An Ohio-based nursing home chain has agreed to pay $3.61 million to settle a False Claims Act lawsuit that accused it of bilking federal health programs by billing for care that was not just poor—but in some instances, allegedly never provided at all, the U.S. Department of Justice announced Tuesday.

The operator, American Health Foundation Inc., along with several of its affiliates, reached the multimillion-dollar deal to put to rest allegations of fraudulent billing tied to its facilities in Philadelphia, Dayton, Ohio, and Medina, Ohio—all now enveloped in this high-stakes settlement.

Shocking Allegations of “Grossly Substandard” Conditions

Federal prosecutors described disturbing conditions at the company’s nursing homes. In a civil complaint filed in 2022, the government alleged that the homes were infested with pests, dispensed unnecessary medications, and routinely billed Medicare and Medicaid for services that were either egregiously inadequate or never rendered.

Although the $3.6 million agreement resolves the case, American Health Foundation has not admitted liability, and the settlement stops short of a finding of fault. Still, the allegations paint a bleak picture of neglect hidden beneath billing codes and federal paperwork.

“This case reflects the DOJ’s unwavering commitment to ensuring that taxpayer dollars do not subsidize care that endangers vulnerable patients,” the department said in its release.

Legal Teams and Fallout

The Justice Department’s Ben Young and Susan Gillin led the charge for the government, pursuing the claims under the False Claims Act—a legal weapon often used in cases of healthcare fraud that allows whistleblowers to bring suits on behalf of the government.

American Health Foundation turned to Michael Ferrara of Dinsmore & Shohl LLP for its defense in the high-profile case.

A Warning Shot for the Industry

Though the case ends with a settlement rather than a trial, its message reverberates across the elder care industry: billing Medicare and Medicaid for care that’s dangerously inadequate—or imaginary—comes with a high price tag and even higher reputational cost.

The agreement arrives amid growing scrutiny of long-term care facilities nationwide, particularly in the wake of COVID-19, which exposed systemic vulnerabilities in the sector. The DOJ emphasized that the settlement aims to protect both public funds and the lives of those in care homes who can’t always speak for themselves.

With no admission of guilt but a sizable payout, American Health Foundation exits the courtroom—but not the shadow of controversy.