On October 14, 2021, Massachusetts Office of the Attorney General Maura Healey announced the $25 million dollar settlement of claims alleging violations of the Massachusetts False Claims Act by a private equity firm and executives in connection with their employment of “unlicensed, unqualified and unsupervised” therapists at clinics throughout the state in violation of Massachusetts regulations. Under the largest Massachusetts-only Medicaid Fraud settlement to date, the global private equity firm and its capital investment affiliate are required to pay $19.95 million dollars while two executive defendants, former CEOs of the mental health centers (the “Centers”), are required to pay the remaining $5.05 million dollars.
The Amended Complaint filed by the Massachusetts Attorney General and whistleblower alleged that:
- Defendants had knowledge that compliance with licensure, credentialing and supervision regulations for mental health providers were material to MassHealth payment and, nonetheless, misrepresented compliance with Massachusetts regulations in submission of claims going as far back as August 2009.
- The Private Equity Firm knew or should have known of the Centers’ noncompliance with Massachusetts regulations during the due diligence process, prior to execution of a stock purchase agreement in which all of Centers’ capital stock was acquired.
- The executive defendants failed to implement compliance measures or otherwise attempt to return the overpayments for false claims, despite having actual notice from employee complaints.
- Defendants knowingly submitted, or recklessly caused to be submitted, false claims in which various Massachusetts Medicaid programs rendered payment in the aggregate amount of approximately $125,000,000.00.
This settlement is a reminder of the serious consequences potentially facing both clinical practices and their non-licensee managers who do not ensure compliance with the requirements for payment by state and Federal health care programs. Federal and state False Claims Act violations can result in significant claims recoupments, treble damages, civil monetary penalties, and in some instances, criminal prosecution. With the recent uptick in demand for behavioral health services, providers should anticipate a corresponding increase in scrutiny.
How Frier Levitt Can Help: Our firm routinely advises clients regarding the structuring of Management Services Organizations (MSOs), payor audits, government investigations, and other regulatory matters. For providers who identify billing improprieties as a result of an internal audit, self-disclosure may be an option to help to avoid the harshest penalties. For more information, call Frier Levitt to speak with an attorney.
