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BH FRAUD UPDATE: CRC agrees to resolve false claims act allegations for $9.25 million

April 21, 2014
by Shannon Brys, Associate Editor
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Last week, the Department of Justice announced that CRC Health Group (CRC) has agreed to pay $9.25 million to the federal government and the State of Tennessee to settle allegations that CRC knowingly submitted false claims by providing substandard treatment to adult and adolescent Medicaid patients suffering from alcohol and drug addiction at its facility in Burns, Tenn. CRC, based in Cupertino, Calif., is a nationwide provider of substance abuse and mental health treatment services. 

CRC owns and operates a residential substance abuse treatment facility in Burns, Tenn., called New Life Lodge.  The government alleged that, between 2006 and 2012, New Life Lodge billed the Tennessee Medicaid program (TennCare) for substance abuse therapy services that were not provided or were provided by therapists who were not properly licensed by the state of Tennessee. The government also alleged that New Life Lodge failed to make a licensed psychiatrist available to patients at the facility, as required by the state’s regulations; failed to maintain patient-staffing ratios required by Tennessee Department of Mental Health regulations and billed for Medicaid patients in excess of the state-licensed bed capacity at the facility.  In addition, the government alleged that New Life Lodge double-billed Medicaid for prescription substance abuse medications given to residents at the facility. New Life Lodge currently is not treating Medicaid patients at its facility.  

“Safeguarding TennCare’s mental and behavioral health support system is a particular focus of this office,” said Tennessee Attorney General Bob Cooper.

The allegations covered by the settlement were raised in a lawsuit filed by Angie Cederoth, who was previously employed in New Life Lodge’s billing department, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for the submission of false claims and to receive a share of any recovery. Cederoth will receive $1.5 million as her share of the settlement proceeds.

“Providers of health care services must not place profits above patients,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services Office of Inspector General in Atlanta. “This was a vulnerable population of individuals who were seeking treatment for their substance abuse problems. We will pursue these cases in order to ensure proper treatment is afforded to those seeking treatment.”

The investigation of this matter reflects a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Tennessee, the Federal Bureau of Investigation, the Tennessee Attorney General’s Office, the Tennessee Bureau of Investigation and the Department of Health and Human Services Office of Inspector General. 

“This resolution is indicative of a great collaborative effort to combat egregious and fraudulent activity against healthcare, which ultimately impacts everyone in Tennessee,” said Director of the Tennessee Bureau of Investigation Mark Gwyn. 

The lawsuit is captioned U.S. ex rel. Cederoth v. CRC Health Corporation Inc., CV-3-11-00897 (M.D. Tenn.).  The claims asserted against the defendants are allegations only, and there has been no determination of liability.

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