NY Attorney General Recoups $8M after Uncovering Fraudulent Substance Abuse Center Scheme

With drug and alcohol abuse at epic proportions throughout the United States, it’s unconscionable that treatment facilities would be more focused on bilking US healthcare programs than helping patients struggling with addiction. However, a company called SpecialCare Hospital Management Corp., worked closely with St. Joseph’s Medical Center and two other hospitals in New York, to create an illegal patient referral scheme. False claims were submitted to Medicare as part of the scheme between 2002 and 2006.

After lengthy False Claims Act investigations, New York State Attorney General Eric Schneiderman announced that his office shut the scam down and agreed a settlement with the three hospitals to recover over $8 million and return it to the Medicare and Medicaid programs.

SpecialCare Hospital Management is a non-profit vendor located outside of New York. The company referred patients to substance abuse treatment programs at St. Joseph’s Medical Center in Yonkers, Columbia Memorial Hospital in Hudson and HealthAlliance Hospital Mary’s Avenue in Kingston (formally known as Benedictine Hospital). The problem, however, is that the substance abuse programs at those three hospitals are unlicensed treatment facilities. They are not legally able to treat patients and most certainly may not bill Medicare or Medicaid.

Not only were the hospitals not permitted to accept referrals, but the entire fraudulent plan was outlined in an “administrative services agreement” and made to look legitimate. Under the plan, the hospitals paid SpecialCare money each month to keep the illegal referrals coming. Patients were put into the unlicensed inpatient detox units and the entire scam, Schneiderman says, was a violation anti-kickback laws and Medicaid regulations at both the state and federal levels.

The New York State attorney general attorney said: “Drug and alcohol treatment programs are designed to help vulnerable people struggling with addiction. This settlement holds those institutions accountable for their scheme, and will make providers think twice before defrauding the Medicaid system.”

The US False Claims Act permits private citizens to uncover fraudulent activity against the government by “blowing the whistle” on the scammers. In exchange for their information and assistance in prosecuting the qui tam claim, the whistleblowers (also called relators) are entitled to a portion of the recovered money.

If you or someone you know has information that would lead to a successful whistleblower lawsuit, contact Ross Begelman at Begelman & Orlow for a free consultation about your case.

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