Feds claim fraud by health care CEO

Major donor to local causes, from a family renowned in Nashville business lore, is at center of $18M suit over alleged scheme to overbill Medicare for nearly 20 years

With claims of sham dealings, false claims and fraud dating back to 1986, the federal government is going after one of Nashville's most visible health care executives and most active philanthropists, Jim Carell.

But his attorney says the whole affair is old-hat.

Middle Tennessee U.S. Attorney Ed Yarbrough filed suit late yesterday in federal court against Carell, his home-health company CareAll and several related parties. The legal action, filed under the False Claims Act, accuses Carell of billing Medicare for more than $6 million in inappropriate costs for the years 1999-2001, though it asserts that he engaged in the same practices for many prior years.

With violations of the False Claims Act subject to triple damages, the lawsuit seeks to recover more than $18 million from Carell and the other defendants.

Carell, the younger brother of the late Central Parking CEO Monroe Carell Jr., has been in the home health business for more than two decades. CareAll is a familiar name to many in Middle Tennessee because of its widespread television advertising.

Carell himself has made news by making several multimillion-dollar donations in recent years to such institutions as Currey Ingram Academy, Father Ryan High School and Aquinas College.

The complaint, available at this link, says Carell installed a Missouri lawyer, Robert Vining, as a "sham owner" of three home health agencies that he and his company really owned. The company, then known as Diversified Health Management, "reaped high profits" by billing the agencies for management fees "at its discretion," and the agencies then passed those costs on to Medicare, the lawsuit alleges.

It also claims that Carell used $100,000 in funds from the bank account of one of the agencies to fund the down payment on a home purchase. It says Diversified loaned more than $2 million to the agencies and that they then billed Medicare for interest on the credits. And it says the agencies paid management fees to Diversified that Medicare would have disallowed if it had known the recipients were related parties.

Had the authorities known that Diversified was ultimately in charge of the agencies, the complaint says, compensation restrictions under Medicare reimbursement rules would have prevented Carell from taking all of the $4 million he paid himself in 2001 compensation.

Other entities mentioned in the lawsuit include an alleged "shell company" owned by Carell that had financial dealings with Vining and with the father-in-law of Doug Brace, a partner at Ortale, Kelley, Herbert & Crawford who is the trustee of a Carell family trust. The document says the father-in-law was paid "to move money between Carell and the home health agencies."

Neither Brace nor his father-in-law are named as parties to the lawsuit. Attempts to reach Brace last night were unsuccessful.

Carell's attorney, Bill Ramsey of Neal & Harwell, calls the government's assertions "ridiculous." He notes that a previous run-in with the feds over reimbursement, back in the 1990s, led to a legal decision in his client's favor.

In that case (decision available here), the U.S. Sixth Circuit Court of Appeals reversed a decision disallowing reimbursement for some of the management fees charged by a predecessor company to CareAll. The appellate court ruled that Medicare authorities had "informally imposed on Medicare providers a 'competitive bidding' requirement not previously made a part of Medicare regulations."

That court decision, Ramsey said last night, was based on "the same regulation scheme" that the new lawsuit is based on. "All of  these issues were also the subject of discussions between Diversified and the government and its representatives since at least 1996," the attorney added.

"I am sure all of the defendants will vigorously defend this case," Ramsey said. "It will also seek payment from the government since it has chosen to raise these stale claims. In fact, the government owes money to these agencies. It is not the other way around. The government has failed to pay over a million dollars owed to these agencies. 

"Mr. Carell and his companies saved the government millions of dollars during the time that is at issue in the complaint. They are continuing to save the government millions of dollars now through their prudent and efficient management techniques."

Ellen Bowden McIntyre of the U.S. Attorney's office is Yarbrough's co-counsel in the lawsuit.