Sobering News of Surging Fraud in the Addiction Treatment Industry

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Red White and Yellow Medication Pills, representing addiction treatment

The opioid epidemic has exacted an immeasurable cost on our country in both human and financial costs. It has also given rise to a new type of health care scam in America – addiction treatment fraud. Unscrupulous operators of drug treatment centers and sober homes are preying on people in desperate need of drug treatment services while also defrauding American taxpayers out of tens of millions of dollars annually.

The Patient-Broker Scam

An FBI investigation earlier this year uncovered a scheme in Western Pennsylvania that is almost certainly taking place in other parts of the country. The scam begins with a middleman known as “patient-broker,” who sets up an 800 number and posts internet advertisements for addiction treatment. Once an unwitting victim is snared, the patient-broker offers to fly the person to a sober home, oftentimes in Florida, free of charge. The sober home often turns out to be nothing more than an unregulated group home where patients live with other recovering addicts. Sometimes, unfortunate victims find themselves in a situation far worse.

A drug rehab facility or sober home can receive tens of thousands of dollars in insurance payments for the care of a single patient. A patient-broker, in turn, gets a kickback for each patient recruited and placed in a sober home. Many times, the patients receive little or no real treatment and wind up on the streets still struggling with addiction. American taxpayers are also victimized as many of the insurance payments made to these fraudulent treatment facilities are subsidized with taxpayer dollars through the Affordable Care Act.

In its investigation in Western Pennsylvania, the FBI discovered that some patient-brokers used fraudulent techniques in order to obtain insurance coverage in Pennsylvania, subsidized with federal tax dollars, for out-of-state addicts. Patient-brokers often used vacant lots in the Pittsburgh area as fake addresses or provided fictitious phone numbers with a Pittsburgh area code to make it appear that their clients were Pittsburgh residents.

Highmark is a Pennsylvania insurer that has been targeted by patient-brokers because of the broad benefits it provides for addiction treatment. According to a Highmark representative, the company paid over $1 million to suspect sober living facilities in just eighteen months. Highmark has identified over 600 cases where patient-brokers placed addicts in dubious rehab facilities.

An Egregious Case of Fraud Involving Sober Homes

In the past year, state and federal officials have raided multiple sober homes and rehab facilities in South Florida. Seventy-seven people have been arrested and charged with $141 million in fraudulent billings. In one notable case, the owner of multiple sober homes in South Florida admitted that he paid kickbacks and bribes for patient referrals to his facilities. The owner, Kenneth Chatman, also admitted that he was the ringleader of a conspiracy that scammed patients and defrauded insurance companies. Many of Chatman’s sober homes were put in the names of other people to hide his true ownership and control over the businesses.

In order to further his fraudulent scheme, Chatman hired doctors to serve as medical directors of his treatment centers. The doctors ordered drug treatment and testing for sober home residents that was intended solely to maximize insurance reimbursements. In some cases, Chatman ordered medical testing and billed for residents who left the sober homes and were no longer receiving treatment.

Chatman and others in his employ engaged in various tactics to keep patients from being able to leave the sober homes. They used threats of violence and confiscated patients’ car keys, telephones, medications, and food stamps in order to continue fraudulently billing their insurance companies. Chatman also coerced female patients and residents into prostitution, telling them that they would not have to pay rent or participate in treatment or testing so long as he could continue to bill their insurance companies for substance abuse treatment and testing.

Reporting Addiction Treatment Fraud

Health care fraud in the United States is estimated to total $100 billion every year. The Department of Justice has established a Health Care Fraud Unit focused exclusively on addressing the problem. Due to the size and scope of the health care industry, it is impossible for the government to identify and prosecute all instances of fraud. Whistleblowers therefore play an extremely important role in reporting fraud that might otherwise continue unhindered.

The False Claims Act imposes serious penalties for any person or organization that knowingly makes a false record or files a false claim involving any federal health care program. This includes any plan or program that provides health benefits, whether directly, which is funded directly, in whole or in part, by the United States Government or any state health care system.

Under the qui tam provisions of the False Claims Act, a private citizen with original information of fraudulent health care claims can bring a lawsuit on behalf of the government. If successful, a whistleblower may be eligible to receive a reward of up to 30% of any monetary recovery.

If you have evidence of potential addiction treatment fraud, contact the experienced whistleblower attorneys at Young Law Group for a free, no obligation consultation by filling out our confidential form or by calling us at (800) 590-4116.