Behavioral health fraud perpetrators plead guilty to $1M Medicaid scheme

Two men, who created and managed a company that provided mental health care to Medicaid patients and collected over $1 million in Medicaid payments, pleaded guilty to conspiracy to commit health care fraud. The president of Coastal Bay Behavioral Health, Inc. (Coastal Bay) acknowledged in the plea agreements that the other participant was an “excluded provider,” who was prohibited from billing federal health care programs due to a 2011 conviction for health care fraud. Each man faces a maximum penalty of five years in prison and a fine of up to $250,000.

Although the president was aware that he was employing an excluded provider, he did not disclose this fact to the state Medicaid program. Using an alias, the provider performed a variety of functions, including hiring and firing individuals, seeing patients, and performing other managerial tasks. Coastal Bay received $1.2 million in reimbursements from Medicaid because of the provider’s alleged fraud, according to court papers.

The provider and his family received significant financial benefits due to his involvement in Coastal Bay. Specifically, the provider had access to a Coastal Bay credit card, which he used to make routine purchases at restaurants, furniture stores, gas stations, and other places in North Carolina, even though Coastal Bay had no operations in North Carolina. In addition, the provider and his immediate family received more than $10,000 in direct payment withdrawals from the Coastal Bay business account.

Mental health services provider enters into $4M FCA settlement

A provider of in-home mental health services and two of its leaders agreed to pay a total of $4.5 million to settle allegations that they violated the federal False Claims Act (FCA) and the Minnesota False Claims Act by billing Medicaid for services that violated clinical supervision requirements. Under the agreement, Complementary Support Services (CSS) and related entities will pay $4 million, its president will pay $400,000, and an executive will pay $120,000.

According to Acting U.S. Attorney Gregory G. Brooker and Minnesota Attorney General Lori Swanson, CSS provided in-home mental health services to children and adults through two Medicaid programs that restrict reimbursement to time spent providing face-to-face services with the patient and prohibit reimbursement for a therapist’s time completing paperwork. Both programs also require a licensed therapist such as a social worker or psychologist to clinically supervise patient care to ensure that the services are appropriate and medically necessary.

Between 2007 and 2016, however, CSS failed to submit claims that reflected signature by licensed professionals serving as clinical supervisors. Instead, CSS’ president “batch signed” progress notes that formed the basis for billing Medicaid. In addition, CSS employees routinely added an extra billable unit for paperwork time for each client visit.

Local news reported that this case reflected a longstanding gap in Minnesota’s oversight of mental health services because CSS, like 200 other agencies, was unlicensed and not subject to routine regulatory oversight. In the wake of these allegations, the state began reviewing its oversight of mental health agencies.

As a part of the settlement, CSS is permanently excluded from participating in federal and state health care programs. The president agreed to an exclusion of at least eight years, and the executive agreed to an exclusion of at least five years.

Kusserow on Compliance: Personal care services (PCS) attendants need stricter screening


The HHS OIG issued an “Investigative Advisory on Medicaid Fraud and Patient Harm Involving Personal Care Services” (PCS), a nonmedical assistance to the elderly, people with disabilities, and individuals with chronic or temporary conditions so that they can remain in their homes and communities. It is typically provided by an attendant who works for personal care agencies enrolled in the Medicaid program. PCS is an optional Medicaid benefit that States may choose to provide under State plan options and/or through Medicaid waiver and demonstration authorities approved by CMS and it is their responsibility to develop qualifications or requirements for attendants to ensure quality of care. The OIG has issued a number of reports concerning high levels of improper payments, questionable care quality, and high amounts of fraud summarized in a Portfolio of 2012. The current report provides additional data concerning the problem and included results of a survey of State Medicaid Fraud Control Units (MFCUs) about fraud trends in the PCS program. Since that report, the OIG has opened more than 200 investigations involving fraud and patient harm and neglect in the PCS program across the country.

The OIG cited a number of examples of different schemes and the negative consequences, including billing for PCS either not necessary or not actually provided; recruiting Medicaid beneficiaries to participate in fraud schemes; and noting instances where patients were harmed, as result of abuse or neglect, resulting in some cases in hospitalizations and even death. The OIG reported discussing potential administrative actions with the CMS, including:

  • Issuing informational bulletins to states on how to improve internal controls for PCS.
  • Establishing minimum Federal qualifications and screening standards for PCS workers, including background checks.
  • Requiring States to enroll or register all PCS attendants and assign them unique numbers.
  • Require that PCS claims identify the dates of service and the PCS attendant who provided the service.
  • Considering whether additional controls are needed to ensure that PCS are allowed under program rules and are provided.




Kusserow on Compliance: HHS OIG annual report on Medicaid Fraud Control Units

Medicaid Fraud Control Units (MFCUs) are funded jointly by each state and the federal government. Federal funding is administered by the HHS Office of Inspector General (OIG) with each receiving approximately 75 percent of its total expenditures from the federal government. In fiscal year (FY) 2015, combined federal and state expenditures for the MFCUs totaled approximately $251 million.

Statistical results from 2015 MFCU investigations

  1. 1,553 convictions
  2. 731 civil settlements
  3. $744 million in criminal and civil recoveries
  4. 71 percent of convictions involved fraud
  5. 29 percent of convictions involved abuse or neglect
  6. Half of fraud cases involved unlicensed providers
  7. Personal care services attendants accounted for 439 convictions (or 65 percent of all fraud convictions)
  8. 40 percent of all abuse or neglect convictions were nurse aides, with 160 convictions
  9. 117 drug diversion cases were 8 percent of convictions and $4.4 million in recoveries
  10. All MFCUs reported civil settlements or judgments, ranging from 3 to 69 per Unit
  11. 731 civil settlements and judgments
  12. 279 (38 percent) civil settlements involved pharmaceutical manufacturers
  13. 54 settlements and judgments involved retail and wholesale pharmacies
  14. On average MFCUs recovered almost $3 for every dollar spent

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2016 Strategic Management Services, LLC. Published with permission.