Grace Healthcare: Therapy Targets Across Ten Nursing Homes

In the Grace Healthcare Ancillary fraud case, Grace Healthcare LLC and Grace Ancillary Services LLC agreed to pay $2.7 million over allegations that Medicare revenue targets drove unnecessary rehabilitation therapy. The government said therapists faced pressure to increase treatment without regard to patients’ individual needs. Residents received unnecessary therapy, and taxpayers paid for it, according to those allegations. For someone working between the therapy schedule and the billing office, that is the connection worth examining: a healthcare company’s revenue goal coming back as a treatment instruction.

The Justice Department announced the settlement on March 8, 2013. It covered alleged false claims to Medicare and Medicaid, including TennCare. A former Grace employee brought the whistleblower case.

Therapy Targets Set Without Regard to Patient Need

The government alleged that Grace pressured therapists at ten nursing homes to provide enough treatment to meet predetermined Medicare revenue targets. The allegations covered physical, occupational and speech therapy during periods ranging from 2007 through June 2011.

According to the Justice Department, the targets could only be reached by billing a large amount of therapy per patient. That puts the alleged decision in the wrong order. Management set the revenue expectation, and therapists were pressed to supply the treatment volume needed to reach it. The patient’s clinical need was supposed to determine the care. In the government’s account, the financial target drove it instead.

The historical payment system explains why minutes mattered. Medicare’s RUG therapy categories used treatment volume as part of the payment classification. Additional counted minutes could move a resident across a reimbursement threshold. Medicare introduced the Patient Driven Payment Model for covered skilled nursing facility Part A stays on October 1, 2019. Grace’s alleged conduct belonged to the earlier payment era.

Pressure to meet a number can become a reason to justify conduct. The 2018 Journal of Forensic & Investigative Accounting paper Pressure to Commit Fraud in the Workplace: Two Teaching Cases Addressing Fraud and Whistleblower Protection discusses a global business survey in which one third of respondents would justify illegal payments during an economic downturn or under pressure to meet financial targets. In a therapy case, the question is how that pressure reached the people deciding what care a resident received.

The Nursing Home Manager and the Therapy Provider

Grace Healthcare was a nursing home manager based in Chattanooga, Tennessee. Its affiliate, Grace Ancillary Services, provided therapy at some of the facilities Grace Healthcare owned or managed in Tennessee and elsewhere. The government alleged that the companies submitted false claims or caused them to be submitted.

A manager’s revenue instruction, a therapist’s treatment record and a claim submitted by a facility can describe different parts of the same health care decision. We examine who set the expectation, who passed it to the clinical staff and how the resulting treatment reached the bill.

The care record itself draws on several people. Therapists assess and deliver rehabilitation. Physicians and other eligible practitioners supply orders and certifications. A registered nurse conducts or coordinates the resident assessment, with contributors responsible for their portions. The completed assessment rests on those clinical observations. Someone who understands the therapy may therefore explain a payment problem that is hard to see from the final claim alone.

What Evidence Is Needed to Prove Fraud?

For a therapy-target case, the evidence connects the treatment a resident needed, the treatment recorded, the financial instruction and the claim for payment. Clinical evaluations, orders and treatment notes describe the resident’s needs and response. Treatment logs, resident assessments and billing records show how that care reached the claim. A target email or instruction about planned minutes can explain why the schedule followed a revenue expectation instead of the patient’s condition.

Those decisions may cross the facility and the therapy company. Payroll and schedules identify who did the work; contracts and management agreements help explain who controlled it. A therapist’s productivity target and a facility’s reimbursement target can operate at different levels. Our whistleblower experts work with the insider who knows those relationships to connect the management pressure, clinical decisions and claims in a case.

Life Care’s Planned Minutes Show the Same Pressure

The separate Life Care Centers of America case shows how a revenue target can become a specific instruction about therapy minutes. The government alleged that Life Care pursued Ultra High therapy classifications and prolonged stays after treating therapists believed treatment should end.

The government’s complaint quoted a manager’s direction to staff:

The instruction protected a payment category from a reduction in planned treatment. A manager allegedly told therapists to preserve the minutes because of the billing result already selected.

The same complaint alleged that therapy increased during payment assessment periods and fell afterward without clinical justification. A treatment log, read against the assessment calendar and the patient’s condition, could expose that change. Grace’s allegation concerned revenue targets set without regard to individual need. Life Care’s documents show the kind of instruction and treatment pattern an insider can recognize when explaining how such pressure worked.

The Settlement and the Whistleblower’s Role

Grace agreed to enter a corporate integrity agreement with the Inspector General of the Department of Health and Human Services as part of the settlement. The Justice Department described procedures and reviews designed to prevent and catch the same conduct.

The former Grace employee brought the case under the False Claims Act’s whistleblower provisions. The department also announced that the employee would receive a reward.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When the Target Overrules the Therapist

If you saw therapy instructions that served a revenue goal over a resident’s needs, tell our whistleblower experts what happened inside the facility. We bring in skilled nursing facility whistleblower lawyers who know therapy billing and work with you on the clinical decisions, management instructions and claims. We stay beside you through the whole journey to build your strongest nursing home therapy whistleblower case.