CHATTANOOGA, TN (WRCB) -- Grace Healthcare LLC and its affiliate Grace Ancillary Services LLC, or Grace, have agreed to pay $2.7 million to Medicare and TennCare over claims they violated the False Claims Act.

The claims states Grace knowingly submitted to the Medicare and TennCare/Medicaid programs false claims for medically unreasonable and unnecessary rehabilitation therapy. In addition, Grace provided some of the therapies in nursing facilities Grace Healthcare LLC owns.

Federal and state investigators claimed 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 which will monitor Grace's compliance with federal health care benefit program requirements.

"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," says U.S. Attorney Bill Killian.