$93.7M in Medi-Cal Payments to Rehab Clinics May Be Fraudulent

Medi-Cal paid nearly $94 million in potentially fraudulent reimbursements to drug and alcohol rehabilitation clinics between July 2008 and December 2013, according to a state audit released Tuesday, the Los Angeles Times' "L.A. Now" reports. 

Medi-Cal is California's Medicaid program (Karlamangla, "L.A. Now," Los Angeles Times, 8/19).

The audit comes after a Center for Investigative Reporting and CNN investigation in 2013 found evidence of fraudulent billing practices at alcohol and drug treatment clinics in the state (Mendelson, Reuters, 8/19).

Details of Audit

For the audit, the State Auditor's office reviewed billing data from the Drug Medi-Cal Treatment Program from July 2008 to December 2013.

The program is managed by the state Department of Health Care Services and the state Department of Alcohol and Drug Programs ("L.A. Now," Los Angeles Times, 8/19).

Findings

The auditor's report found $93.7 million in potentially fraudulent payments during the time period examined. In addition, the audit found:

• Nearly $1 million in payments to potentially ineligible drug and alcohol rehabilitation clinics; and
• More than $10,000 in reimbursements for services reportedly used by deceased beneficiaries (State Auditor report, August 2014).

The audit highlighted Los Angeles County for significant fraudulent activity, noting that more than 65% of the payments to potentially ineligible clinics were to facilities located in the county ("L.A. Now," Los Angeles Times, 8/19).

The report states that DHCS and ADP failed to:

• Implement effective provider certification processes for such facilities;
• Consistently follow certification processes in place; and
• Take steps to improve certification processes, unless mandated to do so.

Recommendations

To reduce fraudulent reimbursements through Medi-Cal, the report recommends that DHCS:

• Coordinate with counties to recover fraudulent payments;
• Establish new procedures for routinely identifying fraudulent payments and initiating fraud recovery efforts;
• Determine whether recovery efforts should be launched related to the potentially fraudulent payments identified in the audit; and
• Collaborate with Fresno, Los Angeles and Sacramento counties to recover fraudulent payments identified in the audit.

The report also recommends that DHCS designate risk levels for all providers and instruct staff to properly conduct mandated database searches of providers (State Auditor report, August 2014).

Reaction

Sen. Ted Lieu (D-Torrance), who called for the audit a year ago, said the report is "deeply troubling," adding, "It confirms that there has been widespread fraud in California's Drug Medi-Cal program, and it's ongoing" ("L.A. Now," Los Angeles Times, 8/19).

However, Al Senella -- president of the California Association of Alcohol and Drug Program Executives and CEO of Tarzana Treatment Centers -- said that while the group supports overall efforts to reduce fraud and waste in the program, automatically designating all treatment providers as "high risk" is "bad public policy."

State Agencies' Responses

DHCS agreed with the audit's recommendations, and officials said they would continue efforts to fight fraud.

DHCS Chief Deputy Director Karen Johnson said the audit "confirmed a lot of our findings, and it is a valuable tool to help us focus on our efforts." Johnson noted that the agency recently has frozen funding to 237 potentially fraudulent clinics until they can be reviewed by the state Department of Justice.

David Beltran, a spokesperson for the state Office of the Attorney General, said the investigations are a high priority (Jewett/Evans, Center for Investigative Reporting, 8/19).