The U.S. Department of Justice intervened in a massive whistleblower lawsuit against Narco Freedom. A non-profit company, Narco Freedom operated 21 outpatient rehabilitation facilities in New York City. The company and some of its executives face criminal and civil fraud charges.
The civil whistleblower claim was brought by six former employees of Narco Freedom. Each was either a Credentialed Alcohol and Substance Abuse Counselor or trainee awaiting certification. According their complaint and the subsequent government complaint filed earlier this week, Narco Freedom was engaged in three different Medicaid fraud scams.
Anti Kickback Statute Scam
The government claims that Narco and two of its former CEO’s, Alan Brand and Gerald Bethea, provided kickbacks in the form of short term housing to lower income individuals in return for them enrolling in substance abuse programs operated by Narco. Residents were told that they could only have free room and board if they attended the company’s outpatient program. Funding for the program came from Medicaid (meaning tax dollars). Residents who didn’t attend were told to leave.
Not only was the rehab program subsidized mostly by Medicaid, because the residents were often lower income the City of New York frequently provided housing assistance grants. Narco Freedom was therefore able to collect money from the city and Medicaid.
Lest you think that the Freedom Houses (as Narco called them) were providing valuable services, conditions were deplorable. Despite a requirement that residents be sober or “clean,” some residents were still using drugs or even dealing. The facilities often had overcrowding issues, vermin, aggressive behavior and lack of heat. Sometimes there was just one staff member for every 100 residents. Many of the staff were untrained.
Freedom’s first CEO, Alan Brand, knew there was a shortage of affordable housing in the city. Prosecutors say that he decided to open the Freedom Houses as a way of getting a steady stream of patients for his rehab programs. Lower income people could get subsidized housing for attending the program.
By requiring residents to attend the program 3.5 times per week, Brand figured he could squeeze $1419 per month in subsidies from the government per resident. With some Freedom Houses having as many as 200 residents, Brand had created a cash cow.
Brand also realized that parolees just released from prison often found it difficult to find housing. He opened his doors to former inmates, once again requiring attendance at his rehab programs.
Some of the Freedom House residents actually required substance abuse services and were enrolled in other facilities where they were progressing well. That wasn’t acceptable to Narco Freedom, however. The Justice Department says that these residents were forced to quit their existing program and enroll in with Narco Freedom. Patients that didn’t or missed meetings were either placed in isolation rooms or evicted.
If Medicaid stopped paying for a patient, he or she was deemed to have “graduated” from the program and forced to leave the house.
Under the federal Anti Kickback Statute, it is illegal for a healthcare provider to pay kickbacks in return for patient referrals. While many people think of kickbacks as being in cash, free room and board – or anything of value – can be a kickback.
Congress passed the legislation because it believes that medical decisions should be based on medical need and necessity, not money. A violation of the Anti Kickback Statute involving Medicaid dollars is a violation of the False Claims Act (more on that below) and gives rise to triple damages and whistleblower awards.
Joining Hands Kickback Scheme
Also named in the whistleblower complaint is a company called Joining Hands Management Incorporated. Prosecutors say that Freedom Narco paid kickbacks to Joining Hands, the operator of several halfway houses in New York. In return for the kickbacks, Joining Hands would send residents to freedom Narco for outpatient rehab services.
Prosecutors say that the agreement between the two companies called for “lease payments,” yet the payments were really bribes and kickbacks. Once again, because Medicaid funds are involved, any violation of the Anti-Kickback Statute is a violation of the False Claims Act whistleblower law.
While helping rehab patients find housing sounds like a lofty goal, the counselors from Narco Freedom says that often the services were unnecessary. According to their complaint, the company was simply trying to maximize how much money it could bilk from taxpayers without regard for the best needs of their residents and patients.
Ghostwriting – Falsifying Medical Records
Medicaid rules have strict record keeping requirements. The government wants to make sure that services are really being delivered and that they are effective. The whistleblowers and government claim that record keeping by Narco Freedom was quite poor. With so many “patients” and so few staff, it was difficult to accurately maintain proper patient charts and records. Instead, Narco Freedom used other counselors who had not treated patients to construct the required records. The counselors say this practice was referred to as “corrective action and maintenance.”
Providing false medical records in return for payment from Medicare or Medicaid is also a violation of the False Claims Act. The government says that the several scams perpetuated by Narco Freedom have cost taxpayers millions of dollars. Under federal law, the government can triple the damages plus add fines of up to $11,000 per false bill or claim submitted to Medicaid.
Sadly, when the six employees balked at falsifying records, they were fired. Luckily, Congress anticipated that some employers might retaliate. Victims of retaliation can receive double lost wages and legal fees.
False Claims Act and Whistleblower Lawsuits
The original case was filed by 6 former Narco Freedom employees in 2012. The group used an 1863 law called the False Claim Act for their suit. This week the Justice Department joined their claim.
Under the False Claims Act, people with inside information about Medicare or Medicaid fraud can file a lawsuit in federal court detailing the fraud. The government is given 60 days to investigate (although that time period is often extended significantly). Ultimately the government can take over the lawsuit as it has done here or allow the whistleblowers and their counsel to pursue the claims. If the claims are successful, the whistleblowers can receive up to 30% of whatever the government collects.
Because of the available triple damages and large penalties per each claim, the amount of the awards can be substantial. (Our whistleblower clients have received over $100 million in awards!)
Why Choose MahanyLaw for Your Whistleblower Claim?
Big healthcare providers and hospitals get away with Medicaid and Medicare fraud every single day. Whistleblowers are the true American heroes – folks who have the strength and courage to stand out and make a difference.
Whistleblowers should choose MahanyLaw for several reasons. First is experience. Founder Brian Mahany is one of a select few American lawyers with billion dollar case experience. (Billions in settlements and wins quite recently) His brand power causes opponents to take his clients very seriously.
MahanyLaw employs lawyers who care – our whistleblower lawyers treat clients like family, always. You speak with an experienced lawyer rather than being shuffled to a staff member or inexperienced attorney.
We also don’t back down. From some of the largest corporations in America to small clinics, we are not looking for a quick settlement or fast fees. Our qui tam lawyers have the resources and drive to take a case to trial against wrongdoers of any size.
MahanyLaw – America’s Whistleblower Law Firm