Investigation Finds Fraud Activity at Southern California Drug Clinics

Several drug treatment centers in Southern California that receive Medi-Cal funding have participated in fraudulent billing practices, according to a yearlong investigation by the Center for Investigative Reporting and CNN, CIR reports.

Medi-Cal is California's Medicaid program (Jewett/Evans, Center for Investigative Reporting, 7/29).

The report follows a decision earlier this month by the state Department of Health Care Services to suspend Medi-Cal payments to 16 alcohol and drug treatment centers following investigations of possible fraudulent activities at the facilities.

Details of DHCS Investigation

DHCS investigated 22 alcohol and drug treatment centers in response to tips from the media and state residents.

The investigators said that 16 of the centers were found to have:

• Billed Medi-Cal for services that were not provided or not medically necessary; and
• Hired individuals who previously were convicted of fraud in government programs, which violates Medi-Cal regulations.

The facilities have not been named because the investigation is ongoing.

DHCS Director Toby Douglas said the agency is "in the midst of a wide-ranging statewide investigation" over the matter.

The centers have 60 days to appeal the payment suspension.

The cases have been transferred to the state Department of Justice (California Healthline, 7/19).

Findings of CIR/CNN Investigation

For the investigation by CIR and CNN, the news groups reviewed thousands of pages of government records and conducted dozens of interviews with counselors, patients and regulators.

Investigators found that $94 million has been awarded over the past two years through the Drug Medi-Cal Treatment Program to 56 clinics in Southern California that have engaged in fraudulent activities, such as:

• Diagnosing people with addictions they did not have;
• Collecting state residents with mental illnesses from board-and-care centers to receive therapy from which they could not benefit;
• Enticing individuals from the street with cash, cigarettes and food; and
• Persuading patients to sign in for days they did not visit the clinics.

The $94 million represents half of all public funding for the Drug Medi-Cal program.

Concerns About Oversight of Clinics

The CIR/CNN investigation raised concerns about the oversight of drug rehab clinics in the state, including:

• The frequency of inspections; and
• Regulators' failure to act when signs of possible fraudulent activity were discovered.

According to investigators, 12 clinics that were found to have engaged in fraudulent activity under the Drug Medi-Cal program were allowed to remain in business and awarded additional public funding.

The report noted that the state certifies rehabilitation clinics, while counties regulate their funding.

John Viernes -- head of Los Angeles County's substance misuse department -- said a 1994 court ruling requires the county to contract with and provide funding for state-certified clinics. However, fraud can only be determined after funding has been dispersed, he said (Center for Investigative Reporting, 7/29).