California paid out nearly $100 million for fraudulent medical claims, including $3 million to deceased patients, since 2008

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(NaturalNews) A recent statewide audit by California regulators found that more than $93 million in Medi-Cal payments made to substance abuse clinics around the state were potentially fraudulent.

According to the Los Angeles Times, the audit, which was released August 19, examined billing data from July 2008 to December 2013 for Medi-Cal's drug treatment program, which provides taxpayer-funded reimbursements to rehabilitation clinics.

The paper noted:

The audit found the state's Department of Health Care Services and the Department of Alcohol and Drug Programs [ADP] failed to administer the program "and created opportunities for fraud."

The auditors concluded that Health Care Services' and the ADP's failure to provide proper program administration "created opportunities for fraud."

Tens of millions bilked from the system

Regulators said they used "five high-risk indicators" that they said were symptomatic of fraud, adding that "our analysis of four years of statewide program claims billing data identified $93.7 million in payments that Health Care Services and ADP authorized for more than 2.6 million outpatient drug-free services that are potentially indicative of fraudulent activity."

In addition, a the audit report [PDF] noted:

Our testing of 338 of these services in the counties of Fresno, Los Angeles, and Sacramento found that providers could not produce complete patient records for services they purportedly rendered. In total, we identified roughly $60,000 in deficiencies for these providers.

Additionally, the regulators' examination of claims' billing data for outpatient drug-free services that were provided between July 1, 2008, and Dec. 31, 2012, uncovered evidence that the state approved some $1 million to providers who likely were ineligible. A majority of them were believed to have been recovered through a subsequent cost-settlement process.

The audit report comes on the heels of an investigation by the Center for Investigative Reporting and CNN in 2013 which revealed that substance abuse clinics in Los Angeles County were defrauding Medi-Cal -- the nation's largest Medicaid program -- and, hence, California taxpayers, by billing for patients who did not go to the clinics. The client lists included some who were dead and some who were in prison.

That report noted that underpinning the Drug Medi-Cal program were a number of clinics that padded their client rolls, largely by diagnosing patients with so-called addictions that they in fact never had.

Also, the clinics would gather mentally ill residents from local boarding homes to sit in on therapy sessions they could never really follow. And the clinics would attract patients from off the street by literally giving them cash, food snacks and even cigarettes. Finally, they would have patients sign in for days when they did not actually show up for treatment.

Indeed, one clinic in Inglewood even made up notes and sent bills to "ghost clients" who never even visited. But then, they were not physically able to show up, either, because -- as one counselor found -- some of them were being held in prison, while one such "patient" was dead.

According to the L.A. Times, the most recent "audit found 323 instances -- totaling more than $10,000 -- in which the state reimbursed providers for services to dead clients. It also found that nearly $1 million in payments went to clinics that were potentially not authorized."

"This is a deeply troubling audit," Ted Lieu (D-Torrance), the lawmaker who requested the review, told the paper. "It confirms that there has been widespread fraud in California's Drug Medi-Cal program, and it's ongoing."

Report recommends shoring up efforts to address fraud

The report noted that L.A. County is notorious for fraud. Of the 19 deceased clients who were billed from across the state, 18 of them were in L.A. County.

More than 65 percent of the nearly $1 million in payments to potentially unauthorized clinics were also in the county.

The audit report recommends that the Department of Health Care Services coordinate with counties to recover any unauthorized payments, as well as develop new procedures to identify such payments and then take disciplinary action against any providers who are deemed guilty. Also, the report recommended strengthening coordination among the state and various counties to more consistently monitor for any fraudulent activity.

Last year, an internal audit by the Department of Health Care Services found "numerous weaknesses and inefficiencies" in the management of the program, according to State Auditor Elaine Howle, who said that eliminating the identified problems was vital to making sure that the department moves quickly to address all instances of waste, fraud and abuse, which would also help lower the state's legal and financial risks.

Sources: [PDF]

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