Tenn. healthcare companies agree to $2.7 million settlement

A Chattanooga, Tenn.-based company that runs nursing homes in several states and one of its affiliated firms agreed to pay $2.7 million plus interest to settle allegations that they overbilled Medicare and other government-run healthcare programs, the Justice Department announced Friday.

The agreement resolves claims in a lawsuit that Grace Healthcare and Grace Ancillary Services gave medically unnecessary therapy to patients so they could collect more money from the government.

The lawsuit claimed that the company pressured therapists to increase the amount of physical, occupational and speech therapy to patients so it could bill for more money. The therapy, the lawsuit claimed, was increased to meet certain Medicare billing targets and not to serve the needs of the patients.

"In today's economic climate, it is more important than ever for the U.S. to make sure that Medicare and Medicaid funds are spent appropriately," Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice, said in a statement.

As part of the settlement, the nursing home company has agreed to accept heightened monitoring and put procedures in place to make keep the company's billing honest.

The allegations stem from a lawsuit filed by a former employee who sued under the Whistle-blower provisions of the False Claims Act. The act allows whistle-blowers to recover a portion of the settlement. The deal gives the whistle-blower in this case $405,000 of the settlement.

The federal government has spent the last few years focused on combating healthcare fraud. The Justice Department has recovered more than $14 billion in False Claims Act cases since 2009.