Audits of alcohol and drug addiction treatment centers have been on the rise. We have also seen an increase in criminal filings relating to billing for medically unnecessary services and payment of kickbacks for the referral of rehab patients. However, the facts when cases go criminal tend to be ones where there is outrageous conduct. A recent Florida case fits that profile.
Although the facts in this case are on one end of the spectrum, alcohol and drug treatment centers need to be very careful about paying marketing fees for the referral of patients, offering patients free or reduced rent at sober homes, paying for patients' insurance, ordering excessive lab tests for patients and any financial arrangements with laboratories.
On March 15, 2017, Kenneth Chatman and Laura Chatman, owners of sober homes and alcohol and drug addiction treatment centers, pled guilty to one count of conspiracy to commit health care fraud in violation of 18 USC Section 1349 for the filing of fraudulent insurance claim forms and defrauding health care benefit programs. Their plea also included money laundering and sex trafficking conspiracy (the outrageous facts) counts.
According to the plea agreements, Mr. Chatman established a series of sober homes, including Stay’n Alive, Inc., Total Recovery Sober Living LLC, and several other multi-bed residences operating as sober homes in Palm Beach and Broward Counties under his wife's name. These sober home facilities were in the business of providing safe and drug-free residences for individuals suffering from drug and alcohol addiction.
Mr. Chatman admitted he paid kickbacks and bribes to sober home owners for referring their residents to Reflections Treatment Center LLC in Margate, Florida and Journey to Recovery LLC in Lake Worth, Florida for treatment. Mr. Chatman called these referral payments “case management fees,” “consulting fees,” “marketing fees” and “commissions” but the government viewed them as kickbacks. The referring sober home owners met with Kenneth Chatman on a weekly basis to collect the referral payments, which were based on the number of insured patients that received treatment each week.