Owner of Drug Rehab Facility Who Paid For Some Patients' Initial Health Insurance Payments and Waived CoPays and Deductibles Charged With Insurance Fraud by Riverside County District Attorney

There are times when health care facilities may contribute to paying a patients' insurance. For example, a patient who is hospitalized for some time where it is documented properly and financial need exists and it is disclosed.

However, can a health care facility pay for the initial premium that allows the patient to get treatment? Not usually. There are also some situations where copay and deductibles can be waived, but there are times when doing so is not allowed. These are two of the issues in a recent criminal case against the owner of a drug rehabilitation facility.

On March 25, 2018, David Leo Johnson, the owner of Southern California Detox Treatment and Recovery (SCDTR) in Temecula, was charged with 30 counts of insurance fraud and an aggravated white collar crime enhancement by the Riverside County District Attorney. The case is set for a felony settlement conference on August 29, 2018. The bail was set at $270,000 which is usually indicative of the alleged loss.

According to court pleadings, from February 2015 to May 2016, Mr. Johnson is accused of billing more than 90 Health Net policies for treatment SCDTR provided to its clients. This was a joint investigation by the DA’s Bureau of Investigation and the Federal Bureau of Investigation.

One issue is the payment of health insurance. It is alleged that an examination of the Health Net policies billed by SCDTR showed some policy applications used the SCDTR address as the policyholder’s residence and that Mr. Johnson's credit card was used to make the initial premium payments on 62 percent of the policies. 

Interviews with clients allegedly showed that they did not submit the applications for their health insurance policies and were not aware of how the coverage was obtained. When interviewed, the clients also allegedly advised that Mr. Johnson did not charge them any of the required patient costs, including deductibles and copayments.

Two Los Angeles Executives of Provider of Substance Abuse Treatments Billed to Drug Medi-Cal Indicted by Grand Jury

The Drug Medi-Cal program has been under a lot of scrutiny since 2013 when it was the subject of investigative reporting. In 2014, significant changes and audits were made.  Many facilities were closed. However, it seems that there are still criminal filings coming out of those past audits.

On March 29, 2018, two executives at a South Los Angeles company that offered alcohol and drug abuse treatment services were indicted on federal charges that allege they defrauded the Medi-Cal program from 2009 to 2015 by submitting bills seeking more than $2 million for services that did not qualify for reimbursement or simply were never provided. An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court. 

Two Florida Owners of Sober Homes and Alcohol and Drug Treatment Centers Plead Guilty for Filing Fraudulent Insurance Claims and Paying Kickbacks for Referrals

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.

Six Florida Defendants Including Two Doctors Charged in Private Insurance Health Care Fraud Involving Sober Homes, Alcohol and Drug Addiction Treatment Centers and Drug Testing

Private insurance companies are aggressively pursing investigations into drug and alcohol rehabilitation centers, sober living homes, laboratories who process drug testing and physicians who make referrals. 

The referrals from licensed treatment centers to sober living facilities owned by the same or related parties is one red flag. In addition, a common issue is whether reduced rent to impoverished or unemployed clients is a referral payment. 

The cases that have more extreme facts are the ones that then get referred for criminal prosecution. A recent case has extreme facts alleged including billing for services not provided, falsification of records, not discharging clients using drugs, and excessive or unnecessary urine drug testing. 

On December 21, 2016, six Florida defendants, including owners, doctors, and an employee of sober homes and alcohol and drug addiction treatment centers were charged in a health care fraud scheme for filing fraudulent insurance claim forms and license applications and defrauding health care benefit programs.

Connecticut Office Manager Pleads Guilty to Health Care Fraud Charges for Billing for Psychotherapy Services Using Social Worker's Provider Number Who Did Not Provide Services

Mental health audits and prosecutions are on the rise in “behavioral health” which includes a wide variety of health care providers who provide care on an outpatient basis. These providers include psychiatrists, psychologists, licensed clinical social workers, licensed marriage and family therapists, licensed professional counselors, and licensed alcohol and drug counselors.  

Managers are often charged in health care fraud cases and a recent case relates to a manager's alleged participation in fraud and abuse in outpatient behavioral health. On December 14, 2016, office manager Maurice Sharpe of Connecticut waived his right to indictment and pleaded guilty before U.S. District Judge Bolden to one count of health care fraud. The facts relate to billing for psychotherapy services provided by unlicensed individuals, using another provider's Medicaid number or billing for services not provided. 

CleanSlate Addiction Treatment Centers Settle Qui Tam Allegations of Prescribing of Suboxone by Nurse Practitioners and Physician Assistants Without Proper Physician Supervision and Improper Billing

The addiction industry is facing a great deal of scrutiny at every level. The laws and regulations are changing and compliance is lagging behind. Noble efforts to get patients treated quickly for substance abuse due to the growing opioid abuse epidemic will cause problems if the federal and state laws are not followed carefully especially where Suboxone and other scheduled drugs are involved (due to potential for misuse and diversion). Further, where there is Medicare/Medicaid or insurance billing involved issues of medical necessity, proper billing and proper medical supervision is key.

Treatment centers need to be mindful that federal rules and regulations regarding prescribing and billing must be followed carefully. A recent qui tam case addresses the prescribing of Buprenorphine (Suboxone), a Schedule III controlled substance that also can be used to treat pain, by mid-level practitioners and what happens when federal law changes but state regulations are not adopted. Providers must follow state and federal laws and regulations.  

How did this qui tam case come about? Until recently, only a physician could prescribe buprenorphine for addiction treatment. Congress modified the law in July 2016, allowing nurse practitioners and physician assistants to prescribe buprenorphine for addiction treatment, provided they meet certain training and state-law licensing requirements.  In Massachusetts, those requirements have not yet been established.

A recent case shows the legal issues. On November 22, 2016, the U.S. Attorney’s Office in Boston reached a $750,000 civil settlement yesterday with CleanSlate Centers, Inc. and Total Wellness Centers, LLC d/b/a CleanSlate. This civil settlement resolved allegations that the two companies, which together operate opioid addiction treatment centers in Massachusetts and other states, improperly prescribed buprenorphine (Suboxone®) for opioid addiction treatment and improperly billed Medicare.

California Owner and CFO of Chain of Outpatient Drug Rehab and Sober Living Facilities Charged With Insurance Fraud and Identity Theft In State Case in LA County Superior Court

There have been investigations into the drug rehabilitation business the past two years with insurance investigators leading the way. The investigations have covered the marketing to patients, payment of patients' insurance policies, use of drug toxicology laboratories, excessive billing allegations and other insurance issues.

In the largest Los Angeles case to date, on November 10, 2016, Community Recovery of Los Angeles (CRLA)'s CEO Chris Bathum and CFO Kirsten Wallace were charged in a state case in Los Angeles County Superior Court with multiple felony counts of grand theft and identity theft for allegedly conspiring to defraud patients and insurers out of more than $176 million through an elaborate conspiracy. Simultaneously, search warrants were also executed at 15 locations throughout Los Angeles and Orange County. Mr. Bathum and Ms. Wallace are presumed innocent and a criminal complaint is not evidence. 

The felony complaint alleges that Mr. Bathum and Mr. Wallace conspired to steal patient identities and buy health insurance policies for patients without their knowledge. After completing treatment, it is alleged that Mr. Bathum continued to have CRLA bill insurance companies for treatment services. It is alleged that CRLA billed health insurance companies more than $176 million in fraudulent claims. The insurers, including Anthem Blue Cross, Blue Shield, Cigna, Health Net and Humana paid approximately $44 million in total before stopping claim payments to CRLA.

Premiertox Pays U.S. and Tennessee $2.5 Million to Resolve False Claims Act Lawsuit for Urine Drug Screening Services. Allegations of Unlawful Kickbacks, Lack of Medical Necessity

Quantitative urine drug screening ordered by physicians or other health care providers (such as drug treatment centers) and toxicology laboratories or the treatment and monitoring of patients have come under increased scrutiny and audits the past three years. 

The increased requirement of urine monitoring for pain management and drug addiction treatment resulted in companies and providers being more aggressive about the ordering of urine screenings. A recent case shows that qui tam relators are also filing actions against toxicology labs and the doctors who order the screeenings. At the heart of the case is the business relationships between the labs and referring providers.

Referral arrangements between ordering physicians and the laboratories are an issue. I expect to see many more qui tam lawsuits, civil lawsuits by insurance carriers and even some criminal prosecutions.

Understand that the government views providing free point of care testing cups is proving to be an illegal inducement. It also views ownership of any referring provider in the laboratory or a related entity which received profits from the urine tox referrals is also an illegal inducement. Labs and its marketing companies are coming up with creative ways to get referring physicians and drug treatment clinics, but be careful since this could be your company 3 years from now. A company like PremierTox can afford to pay millions but individuals tend to get more aggressive treatment (criminal allegations).  

On February 10, 2016, PremierTox 2.0, Inc. paid $2.5 million to resolve alleged violations of the False Claims Act. PremierTox previously did business in Tennessee under the name Nexus and is a company that provides drug urine screening services.  The government alleged that PremierTox submitted false claims when billing Medicare, TennCare and Kentucky Medicaid for drug urine screening services. PremiereTox 2.0 had a settlement and corporate integrity agreement back in 2014 that was a substantial (payment of $15 million) and it seems the company is resolving its legal matters from its old ownership. 

Drug Rehab Industry Reacts to Second Degree Murder Charges And Dependent Adult Abuse Charges Filed Against Murietta Drug Rehab Center and Four of Its Employees

A jolt has been sent through California's large drug and alcohol rehabilitation industry—an industry with more than 1,500 facilities across the state. 

As reported by the Los Angeles Times, the California State Attorney General's office has pursued second-degree murder charges against A Better Tomorrow and four of its employees relating to the death of a client in 2010.  This is the first time in California history that a drug and alcohol rehabalitation corporation has been accused of murder.

The criminal case against A Better Tomorrow and its employees is a warning to California's treatment centers. The prosecutor has argued that the company, in its drive for profit, accepted a client it was not prepared to care for (he was on oxygen and had just been discharged from a hospital for pneumonia) and killed him by failing to refill his oxygen and allowing employees with little or no medical training to give him drugs that were not prescribed by a physician (and were just in their stock of leftover drugs) that made it harder for him to breathe. 

Benefield was the fourth person to die after checking into the facility in a little over two years from 2008 to 2010 and that is what the State will attempt to use to prove recklessness or implied malice. There was a civil case that settled and it appears that the coroner found the death to be from natural causes which will cause problems for the prosecution.

It raises an issue for the industry which has gotten used to admitting addicts—some of whom have serious health issues without a clearance from a physician. If the treatment center was for eating disorders, there would be physical clearances and medical staff on site. The industry also has changed a great deal since 2010 when this death happened. It was 6 years ago but the prosecutors are seeking to ensure that the drug and alcohol rehabilitation industry recognizes how complex the medical conditions of addicts can be especially older ones with other health issues.

This was tragic and I cannot imagine that anyone intended that the client's health would be endangered but the law of uninended consequences can occur. Having physical and medical clearances before accepting clients to residential treatment programs will be the new norm. Addicts, even young ones, can have enlarged hearts and need to have EKGs and physicals before they are sent for detox and treatment at facilities that do not have full-time medical staff.

Drug Medi-Cal Fraud Case Set for Trial in May 2016 For Alleged Submission of False Claims for Alcohol and Drug Treatment and Counseling for Students

Trial is set for May 10, 2016 in federal court in Los Angeles regarding the operation of a Caliornia Drug Medi-Cal provider Atlantic Health Services, formerly known as Atlantic Recovery Services (ARS) in which eight individuals were indicted and charged with health care fraud and aggravated identity theft.

The Drug Medi-Cal programs in the schools was a unique program and there may be very good defenses to this case given the County contracts, the approval of billing and submissions in the past, the State agency that regulated these programs and upon which the programs relied, and the aggressive tactics that Medi-Cal used when it decided to cut these programs.  

The overall allegation was that ARS submitted more than $50 million in fraudulent bills to a California state program for alcohol and drug treatment services for high school and middle school students that, in many instances, were not provided or were provided to students who did not have substance abuse problems. 

The eight defendants are all former employees of ARS, which received contracts to provide substance abuse treatment services through the Drug Medi-Cal program to students in schools in Los Angeles County. 

The schools included various sites operated by Soledad Enrichment Action and public schools in Montebello, California, Bell Gardens, Californina, Lakewood, and the Antelope Valley. ARS submitted claims for payment to the Drug Medi-Cal program for at least ten years and ARS shut down in April 2013, when California suspended payments to the company.

Former Doctor and Non-Doctor Owners of Kentucky Clinical Laboratory Indicted for Health Care Fraud Due to Urine Drug Testing

Drug toxicology was considered a lucrative field in health care. Urine drug testing is important for physicians to monitor patient use of drugs and compliance especially with pain medications or addiction treatment.

There are now a number of fraud cases arising involving drug toxicology. In California, it has been a hot area in workers' compensation fraud. There are also Medicare, Medicaid, workers' compensation insurance and private insurance fraud investigations around the country relating to drug testing. 

On December 1, 2015 arraignment was held after a federal grand jury in Kentucky returned a 100-count indictment charging five men, who owned a clinical laboratory, with billing health care third-party payors for urine drug tests that were medically unnecessary and not eligible for reimbursement.

Tracy Green Quoted In Lengthy Investigative Article About Medi-Cal Drug Rehab

Tracy Green was quoted in an investigative article about Medi-Cal Drug Rehab programs and allegations of fraud and abuse. The article is entitled "Amid Fraud Allegations, Rehab Doctors OK Treatment Without Seeing Patients" and is by the Center for Investigative Reporting with contributions by CNN who also did a 3-part series called "Rehab Racket." This is one in a series about Medi-Cal programs for drug and alcohol counseling treatment. Tracy Green was interviewed about one of her clients a physician who had plead to a misdemeanor count for signing blank treatment forms after being charged with felony counts.

The article focuses on the "medical directors" and the fact that the doctors did not physically examine the patients without understanding that these drug and treatment clinics are not owned by the doctors or health care professionals and that there is no requirement that the patients must be seen by a physician. In fact, the Medi-Cal program does not pay for a physical examination. The reimbursement rates are so low that it would be financially impossible to have a physician see each patient. The program cannot have it both ways -- want physical exams but not pay enough to cover it -- and this reimbursement structure has helped create this problem. The medical directors were not responsible for these clinics and were paid fairly low monthly fees ($1,000 a month). To cast the blame on these physicians is missing the real problems by the owners and managers of these clinics.

Since this series of articles have been published, the Department of Health Care Services has taken action and suspended 73 clinics including 101 additional counseling sites. Not surprisingly, all of the clinics referenced in the article have had their Medi-Cal provider numbers temporarily suspended based on accusations of fraud and abuse.

The Department of Health Care Services has also referred 64 of the clinics to the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse for criminal investigation.  This referral will be used to justify the temporary suspensions of the provider numbers. Those clinics will have to address the administrative law issues as well as the criminal investigation.

Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law
800 West Sixth Street, Suite 450
Los Angeles, California  90017
213-233-2260
tgreen@greenassoc.com

California Department of Health Care Services (DHCS) Issues Temporary Suspensions Against 16 Alcohol And Drug Treatment Centers - More Suspensions To Come

On July 18, 2013, the California Department of Health Care Services (DHCS) announced temporary suspensions against 16 alcohol and drug treatment centers that are suspected of operating in violation of state and federal Drug Medi-Cal (DMC) laws. The disciplinary measures resulted from preliminary investigations of alcohol and drug treatment programs by DHCS’ Audits and Investigations Division. The investigations included reviews and onsite visits last week of 22 treatment centers.

It is believed that a total of 66 companies have been audited and that additional treatment centers have been suspended since July 18 based on reports by the Los Angeles Times. According to the Times, 29 companies that operate a total of 83 clinics have been temporarily suspended.

As DMC-certified clinics, they are reimbursed by the state for substance use disorder services provided to eligible Medi-Cal members. As a result of the investigations, the 16 centers received temporary suspensions of their Medi-Cal provider numbers, preventing them from submitting claims for reimbursement of services until investigations are complete.

"Temporary" suspensions can take over one year while the criminal investigation is pending. Temporary suspensions can result in the facility closing given that most of these programs are fully reliant on Medi-Cal payments. All 16 cases have been referred to the California Department of Justice for further investigation, which may lead to permanent sanctions (such as termination of provider number) or the filing of a criminal action.  However, the temporary suspension can be lifted early if the treatment centers can show that there is not reliable evidence of fraud or abuse. This action is the first phase of DHCS’ ongoing review of DMC, which came fully under its purview earlier this month.

 Allegations received by DHCS regarding DMC include claims that providers have hired individuals who are on the federal list of excluded providers. These individuals have been convicted of a felony or misdemeanor involving fraud or abuse in any government program, or they have been convicted of neglect or abuse of a patient while providing a health care item or service. Some centers are suspected of violating state and federal laws by providing services that are not deemed medically necessary and of fraudulently billing DMC for services that were not rendered. DHCS is working with counties, which contract directly with these clinics to provide services, to resolve any discrepancies between the actions of the centers and their billing of Medi-Cal.

On July 1, 2013, all substance use disorder programs from the Department of Alcohol and Drug Programs completed their transfer to DHCS. This allows for better coordination of the licensing, certification and program management of substance use disorder services to the benefit of individuals with substance use disorders.

Attorney Commentary Having represented Medi-Cal providers, including alcohol and drug treatment centers, who received temporary suspensions, it is critical to act quickly in assessing the merit of the allegations.  There are opportunities to seek a settlement conference and resolution with the Department especially where the allegations are weak or with little merit.

Posted by Tracy Green, Attorney
Green and Associates

California Department of Alcohol and Drug Program Ceases Operation July 1, 2013

As a part of the FY 2012-13 budget process, the Legislature authorized the transfer of the programs and functions of the Department of Alcohol and Drug Programs (ADP) to departments within the California State Department of Health Care Services, effective July 1, 2013. The transition plan can be found on the ADP website. 

The result of this reorganization will be a state administrative structure that will provide one state department for the substance use disorder system, align with federal and county partners, and promote opportunities for improving health care delivery to the benefit of consumers with substance use disorders. For those programs that are paid for by Medi-Cal, this allows DHCS to license those facilities to whom payments are made for services provided. It is also anticipated that the federal Patient Protection and Affordable Care Act will make more people eligible for insurance covered drug and alcohol treatment treatment. The Counties will also have increased responsibility for oversight. 

This will be a time for change for those facilities licensed by the ADP and we can certainly anticipate changes in licensing and regulation over time. For sober living facilities, non-medical detox facilities and related programs, it will be a time of adjustment. As prescription drug abuse becomes a greater issue nationwide, there will be more need for programs but also more scrutiny especially for the non-medical programs.

It will be important for all facilities to keep informed about program and licensing changes for those programs that are not receiving payment from Medi-Cal. For those who have a medical model where reimbursement is sought, DHCS may be more concerned with reimbursement issues than the public health issues of addiction. At one level, it is useful to have the entire program (reimbursement and licensing) under one agency. However, this will be a larger agency that has many other programs other than drug and alcohol abuse.

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260.

Any questions or comments should be directed to Tracy Green an experienced administrative law attorney, health care litigation attorney, and Drug Medi-Cal attorney. She is very familiar with the issues facing facilities licensed by the Department of Alcohol and Drug Program and has represented many facilities over the years in compliance and licensing issues.  The firm website is: http://www.greenassoc.com/

Former State Employee Who Inspected California Alcohol Drug Rehab Clinics Sentenced to 41 Months in Federal Prison for Taking Cash Bribes

In Los Angeles, on January 10, 2011, former state employee Gary Eugene Goethe, 48, of Sacramento, was sentenced by United States District Judge Gary A. Feess  to 41 months in federal prison after pleading guilty to four counts of extortion under color of official right and two counts of bribery charges for demanding more than $100,000 in bribes from the owners of two drug rehabilitation clinics.

Mr. Goethe pleaded guilty in May 2010 pursuant to a written plea agreement.  In addition to the prison term he received today, Mr. Goethe was ordered to repay the bribes he received during the FBI’s undercover investigation of his corrupt activities.


Mr. Goethe worked for the California Department of Alcohol and Drug Programs (ADP) as a Drug Medi-Cal Monitoring Supervisor who traveled to alcohol and drug treatment clinics throughout California to inspect records and documentation related to Medi-Cal billings. ADP, which receives federal funding, is responsible for administering prevention, treatment and recovery services for alcohol abuse, drug abuse and problem gambling. The case was prosecuted in Los Angeles because the clinics at issue were in the Central District of California.

Mr. Goethe was arrested on July 9, 2009 by FBI special agents as he was leaving a meeting where he accepted a $3,500 cash payment that was part of a $10,000 bribe he had negotiated. Mr. Goethe subsequently pled guilty to having solicited and accepted bribes from rehabilitation facility owners in exchange for his promises of approvals and other benefits. In a plea agreement filed in this case, Mr. Goethe admitted that he told a clinic owner that he could help the owner obtain certifications that would allow the owner to expand service offerings to include mental health treatment. Mr. Goethe admitted having promised that, in exchange for cash bribery payments, he could “guarantee” that the owner’s clinics would obtain certification to provide mental health treatment services. Goethe demanded $92,000 in bribery payments from the owner.

In relation to another facility, Mr. Goethe admitted that he revealed to the owner that the clinic was being investigated by the California Department of Justice (CalDOJ), but, in exchange for a cash bribe, he could “help” the clinic owner by providing confidential information about the subjects and progress of the investigation, as well as steering CalDOJ away from the clinic. Mr. Goethe admitted that he demanded $10,000 in bribe payments from the owner of this facility. During sentencing, Judge Feese commented that Mr. Goethe’s conduct was “essentially a shakedown of those...over whom he has authority and the ability to control." 

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.  

The firm focuses its practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed health care providers in California and throughout the country. Their website is: http://www.greenassoc.com/

California Unveils Improved Prescription-Tracking System

On September 15, 2009, the California Department of Justice, Bureau of Narcotic Enforcement, CURES, unveiled improvements to their prescription medication tracking system, including the capability to instantly flag whether patients are abusing those drugs -- an issue highlighted with the deaths of celebrities Anna Nicole Smith and Michael Jackson.

This upgrade is a real-time access Prescription Drug Monitoring Program (PDMP) system which allows pre-registered users including licensed healthcare prescribers eligible to prescribe controlled substances, pharmacists authorized to dispense controlled substances, law enforcement, and regulatory boards to access real-time patient controlled substance history information.

The state’s database known as the Controlled Substance Utilization Review and Evaluation System, C.U.R.E.S, contains over 100 million entries of controlled substance drugs that were dispensed in California. Each year the CURES program responds to more that 60,000 requests from practitioners and pharmacists. The online PDMP system will make it much easier for authorized prescribers and pharmacists to quickly review controlled substance information via the automated Patient Activity Report (PAR) in an effort to identify and deter drug abuse and diversion through accurate and rapid tracking of Schedule II through IV controlled substances.

In order to obtain access to the PDMP system Prescribers and Pharmacists must first register with CURES by submitting an application form electronically at ttps://pmp.doj.ca.gov/pmpreg/. In addition, your registration must be followed up with a signed copy of your application and notarized copies of your validating documentation which includes: Drug Enforcement Administration Registration, State Medical License or State Pharmacy License, and a government issued identification.

You can mail your application and notarized documents to: Bureau of Narcotic Enforcement (BNE), Attn: PDMP Registration P.O. Box 160447 Sacramento, CA 95816.

Attorney Commentary: This will be critical for any physician or health care provider who is engaged in pain management or addiction treatment. It should be part of any compliance plan for these type of practices.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed health care providers including, but limited to, those involved in addiction treatment and pain management. Their website is: http://www.greenassoc.com/

California State ADP Employee Who Inspected Rehab Clinics Indicted on Charges for Allegedly Taking Cash Bribes

The California Department of Alcohol and Drug Programs (ADP) is responsible for administering prevention, treatment, and recovery services for alcohol and drug abuse and problem gambling. The ADP has the sole authority in state government to license adult alcoholism or drug abuse recovery or treatment facilities. ADP also receives federal funding and certain programs bill Medi-Cal.

An ADP employee, Gary Eugene Goethe of Sacramento, was indicted in United States District Court in Los Angeles on August 4, 2009 with four counts of “honest services” wire fraud, four counts of extortion and two counts of bribery charges for allegedly demanding more than $100,000 in bribes from the owners of two rehabilitation clinics that were seeking state certifications.

The indictment followed Mr. Goethe’s arrest on July 9 by special agents with the Federal Bureau of Investigation as he was leaving a meeting where he allegedly accepted a $3,500 cash payment that was part of a $10,000 bribe he had negotiated. Mr. Goethe was initially charged in a criminal complaint, a charging document that is now superseded by the grand jury indictment.

Mr. Goethe worked for ADP as a “drug Medi-Cal monitoring supervisor” who traveled to alcohol and drug treatment clinics throughout California to inspect records and documentation related to Medi-Cal billings. The indictment alleges that Mr. Goethe solicited and accepted bribes from rehabilitation facility owners in exchange for his promise of approvals and other benefits.

The indictment alleges that in one case Mr. Goethe told a clinic owner that he could help the owner obtain certifications that would allow the owner to expand service offerings to include mental health treatment. Mr. Goethe allegedly promised that, in exchange for cash bribery payments, he could “guarantee” that the clinics would be certified to provide mental health treatment services. Mr. Goethe allegedly demanded $92,000 in bribery payments from the owner.

In relation to another facility, Mr. Goethe is accused of revealing to the owner that the facility was being investigated by the California Department of Justice (DOJ), but that, in exchange for cash bribe, Mr. Goethe could “help” the clinic owner by providing confidential information about the subjects and progress of the investigation, as well as steering DOJ away from the clinic. Mr. Goethe allegedly demanded $10,000 in bribe payments from the owner of this facility.

After being arrested last month, Mr. Goethe was freed on a $50,000 bond. He is scheduled to be arraigned on the indictment August 10. The charge of “honest services” wire fraud carries a statutory maximum penalty of 20 years in federal prison. The charge of interference with commerce by extortion under color of official right also carries a maximum penalty of 20 years in prison. The charge of bribery concerning programs receiving federal funds carries a maximum penalty of 10 years in prison. An indictment contains allegations that Mr. Goethe has committed a crime. Every defendant, including Mr. Goethe, is presumed innocent until and unless proven guilty.

Attorney Commentary:

One issue we have seen in our practice is that it has been very difficult to obtain licenses and/or certification from the ADP in a timely manner. We have clients that opt to operate nonresidential recovery programs since they realize it can take one or two years to become licensed. Further, the power of Cal DOJ and the fear of audits can make ADP owners willing to take dangerous risks in order to preserve their business. There are individuals and businesses committed to recovery but face significant government bureaucracy and red tape in order to operate.

Generally, any residential facility providing detoxification; group, individual or educational sessions; and/or recovery or treatment planning to adults must be licensed. See California Code of Regulations (CCR), Title 9, Section 10501 et seq. Nonresidential programs are not required to be licensed. In addition to licensure, ADP provides a voluntary certification process to identify programs which exceed a minimal level of service quality and are in substantial compliance with the Department’s standards. Certification is available to both residential and nonresidential programs. Obtaining certification is considered advantageous in gaining the confidence of both potential residents and third party payers.

For providers and those wanting to operate residential facilities, seeking experienced legal counsel or consultants to help streamline the process of becoming licensed or responding to audits and investigations is an excellent idea. Attempting to short-cut the process through "old-fashioned handshakes" will cause more problems than it will solve. We have represented several people accused of bribing government officials in order to get Medicare or Medi-Cal provider numbers or to speed up the process. We would prefer to help individuals and businesses avoid any adverse legal exposure.

Any questions or comments should be directed to: tgreen@greenassoc.com at 213-233-2260. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings. They have represented a number of alcohol and drug rehabilitation programs (residential and non-residential). The firm's website is at: http://www.greenassoc.com/