A state audit (pdf) released this week accused Medi-Cal administrators of shoddy practices that may have steered $93.7 million to alcohol and drug and rehabilitation clinics under fraudulent circumstances during a four-year period.

California State Auditor Elaine Howle’s report, which covered five and a half years between July 2008 and December 2013, also found 323 instances of money being reimbursed to providers of services “purportedly rendered to deceased beneficiaries.”    

California’s Department of Health Services (DHS) administers the rehab program for Medi-Cal, which is the state’s version of Medicaid. For a portion of the past five years, the department contracted with the now-defunct Department of Alcohol and Drug Programs (ADP), but that ended in 2012.

The auditor found that both departments screwed up. They didn’t have a provider certification program for preventing fraud that was worth a darn and many of the processes they did have weren’t followed. The files of 25 program providers were found to have “serious deficiencies.”

The auditor gave a tip of the hat to media sources for raising a ruckus in 2013 about alleged abuses of the system that inspired lawmakers to demand the audit. The Center for Investigative Reporting and CNN conducted a yearlong probe which implicated 56 clinics in schemes to bilk the system.

Clinics allegedly rounded up clients from foster care, board-and-care homes and off the street who don’t have addictions or need rehabilitation and submitted paperwork based on their participation in the program. Sometimes the clinics simply used “ghost clients” who were behind bars, dead or otherwise indisposed.

The news organizations complained that California officials were not cooperative as they compiled their report, but noted that 16 clinics were barred from Medi-Cal participation two weeks after they submitted their findings to the state.

One scam documented by the investigative team involved foster children at So Cal Health Services in Riverside. A former counselor there told reporters that the clinic, which billed the state between $31 and $75 for each visit, would concoct stories of addiction for the kids. “You’d have to make up a summary of them trying this drug and make up scenarios of how they tried it, how they got it,” Nadine Cornelius reportedly said. “It was all lies.”

Instead of the clinic conducting rehabilitative therapy, the children would just watch movies and play games, she said.     

The $96.7 million in payments for potentially fraudulent actions involved 2.6 million outpatient drug-free services. The state auditor used five high-risk indicators to identify hinky claims but only reviewed a small sample of services, 338 in Fresno, Los Angeles and Sacramento counties.

Ten of the 16 providers that investigators visited could not produce adequate documentation to support 74 of the services they claimed to have rendered. That qualifies as a high-risk indicator. Seven out of 10 providers couldn’t document 1,784 services because of stuff like missing sign-in sheets.

Missing documents was a common theme. An attempt to review files of 30 service providers found five of them were missing in their entirety. “Other application files were missing critical checklists and important documentation,” the report said.

The auditor recommended that they fix all that stuff and DHS agreed.

–Ken Broder  

To Learn More:

State Audit Confirms Weak Oversight, Potential Fraud at Rehab Clinics (by Christina Jewett and Will Evans, The Center for Investigative Journalism)

Audit Finds Questionable Billing by California Drug Rehab Programs (by Jeremy B. White, Sacramento Bee)

Drug Rehab Clinics and Their Fake Clients Allegedly Rip off Taxpayers for Millions (by Ken Broder, AllGov California)

California Department of Health Care Services (California State Auditor) (pdf)