NASHVILLE, Tenn. (Legal Newsline) -- Tennessee Attorney General Bob Cooper and U.S. Attorney Jerry Martin announced Wednesday that the state will receive $112,000 as part of a civil fraud agreement with two Florida-based providers of mental health services.

In addition to the money recovered for the TennCare program, the U.S. Attorney's Office for the Middle District also recouped $108,000 on behalf of the Medicare program.

Named in the case were Paradigm Health Services Inc. and Paradigm Health LLC. The lawsuit and subsequent agreement stems from the fraudulent actions of a former Paradigm employee and licensed clinical social worker, Janet R. Vaughn.

State and federal officials allege that from 2003 through 2006, Vaughn billed TennCare for therapy sessions for Tennessee nursing home residents, but did not provide any meaningful service to the residents.

Specifically, TennCare received multiple bills for 20-minute therapy sessions when, in fact, Vaughn had spent only a couple of minutes with the patient.

Vaughn pleaded guilty to one count of federal health care fraud, and in 2010 was sentenced to 36 months probation. She was also required to pay $43,743 in restitution to TennCare and $41,956 in restitution to Medicare.

The civil settlement with Paradigm announced Wednesday is in addition to the restitution payments to be made by Vaughn.

Cooper, who praised the settlement, stressed the duty of health care providers to have procedures in place to safeguard against fraudulent billing.

"It is incumbent upon all TennCare providers to verify that their employees properly document the services they provide," he said in a statement.

"When we are all struggling to stay within our budgets, we must be vigilant in our quest to ensure taxpayer dollars are not wasted."

There was no evidence that Paradigm was actually aware of Vaughn's criminal conduct, and Paradigm does not admit liability in the settlement. Also, Vaughn has been excluded from participating in any federal health care program.

In addition to the civil settlement, Paradigm will enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General.

The case was pursued by the Medicaid Fraud and Integrity Division in a joint operation with the U.S. Attorney for the Middle District of Tennessee. The Nashville office of the Department of Health and Human Services Office of Inspector General conducted the investigation.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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