appropriate opportunity."

     Vendell allegedly sought reimbursement on a number of
fraudulent claims, including:

     * advertising costs that were incurred to increase patient   
       admissions rather than educate the public about medical    

     * building depreciation and interest costs while             
       simultaneously claiming for rent paid to a related         
       corporation; and,

     * legal fees it incurred while entering into a previous      
       settlement agreement with the United States and the State  
       of Nebraska.

     In December 1995, Vendell closed the Seward hospital, two
months after the State of Nebraska removed all Medicaid patients
from the facility.  The hospital property was sold in June, 1997
to the Catholic Bishop of Lincoln after the bankruptcy.

     The case was handled jointly by the Justice Department's
Civil Division, the U.S. Attorney's Office, the FBI, the
Department of Health and Human Services Office of Inspector
General and the Nebraska Department of Health and Human Services
Finance and Support, formerly the Nebraska Department of Social
97-319                         ###