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Fraud, Waste and Abuse Schemes in the Addiction Treatment Industry


Isaac Asamoah

Substance use disorder (SUD), commonly referred to as just addiction, is a treatable mental disorder that affects a person’s brain and behavior, leading to their inability to control their use of substances like legal or illegal drugs, alcohol or medications. With addiction being the most severe form of SUD, symptoms can range from moderate to severe. In 2021, drug abuse was added to the list of high-risk situations by the Government Accountability Office (GAO). GAO high-risk list are areas susceptible to increased fraud, waste and abuse.  

Treatment for substance use disorders was an out-of-pocket expense that only the wealthy could afford until the Mental Health Parity and Addiction Equity Act was passed in 2008. More people now have access to SUD treatment because of the passage of legislation like the Patient Protection and Affordable Care Act. The Department of Health and Human Services (HHS) estimates that the financial cost of substance addiction is $193 billion for illegal drug usage and $249 billion for alcohol consumption. 

 Causes Of the Opioid Crisis in the United States 

The Congressional Budget Office pinpoints 3 factors that led to the Opioid epidemic in 2018. These factors are increase in prescription by physicians, increase in demand for self-medication, increase in consumption of opioid medications due to the illicit access of the market and illegal trafficking of opioids into the market.  

What is so peculiar with fraud and abuse in substance use abuse and addiction treatment? 

Fraud occurs in a variety of healthcare settings, such as laboratories, dentist offices, home health agencies, pharmacies and transportation. What, therefore, distinguishes fraud, waste and abuse in drug use disorders? According to (SAMSHA 2014), the SUD treatment sector is expected to continue growing, reaching a value of $34 billion by 2020. Only 2.7 million (6.5%) of the 41.1 million persons who need treatment for substance use disorders (SUD) during the course of the previous year received it at a specialty treatment center, according to the 2020 National Survey on Drug Use and Health (National Survey on drug abuse and health, 2020). Help is needed for vulnerable individuals to treat their substance dependence, yet many of them receive little to no assistance because of fraud, waste and abuse schemes. Zachary A. Cunha, the defendants’ attorney, stated, “What makes the fraud scheme that we have charged today particularly pernicious is that it was not only, as we allege, designed to defraud by enriching these defendants with federal and private healthcare dollars they did not earn,” but it also defrauded a vulnerable population of recovery patients of the full, genuine support and treatment that they need to have. 

As per an investigation by STAT and the Boston Globe, individuals struggling with drug addiction are being used as pawns in a large-scale nationwide insurance fraud operation. Taking advantage of the growth in opioid addiction, these profit-seekers have accepted patients from all around the country. For Peter SanAngelo, who had been using heroin for ten years and was homeless, the promise of free insurance and lavish rehab in a faraway state turned out to be a lifeline. Using a fictitious address, a patient broker registered the Massachusetts man in a Pennsylvania Blue Cross plan and bought him an airline ticket to Florida. They even made a money-saving offer to purchase him cigarettes. Three months after the 33-year-old drug overdosed, he passed away. 

Agencies Collaborating to Tackle Substance Use Disorder Treatment Fraud 

The Federal Bureau of Investigations (FBI) is the primary agent charged with tackling healthcare fraud in the United States. However the FBI works with federal and state agencies such as the Center for Medicaid and Medicare Services (CMS), Department of Health and Human Services – Office of Inspector General (HHS – OIG), the Substance Abuse and Mental Health Services Administration (SAMSHA), Food and Drugs Authority (FDA), Center for Disease Control (CDC), Health Resources Services and Administration (HRSA), Drug Enforcement Administration (DEA), US Department of Justice – Office of Inspector General (USDOJ – OIG), Heroin and Opioid Awareness, Department of Homeland security (DHS) and the office of National and Drug Control Policy (ONDCP) etc. Apart from these federal agencies, the FBI works with state and private public agencies such as the Medicaid Fraud Control Unit (MFCU), Healthcare Fraud Prevention Partnership (HFPP), National Healthcare Anti-Fraud Association (NHCAA) and the National Insurance Crime Bureau (NICB).  

Example of Fraud Scheme in Sober Homes 

The announcement of the sober living homes cases on its one-year anniversary in 2020 marked the celebration of the first-ever national sober homes initiative, which included charges against more than a dozen criminal defendants in connection with over $845 million in allegedly false and fraudulent claims for tests and treatments for vulnerable patients seeking treatment for drug and/or alcohol addiction. The over $133 million in false and fraudulent claims that are additionally alleged in cases announced today reflect the ongoing efforts of the National Rapid Response Strike Force and the Health Care Fraud Unit Strike Force to prosecute individuals involved in illegal kickback and bribery schemes involving the referral of patients to substance abuse treatment facilities—where those patients may be subjected to medically unnecessary drug testing. 

Example of Fraud Schemes in Addiction Treatment 

One of the earliest healthcare fraud tactics is upcoding. In the addiction treatment sector, upcoding refers to doctors charging for higher level visits than actually completed (typically in an effort to receive higher reimbursements). For example, a doctor has up coded the service if they charge an addiction patient the maximum evaluation and management CPT 99215 (40+ minutes) for a visit that only took 25 minutes. CPT 99214 is the right code that the doctor ought to have used. A news release about an addiction treatment center accused of healthcare fraud was issued by the USDOJ in 2023. According to the documents included in the press release, Brier, Bruining and RCCA operated a chain of addiction treatment centers but failed to provide patients with the required therapy and counselling sessions. In addition, they commonly submitted claims for 45-minute counselling sessions to Medicare, Medicaid and other health care payers, even though the sessions typically lasted 10 minutes or less. There have been times when the available therapist could not have finished the total quantity of treatment sessions in a 24-hour period due to the volume of sessions being billed at this rate.  

Patient brokerage FWA schemes in the addiction industry includes patients shopping for prescriptions from physician to physician. Patients occasionally receive more prescriptions for medications than they need. This results in patients selling or giving their medications to family and friends. These medications are usually paid for through federal and state insurance programs like Medicare and Medicaid. Obtaining patients from patient recruiters is another aspect of patient brokerage for doctors. In exchange for patients, this typically entails the doctor paying the recruiter gifts and incentives, or “kickbacks.” A South Florida clinic convicted in a $112 million addiction treatment fraud scheme was highlighted by the USDOJ in 2022. According to the Boston Globe and STAT investigation, patient brokers are paid for putting insured people in touch with treatment facilities; the treatment facilities then pocket thousands of dollars’ worth of claims for each patient. Because Blue Cross Blue Shield plans have generous benefits and few restrictions on using out-of-network treatment programs for medical care, they often target specific plans. 

In the addiction treatment sector, invoicing for services not provided and performing unnecessary procedures for addicted individuals is another FWA scheme. To assist addicts in regaining sobriety, sober living homes are registering residents, but in the absence of stringent policies such as federal and state oversight agencies keeping an eye on and requiring proof of recovery from sober living homes, these patients might remain in the sober living homes as long as they can continue to bill federal and state insurance programs for profits at the expense of providing patients with high-quality care. The public was alerted to fraud schemes targeting Native Americans in May 2023 by the Department of Health and Human Services’ Office of Inspector General. HHS-OIG advisory: Scammers set up fictitious sober living homes that claim to provide addiction treatment and assistance, specifically targeting vulnerable Native Americans. However, people who are asking for help are seriously put at risk because these places are fronts for illegal activity. In addition, Native Americans are the target of schemes including healthcare fraud and human trafficking. By adopting the identity of medical experts, thieves use victims’ personal information and medical identities to sell fraudulent medical services or treatments. Subsequently, they make fraudulent charges for services that were never provided. A STAT / Boston Globe investigation revealed that patients are being moved to treatment centers hundreds of miles away from their homes for expensive, but frequently poor, care that is covered by premium health insurance benefits obtained using false addresses. In exchange for providing those patients, labs routinely pay fictitious bribes to sober houses. In order to continue receiving kickbacks fraudsters schedule a lot of tests or make drug-addled residents produce samples for patients who do not exist. 

Three people were found guilty on Monday, according to federal prosecutors, of conspiracy to submit fraudulent claims for drug and alcohol treatment for students in order to cheat California’s Medi-Cal program out of over $20 million. According to the statement, the group that was found guilty allowed students to enroll in its program for four years, until 2013, even if they had only once used alcohol or drugs. The students then produced paperwork to support their claim that they were suffering from a “medically diagnosed substance use disorder.” Furthermore, the organization submitted bills for payment to the state’s Medi-Cal drug program after forging student signatures on documents that purported to show that they had attended counselling sessions. 

Post-mortem billing is the practice of doctors invoicing insurance companies—federal, state and private—for services provided to patients who have passed away. One technique to identify post-mortem I is to compare the date of service provided by the doctors with the member’s death data that they have billed for. It is considered healthcare fraud if the billing was completed after the patient passed away. Medical practitioners frequently treat a variety of medical issues in their patients with controlled medications on a regular basis. From time to time, a provider may be subject to scrutiny by the Drug Enforcement Administration (DEA), which is looking into charges of drug diversion. A number of DEA enforcement actions, including the suspension or cancellation of their registration for the controlled substance, the loss of their state medical license or even criminal prosecution, may follow allegations that doctors or pharmacies are unlawfully dispensing controlled substances. 

SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners

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