Fraud Found in Taxpayer-Funded Rehabilitation Clinics

A joint investigative effort by CNN and the Center for Investigative Reporting (CIR) recently revealed fraud in a number of California’s tax-payer-funded drug rehab clinics. The investigation uncovered financial fraud, misreporting, insufficient oversight, and poor hiring practices at some of the clinics, which are funded by Medi-Cal, part of the federal Medicaid health care system. The majority of the clinics at fault were located in the greater Los Angeles area.

Whistleblowers at the fraudulent clinics reported that the institutions profited by billing government funds for “ghost clients”—patients who were not being treated at those clinics. One clinic operator, CNN reports, spent over $10,000 of his clinic’s funds on lavish personal expenses. In the case of another clinic operator, one third of the foster children he treated for drug or alcohol dependency had no addiction.

Including state and federal funds, $185.8 million was spent on drug rehabilitation and counseling in California in the last two fiscal years. Of that total, $94 million went to the fraudulent clinics, including $3.6 million to a clinic operated by a felon and $1.7 million to a clinic that billed for “ghost clients.” More than half of the overall rehab budget went to rehab clinics that showed signs of “deception or questionable billing,” according to the CNN/CIR research.

The state’s rehab program funds 1,064 clinics in total. So far, 66 of the companies who run the drug rehab clinics have been investigated for fraud. As of last month, the state has temporarily cut funding for 29 of those companies, which operated a total of 83 clinics in California.

The California Department of Health Care Services is conducting a statewide review of the program in light of the allegations of fraud. The state Department of Justice may file a criminal suit.

California state legislators have also called for a thorough review of the program, including State Sen. Ted Lieu (D-Torrance) and Dr. Richard Pan, chairman of the Assembly Health Committee. These members hope to uncover and end any fraud in the system so that the honest clinics can continue to receive the funding they need to treat their patients.

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