Nursing Home Fraud Settlement

On June 3, 2025, the Department of Justice (DOJ) announced that the American Health Foundation (AHF), its affiliate AHF Management Corporation, and three affiliated nursing homes, including Cheltenham Nursing & Rehabilitation Center (Cheltenham), have agreed to pay $3.61 million to resolve a False Claims Act case brought by the United States of America. The complaint alleges that AHF defrauded Medicare and Medicaid by billing for non-existent or grossly substandard care. This is part of a nationwide trend to root out nursing home fraud involving similar practices.

What Are the Facts of the Case?

Cheltenham Nursing & Rehabilitation Center is a 255-bed facility in Philadelphia which, along with AHF and two additional affiliated Ohio nursing homes, allegedly defrauded Medicare and Medicaid by billing for non-existent and substandard care. As a result, they received millions in funds while neglecting and providing low-quality care to their residents.

According to the lawsuit, which was filed in 2022, AHF collected millions of dollars in management fees from its nursing homes while pressuring them to cut nursing costs. Their desperation to cut costs led to a hostile environment where they neglected patients by allowing them to live in pest-infested buildings, giving them unnecessary medication, subjecting them to verbal abuse, and more. As a result, the DOJ brought this lawsuit seeking remedies for fraud and ultimately reached a settlement with the defendants.

Key Allegations in this Nursing Home Fraud

The complaint illustrated the various ways in which these nursing homes neglected and endangered their patients. One of the most horrific incidents occurred in June of 2018, when an elderly resident committed suicide, which the DOJ credited to the facility’s failure to provide appropriate mental health services. Around that time, federal regulators stated that Cheltenham gave inappropriate and unnecessary medication to residents, such as antibiotics, antipsychotic, antianxiety, and hypnotic drugs. In addition, the facility failed to protect residents’ belongings and subjected them to verbal abuse. These examples provided a clear picture of how substandard the care truly was. Despite the center’s clear neglect and substandard care, it received millions in Medicare and Medicaid funds for its false claims.

How the False Claims Act Targets Nursing Home Fraud

The False Claims Act (FCA) is a federal statute which provides that any individual who knowingly submits, or causes to submit, false claims to the government is liable for three times the damages, with additional penalties due to inflation. This applies to healthcare fraud in long-term facilities and holds them accountable when they bill government programs like Medicaid or Medicare for services that are unnecessary, substandard, or simply not rendered. In this case, not only did Cheltenham perform substandard services, but the poor conditions at Cheltenham also endangered their residents.

The Role of Whistleblowers in Exposing Fraud

The FCA not only helps recover taxpayer dollars, but most importantly, it ensures that patients in these facilities or employees in a company are protected from harm and unsafe practices. Whistleblowers are essential to this process since they are the ones reporting fraud or misconduct to the government. As such, the government provides strong incentives and protections for these individuals to encourage them to come forward about the wrongdoings they have witnessed.

A Growing Focus on Healthcare Fraud

Healthcare fraud has become extremely common in the last few years. In 2023 alone, it was a leading source of FCA settlements, and the recoveries restored funds to important government programs such as Medicare, Medicaid, and TRICARE. The government has imposed penalties for this kind of fraud to ensure that others are deterred from conducting similar practices and that taxpayer money is allocated to those who are truly in need.

Originally published at Miller Shah LLP Blog