Sen. Cannella Legislation to Combat Medi-Cal Treatment Program Fraud Passes Legislature

Wednesday, August 20, 2014

Legislation by State Senator Anthony Cannella (R-Ceres) to reduce fraud in California’s Drug Medi-Cal (DMC) outpatient treatment program today passed the Legislature and is headed to Governor Jerry Brown for signature. SB 1339 is in direct response to a yearlong investigation by CNN’s Special Investigations Unit and the Center for Investigative Reporting (CIR) which uncovered a widespread “rehab racket” in the DMC program, allowing fraud and abuse. The bill passed both the Senate and Assembly on unanimous votes.

Yesterday, the State Auditor’s office released a report confirming widespread fraud in the program. The audit discovered $93.7 million in authorized payments that were potentially fraudulent and 323 reimbursement payments amounting to more than $10,000 for deceased beneficiaries.

“Yesterday’s report underscores exactly why this legislation is necessary. This program provides important services to some of our most vulnerable citizens, and we have to restore public trust.” said Cannella. “Most Drug Medi-Cal providers follow the rules and truly care about their patients, but the few bad actors tarnish the reputations of legitimate clinics. SB 1339 provides safeguards to protect taxpayers, people in need of rehabilitative services, and honest clinics that place patients over profits.”

In the 2013 report by CNN and the CIR, 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 paid using taxpayer dollars. The investigation led to an audit which resulted in the suspension of 43 clinics.

This year’s budget created the standard for fraud prevention by designating a categorical risk for the owner and anyone with a 5% interest in a DMC facility. SB 1339 extends current law to the officers and executive director of non-profit DMC providers and applicants. This authorizes the Department of Health Care Services to implement consistent fraud prevention standards throughout the DMC program.