In late January, Health Net, one of the state of California’s largest insurers launched an investigation into waste and fraud. The investigations centers on several residential and outpatient substance abuse treatment centers, but that could be the tip of the iceberg. In fact, according to Behavioral Healthcare, “Experts say the investigation is aggressive and unusually broad, striking more than a dozen providers with the operations of perhaps hundreds of others potentially being questioned.” Some of the facilities will go unpaid until they are cleared of wrongdoing as Health Net looks at their documentation.

Doctors are Under Increased Scrutiny

Doctors are Under Increased Scrutiny

The treatment centers, all located in Southern California, received notice of the investigation through a letter signed by Matthew Ciganek, Director of Health Net’s Special Investigation Unit3. Included in the correspondence was a request for sworn responses to questions Health Net had regarding possible fraud and abuse.

The investigation is just the latest in a string of scrutiny, following a year of high rates of audits and investigations of drug rehabilitation facilities by other insurers. Nelson Hardiman, a lawyer that works with treatment centers in California, told Behavior Health that the increases scrutiny comes after a relatively light enforcement of compliance rules by regulatory bodies. This has prompted insurers to expand their own fraud investigations, and investigate treatment centers with high turnover rates and other clues to fraud or mismanagement. He also warns that this is just the beginning of this type of accountability action taken by insurers. Beahvioral health providers should be aware that their insurers can demand similar information or transparency.

“There has been explosive growth in the industry, thanks in part to insurance reimbursement available in the wake of the Mental Health Parity Act of 20082 and the Affordable Care Act 1, which mandated the inclusion of substance abuse treatment in the definition of ‘minimum essential coverage,’” Hardiman says.  “Health Net and other insurers have been hemorrhaging money and have been looking for more aggressive strategies to stop perceived abusive billing and deter others.

Health Net’s inquiry seeks information concerning (i) the procurement of insurance policies for individuals who do not reside in Southern California; (ii) the failure to collect deductibles, copayment, and coinsurance from residents as required by insurance policies; (iii) the charging of inconsistent rates to different payors for drug treatment services; (iv) the payment of kickbacks in marketing to induce the referral of drug rehab patients; and (v) the lack of medical necessity.

1. Fact Sheet: Celebrating the Affordable Care Act, available here.
2. HHS’s New Mental Health and Substance Use Disorder Benefit Resources Will Help People Seeking Care to Better Understand Their Rights, available here.
3. Health Net January Letter, available here.