Tennessee Drug Treatment Facility to Pay $9.25 Million to Settle False Claims Act Lawsuit

CRC Health Corp., a Cupertino, California-based nationwide service provider of mental heath and substance abuse treatment, will pay $9.25 million to the State of Tennessee and the federal government, resolving allegations that it violated the False Claims Act by knowingly submitting claims for reimbursement for substandard treatment. The allegations involve a CRC-owned and -operated facility in Burns, Tennessee that provided treatment to adolescent and adult Medicaid patients who suffered from alcohol and drug addiction.

Between 2006 and 2012, the facility, called New Life Lodge, allegedly billed TennCase, the Tennessee Medicaid program, for substance abuse therapy that was either never provided or else provided by therapists who were not properly licensed under Tennessee law. The Department of Justice (DOJ) also made several other claims that New Life Lodge: did not make a licensed psychiatrist available to the facility’s patients, a requirement under state regulations; failed to abide by Tennessee Department of Mental Health regulations requiring specific patient-staffing ratios to be maintained; billed in excess of state-licensed bed capacity on behalf of Medicaid patients; and double-billed Medicaid for prescription substance abuse medications that it provided to its residents. New Life Lodge is no longer currently treating Medicaid patients.

The settlement resolves a case originally filed by a whistleblower under the qui tam provisions of the False Claims Act, which allow private citizens to sue on behalf of the government and collect a portion of the reward. The whistleblower in this case is Angie Cederoth, a former employee of New Life Lodge in the billing department. She will receive a $1.5 million share of the total $9.25 million reward.

This case is the latest achievement of the government in battling fraud against federal health care programs. In May 2009, Secretary of Health and Human Services (HSS) Kathleen Sebelius and Attorney General Eric Holder announced the launch of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), a joint initiative of the two departments to coordinate its efforts in this area. The False Claims Act is one of the most useful tools at the government’s disposal to target federal health care fraud.

Since January 2009, more than $19 billion has been collected by the DOJ in False Claims Act cases; this includes more than $13.4 billion from cases that involved fraud against federal health care programs.

Six different state and federal agencies cooperated to bring about this settlement: the DOJ’s Civil Division’s Commercial Litigation Branch, HHS’s Office of the Inspector General, the Federal Bureau of Investigation, the U.S. Attorney’s Office for the Middle District of Tennessee, and the Tennessee Bureau of Investigation.

The settlement resolves the allegations in the lawsuit, but no determination of liability was made.

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