New York Attorney General Announces $8 Million Settlement Over Unlicensed Detox Programs

Following a lengthy investigation by both the state of New York’s Medicaid Fraud Control Unit and the U.S. Attorney’s Office for the Eastern District of New York, several medical corporations operating in the state have agreed to pay $8 million to settle allegations of fraud against Medicaid and Medicare.

The defendants in the case include SpecialCare Hospital Management Corporation and its CEO, Benedictine Hospital, Columbia Memorial Hospital, and St. Joseph’s Medical Center. The case began following the filing of a whistleblower complaint by two courageous whistleblowers who – as former employees – relayed firsthand knowledge of ongoing fraud and abuse of taxpayer funds. The settlement is one of several linked to Missouri-based SpecialCare, as previous settlements in this case were resolved with New York Downtown Hospital for $13.4 million, and Our Lady of Mercy Medical Center for $4.5 million.

Details of the allegations against SpecialCare, et al.

According to the allegations,[1. “A.G. Schneiderman Announces $8 Million In Settlements With Specialcare Hospital Management Corp. And Hospitals In Yonkers, Kingston And Hudson For Defrauding Medicaid.” August 24, 2015.http://www.ag.ny.gov/press-release/ag-schneiderman-announces-8-million-settlements-specialcare-hospital-management-corp] SpecialCare and the various defendant hospitals are alleged to have referred patients to unlicensed and unqualified “detox centers” for drug rehabilitation in violation of Medicare and Medicaid guidelines governing this area of medical practice.

More specifically, for a period spanning from 2002 through 2006, SpecialCare is alleged to have encouraged the local hospitals to refer Medicaid and Medicare patients for medically unnecessary drug and alcohol rehabilitation, and offered the hospitals fraudulent “administrative fees” for doing so.

With regards to the illegal patient-referral scheme,[2. “Five Defendants Pay Over $8 Million To Resolve Civil Fraud Allegations That They Billed Medicare And Medicaid For Unlicensed And Unnecessary Inpatient Detoxification Services.” August 24, 2015. http://www.justice.gov/usao-edny/pr/five-defendants-pay-over-8-million-resolve-civil-fraud-allegations-they-billed-medicare] the New York Attorney General’s office alleged that SpecialCare executed “administrative services agreements” with each of the aforementioned New York hospitals.

Under these agreements, hospitals would receive a certain amount of money for each Medicaid or Medicare patient it referred to a SpecialCare facility for drug detoxification – which, in many instances, was either medically unnecessary or, if necessary, conducted by unlicensed care providers.

Moreover, each hospital itself is alleged[3. “More Success For The New York State FCA.” August 25, 2015. http://taf.org/blog/more-success-new-york-state-fca] to have implemented an unlicensed drug rehabilitation program to specifically treat referrals under the SpecialCare administrative agreement. Specifically, Benedictine Hospital, St. Joseph’s Medical Center, and Columbia Memorial Hospital set up “discrete units” known as the “New Vision” program to treat chemical dependence despite a complete lack of state approval or operating certificate. According to the allegations, the programs did not meet minimum standards of care and ultimately placed patients in danger of enduring an unhealthy detoxification or damaging rehabilitative experience.

As a result of the settlement, SpecialCare and its affiliates are prohibited from engaging in the service of any patient receiving Medicare or Medicaid benefits for a period of five years.

Attorney General Schneiderman said in a statement, “Drug and alcohol treatment programs are designed to help vulnerable people struggling with addiction. By exploiting their needs and the Medicaid program in order to maximize revenue, SpecialCare Hospital Management Corporation, St. Joseph’s Medical Center, Benedictine Hospital, and Columbia Memorial Hospital wasted Medicaid resources and illegally billed taxpayers for unlicensed and medically unnecessary treatment services….This settlement holds those institutions accountable for their scheme, and will make providers think twice before defrauding the Medicaid system. Together with our federal partners, my office will leave no stone unturned in the fight to recover misappropriated money on behalf of New York’s taxpayers.”

Contact Berger Montague today

If you are concerned about possible healthcare fraud by your provider or place of employment, please do not hesitate to contact Berger Montague today.