Strauss Ventures LLC, doing business as The Grand Health Care System, and 12 affiliated skilled nursing facilities (collectively, the Grand) have agreed to resolve allegations that they violated the False Claims Act by knowingly billing federal health care programs for therapy services that were unreasonable, unnecessary, unskilled or that simply did not occur as billed.

“We expect nursing facilities to provide only reasonable and appropriate amounts of skilled rehabilitation therapy service to their residents and to bill government healthcare programs only for the services actually provided,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department's Civil Division. “The department is committed to protecting both vulnerable nursing home patients and taxpayers against fraudulent conduct by unscrupulous actors.”

The settlement resolves allegations that, from as early as Jan. 1, 2014, to Sept. 30, 2019, the Grand knowingly submitted false claims for rehabilitation therapy for residents at 12 facilities Strauss Ventures owned and operated. During this period, Medicare Part A (Medicare’s hospital insurance, which also pays for care in a skilled nursing facility in some circumstances) and TRICARE (the federal health care program for the Department of Defense) paid for such services at rates that varied based on the number of minutes of skilled rehabilitation therapy provided. The Grand allegedly submitted bills where the reimbursement claimed was based on providing more therapy than was reasonable and necessary, or in some cases where the therapists did not provide the amount of therapy reported.

As part of the settlement, the Grand admitted that certain now-former Grand management level employees implemented quotas that each of the 12 facilities was expected to reach, including quotas relating to beneficiaries’ lengths of stay and to the percentage of beneficiaries billed at the highest reimbursement level. To meet these quotas, facilities often scheduled patients to receive therapy without consideration of what was reasonable and necessary based on the individual patients’ clinical condition. In addition, the Grand directed that no more than three patients be discharged from any facility per week and instructed that no Medicare Part A patients should be discharged from rehabilitation therapy unless it had been discussed with corporate officials. The Grand admitted that this resulted in some Medicare beneficiaries “staying on therapy longer than was reasonable and medically necessary.”

The Grand acknowledged that there were various instances where supervisory officials, who did not personally evaluate or treat patients, set or adjusted the number of minutes of therapy that a Medicare patient would receive. The Grand also acknowledged that there were instances where supervisory personnel falsified the number of therapy minutes in the Grand’s electronic recordkeeping system or instructed subordinates to do so, well after the therapy was allegedly rendered.

“Today’s settlement protects patients and taxpayers by ensuring that medical treatment is dictated by patient need and not by financial motive,” said U.S. Attorney Carla B. Freedman for the Northern District of New York. “Skilled nursing facilities provide important services to a vulnerable population, and we will continue to hold them accountable when they provide patients with unnecessary services and falsify records.”

The settlement also resolves federal allegations that the Grand submitted false claims to Medicaid for services rendered at its Pawling, New York, nursing home between Jan. 1, 2016, and June 30, 2021. These claims were allegedly false because the reimbursement rate was inflated by data inaccurately reflecting the degree of care, including rehabilitation therapy services, needed by Medicaid patients there.

The Grand has also entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG) that requires an independent review organization to annually assess the medical necessity and appropriateness of therapy services billed to Medicare.

“Violations of the False Claims Act are absolutely unacceptable and will not be tolerated by the FBI and its partners,” said Executive Assistant Director Michael Nordwall of the FBI’s Criminal, Cyber, Response and Services Branch. “We will continue our work of protecting the American taxpayer by relentlessly pursuing businesses that do not comply with the rule of law. If you bill federal health care programs in an unnecessary manner, there will be consequences.”

“As a part of this settlement, the defendants acknowledged that they obtained funds from the Medicare program to which they were not entitled,” said Special Agent in Charge Naomi Gruchacz of HHS-OIG. “Individuals and entities that participate in the federal health care system are required to obey the laws meant to preserve the integrity of program funds and the provision of appropriate, quality services to patients.”

“Protecting the integrity of the healthcare system for our military members and their families is a top priority of the Defense Criminal Investigative Service (DCIS), the law enforcement arm of the Department of Defense Office of Inspector General,” said Acting Special Agent in Charge Brian J. Solecki of the DCIS Northeast Field Office. “DCIS will continue to work with its law enforcement partners and the Department of Justice to hold Department of Defense contractors accountable for their fraudulent activity and ensure America's service members are not subject to unnecessary risk.”

The settlement resolves a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by Stacey Rosenberger and Kelley Retig, former providers of rehabilitation therapy at the Grand. The Act allows private persons to file civil actions on behalf of the government and share in any recovery. Under the settlement, the whistleblowers will receive approximately $4,047,000 of the settlement proceeds. The case is captioned United States ex rel. Rosenberger and Retig v. Strauss Ventures, LLC, et al., No. 1:19-cv-1311 (N.D.N.Y.).

The U.S. Attorney’s Office for the Northern District of New York; the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section; HHS-OIG’s New York Region; the FBI Albany Field Office; DCIS, Syracuse Resident Agency and the New York State Attorney General’s Office investigated the matter.

Senior Trial Counsel Christelle Klovers of the Civil Division's Commercial Litigation Branch, Fraud Section and Assistant U.S. Attorney Adam J. Katz for the Northern District of New York prosecuted the case.