Cracking Down on Medi-Cal "Rehab Racket"

By State Senator Anthony Cannella
Friday, May 2, 2014

Also published at The Ceres Courier

How could a convicted felon get rich from the vulnerability of those participating in drug and alcohol rehabilitation treatment programs funded by the state? Why aren't there safeguards in place to prevent this from happening?

That was my question after learning about a year-long investigation in 2013 by CNN and the Center for Investigative Reporting exposing a widespread "rehab racket" in the Drug Medi-Cal (DMC) outpatient treatment program. During their investigation, undercover reporters witnessed a Los Angeles drug and alcohol treatment center that received Drug Medi-Cal funds accept fewer than 30 people in one operating day. Records revealed that the center billed the state for 179 patients that day, which was promptly paid using your taxpayer dollars. The investigation led to an audit which resulted in the suspension of 43 clinics.

The DMC can be a lucrative business because almost half of the $185.8 million allocated for the program goes directly to clinics. It's a rampant problem that not only involves fraud and the blatant misuse of millions of dollars, but also takes advantage of vulnerable people who truly deserve treatment. The report found these unscrupulous clinics would directly pay patients to have their drug counseling sessions reimbursed by the state, but then failed to provide the much-needed counseling or guidance.

In short, these coercion and forgery tactics defrauded a taxpayer-funded program designed to provide treatment and help for addicts.

And it gets worse. The investigation also uncovered that several treatment center owners and management staff have criminal records - some are even convicted felons on a federal fraud blacklist. They are legally prohibited from owning or managing clinics, but because of the lack of proper oversight, it is far too easy for these bad actors to fall through the cracks, allowing them to unjustly profit using your money.

While the majority of DMC treatment centers follow the rules and truly care about their patients, the reputations of legitimate clinics are ultimately damaged by these deceptive practices. In spite of this corruption and deception, I believe the program offers too many positives to eliminate, as they do provide valuable and necessary services for people who want to make a change. Rehabilitation programs are an important aspect of public safety as they can reduce crime rates while offering individuals in need a second chance to succeed in life.

That's why I introduced SB 1339, which will combat DMC fraud by providing the Department of Health Care Services administration or a contracted county with the criminal background information on clinic owners and medical directors. To ensure anyone who runs a treatment center has a clean criminal record, the legislation also requires a fingerprint to become a contracted provider.

We cannot allow criminals who defraud our state to profit from your taxpayer dollars. SB 1339 aims to provide more safeguards to protect you, people in need of rehabilitative services and honest DMC clinics that place patients over profits.