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Fighting Fraud at Community Mental Health Centers

Lethal Weapon. Tootsie. Ghostbusters. Batman. You may think these are great movies—some might argue they're classics—but do they qualify as psychotherapy? Patients at Diagnostic and Behavioral Health Clinic watched these films for entertainment and participated in other recreational activities, such as playing games and going on field trips, while the clinic billed Medicare for mental health services. Therapists also charged for 1-hour sessions when patients were in-and-out the door in 15 minutes. As a result, the clinic improperly billed Medicare over $4 million. OIG's investigation of this case led to the 1999 convictions of the owner and another employee.

Over a decade later, OIG and our law enforcement partners found that employees at another
facility—American Therapeutic Corporation—concocted a $205 million fraud scheme involving fictitious companies, fabricated patient files, patient recruiters, kickbacks, and elaborate cover-ups. They also illegally prescribed unnecessary psychotropic medications. Prosecutors for the case charged dozens, and the three owners/operators received a combined 120 years in prison (additional information below).

Besides committing fraud, the facilities in these two examples have something else in common: both are Community Mental Health Centers (CMHC), a type of facility that provides mental health services to individuals who reside in a defined geographic area. Fraud at CMHCs is not new, and OIG studies on CMHCs show that it isn't isolated. For example, the report Questionable Billing by Community Health Centers found approximately half of CMHCs had unusually high billing for at least one of nine questionable billing characteristics. These characteristics include billing for patients with no mental health diagnoses, billing for patients who participated in CMHCs outside their own communities, or billing for patients who were not referred by health care facilities. While there are procedures in place for detecting and deterring fraud involving CMHCs, another OIG report - Vulnerabilities in CMS's and Contractors' Activities to Detect and Deter Fraud in Community Mental Health Centers - identified a number of shortcomings in oversight of CMHCs and found the extent to which Medicare contractors engaged in anti-fraud activities varied considerably.

A map of fraud-prone areas

However, through programmatic recommendations, data analytics, and geographically targeted fraud-fighting efforts, OIG and partners have made significant progress cracking down on CMHC fraud. For example, an October 2013 final rule on CMHCs cited findings from OIG's Questionable Billing report and enacted our recommendation to finalize CMHC conditions for participation in Medicare. Furthermore, by analyzing payment trends, OIG agents determined the areas where suspicious billing by CMHCs is most rampant. As shown in Figure 1, our principal target areas - known as Strike Force cities - overlap with the cities identified in OIG's report as home to approximately two-thirds of the CMHCs with questionable billing. We deployed our Strike Force teams to investigate CMHCs with excessive Medicare billing and prosecute fraud. This focused law enforcement crackdown sent fraudsters to jail and sent the message that CMHC fraud will not be tolerated.

A graph of medicare payments for CMHCs by calendar year

And the data suggests this message made an impact. Total national Medicare payments to CMHCs peaked in 2008 at $273 million. Targeted enforcement activities - centered in Miami, Baton Rouge, and Houston - also began in 2008, and major enforcement actions occurred in all three cities from 2010 - 2012, some of which are described below. As seen on the graph, payments to CMHCs dramatically decreased during and after this period. In 2012, payment levels fell to $31 million, a difference of over $240 million. This may suggest that the large-scale CMHC fraud convictions not only eliminated some of the "bad actors" but could have also deterred other "would-be" fraudsters.

Our CMHC work is a clear example of how devoting resources to fraud-fighting can pay off. But it's also important to consider the challenges that still exist. For example, while billing dramatically decreased in the targeted areas, criminals may have moved into other types of fraud. Furthermore, OIG investigations continue to identify scenarios where CMHCs bill for mental health services but instead provide, at best, recreational adult day care. This not only clogs the system for those in need of legitimate care, but could also drive up overall health care costs. As mental health services are expanding under the Affordable Care Act, the task of rooting out fraud, waste, and abuse will only become more vital. Therefore, OIG will continue to use every tool in its arsenal - inspections, audits*, data-analytics, law enforcement partnerships, and more - to fight fraud and protect Medicare mental health services.

*OIG is currently reviewing the appropriateness of Medicare payments for partial hospitalization program psychiatric services in hospital outpatient departments and community mental health centers. For more information on this upcoming audit, see page 22 of our 2013 work plan.

CMHC Fraud Cases in Strike Force Cities

American Therapeutic Corporation - American Therapeutic Corporation (ATC), an umbrella organization that managed seven CMHCs owned by Lawrence Duran, along with American Sleep Institute (ASI), another of Duran's companies, submitted more than $205 million in false and fraudulent claims to Medicare for services that were medically unnecessary, not eligible for Medicare reimbursement, or were never provided. Duran and his co-conspirators created a massive criminal operation in which they paid large kickbacks in exchange for Medicare beneficiaries who claimed to receive ATC and ASI services. To fund these kickbacks, the defendants created fictitious identities, set up various corporations, and utilized multiple individuals to launder money. Additionally, evidence showed that ATC medical directors signed patient files without reading them; did not see patients; and changed, removed, or placed patients on psychotropic medications without medical evaluation, all in an effort to conceal the fact that many of the patients did not qualify for reimbursement. Twenty four defendants have been sentenced to a combined total of more than 200 years in prison for crimes related to this scheme. Duran was sentenced to 50 years and ordered to pay $87 million in restitution.

Biscayne Milieu - Claiming to operate as an intensive treatment program for individuals with severe mental illness, this Miami-based CMHC devised a $55 million Medicare scheme involving patient recruiters, kickbacks, billing for services not provided, and billing for ineligible patients. For example, Biscayne Milieu billed Medicare for patients who were not mentally ill, but rather soliciting false diagnoses so they could be exempt from portions of their U.S. citizenship application. The fraud scheme also involved elaborate cover-up efforts, including fake case managers and phony medical records. Biscayne Milieu, its owners, and more than 25 other defendants either pled guilty or were convicted at trial. The three owners were jailed for a combined 77 years.

Spectrum Care P.A. - Based in Houston, TX, this CMHC is charged with submitting $97 million in claims to Medicare for services that were unnecessary or not provided. Spectrum allegedly paid kickbacks in the form of cash, gifts cards, and even cigarettes in exchange for delivering Medicare patients who were willing to sign files documenting services they never received and/or were not qualified to receive. Meanwhile, the patients allegedly enjoyed playing bingo and watching movies. Eight were indicted in this case, which is scheduled to go to trial in 2014.

Health Care Solutions Network - The clinical director at the Florida location of this CMHC submitted claims to Medicare using her personal Medicare provider number for individual therapy she claimed to provide, while knowing that the CMHC was simultaneously billing for services for the same patients. In addition, the CMHC paid kickbacks to a local assisted living facility for referring patients, many of whom weren't even eligible for the services. Employees forged records to support the $56 million in fraudulent claims submitted to Medicare and Florida Medicaid. In total, 12 defendants were sentenced to a combined 70 years in prison and ordered to pay $186 million in restitution.


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