Recent False Claims Act Settlement Should Put Treatment Centers on Notice

Late last month, the federal government announced a False Claims Act settlement with Summit BHC New Jersey, LLC, d/b/a Seabrook (“Seabrook”), a prominent New Jersey Drug & Alcohol Rehabilitation facility. The joint settlement with the New Jersey Attorney General’s Office, in the amount of $19,751,762.69, covered claims submitted by Seabrook under the Medicaid program and Department of Veterans Affairs benefit programs. The Agreement included no admission of wrongdoing by Seabrook. Moreover, the U.S. Attorney’s Office in New Jersey acknowledged cooperation with the investigation and has undertaken remedial measures.

The case originated in January 2023 with a sealed qui tam Complaint filed on behalf of the federal government and the State of New Jersey by Seabrook’s former Director of Risk Management and Corporate Compliance Officer, Jennifer Coulter. Pursuant to the False Claims Act and New Jersey’s False Claims Act, Ms. Coulter will receive a Relator’s share of the settlement of approximately $3.5 million.

The Allegations

Ms. Coulter alleged that Seabrook violated New Jersey regulations in its treatment of inpatient clients, particularly New Jersey Medicaid clients, including in the following ways:

• Providing assessments and counseling services by insufficiently credentialed individuals, such as licensed practical nurses providing services that are required to be provided by a registered nurse; and providing services to dual diagnosis patients by clinicians (and even an intern) who were not properly credentialed.
• Failing to meet regulatory standards for documenting (1) client treatment plans for medication, medical treatment, and other services to treat clients’ substance use disorder and co-occurring disorders, and (2) client care, including required 60-minute individual treatment sessions.

The Settlement

The Settlement Agreement between the U.S. and Seabrook focused particularly (although not exclusively) on the treatment of veterans, and related claims submitted to the Community Care Program of the Veterans Health Administration. The “Covered Conduct” included:

• Partial hospitalization services to veterans for which Seabrook did not have a license, and then concealing the presence of the veterans in this program from State inspectors by taking them on field trips during inspections;
• Failing to employ properly credentialed caregivers, specifically that “many veterans and Medicaid beneficiaries were treated principally by interns, rarely receiving care from fully-credentialed and licensed providers because Seabrook failed to ensure that more than 50% of its staff were licensed providers (as required by New Jersey law).”;
• Misrepresenting the credentials of staff who provided care to veterans;
• False documentation of services provided, including documenting that a patient received different services from different providers at the same time, documenting two or more mutually inconsistent forms of treatment, and documenting services that were not provided;
• Submitting claims at the full per diem rate for individual and group counseling, knowing that the patients had not received all the services to justify that rate; and
• Falsely representing that it had specialized care and services for veterans’ unique needs, while in fact, providing veterans the same services as all other patients.

Analysis

The Complaint and Settlement rely upon two different theories under the False Claims Act: (1) billing for services not rendered or representing falsely what services were provided to Seabrook patients, and (2) presenting claims with a false certification of compliance with New Jersey regulations. A false certification can be express or implied. Under the express certification theory, the provider is expressly (and falsely) certifying compliance with the regulations that are material to the government’s decision to pay the claim; under the implied certification theory, the submission of the claim itself implies compliance with the regulations material to the government’s payment decision when the provider has not complied with those regulations.

In the Seabrook case, the Settlement Agreement appears to have covered both types of false claims.  Claims for payment for patients receiving two different forms of treatment at the same time from different people at different locations would be illustrative of false claims for services not provided. By contrast, the claims for the provision of counseling or other services by individuals who were not properly credentialed are illustrative of the false certification theory, whereby the claim was submitted with either the express or implied certification that the services were provided by staff members who met the applicable criteria.

Key Takeaways

Addiction treatment programs should take several lessons away from the Seabrook settlement.

First, the Department of Justice remains deeply committed to fighting health care fraud. Just last week, the head of DOJ’s Criminal Division issued a memo placing health care fraud at the top of  a list of priorities for combatting white collar crime.

The U.S. Attorney’s Office for New Jersey recently has taken a strong interest in combatting fraud at drug treatment programs in particular. In addition to the Seabrook settlement, in December 2022, Camden Treatment Associates LLC agreed to pay $3.15 million to resolve criminal and civil claims concerning kickbacks and other fraudulent billing.

There is also a lot of investigative and enforcement energy by the State of New Jersey. The Attorney General’s Office participated in the settlement of the Seabrook case, and the State Commission on Investigation issued a report on abuses in the drug treatment industry in February 2024.

We can expect the DOJ and the State of New Jersey will continue to focus resources on the treatment industry, putting a premium on providers’ compliance with applicable regulations.

Second, and more specific to the Seabrook case, it is critical that treatment facilities and programs invest the time and effort to ensure they are meeting the staffing and credentialing requirements for the services they are advertising, providing, and billing. Staffing presents a constant challenge for treatment and other long-term care facilities, who as a result may employ caregivers who provide the services but simply are not adequately credentialed. Since the services are in fact being provided, and provided adequately, it can be easy to overlook the regulatory risk.

But as demonstrated in the Seabrook case, even well-intentioned providers can find themselves at the wrong end of a government investigation from utilizing improperly credentialed staff and/or inadequately or inaccurately documenting services. Treatment programs should thus conduct routine audits of the credentials of their staff, and of patient charts, to identify and rectify areas of potential noncompliance with state regulations and/or inaccurate billing.

With any questions about compliance in the alcohol and drug treatment industry, please contact Pietragallo partner Scott Coffina at 856-817-2601 or SAC@Pietragallo.com.