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State audit finds DHCS may have paid $93.7 million for fraudulent Medi-Cal drug treatment



August 20, 2014
Area(s) of Interest: Public Payors 

A California State Auditor’s report issued today found the Department of Health Care Services (DHCS) failed to properly administer the Medi-Cal Drug Treatment Program and may have paid at least $93.7 million for fraudulent drug treatment.  The program provides substance abuse services to Medi-Cal beneficiaries when physicians determine they are medically necessary. The focus of the report was on outpatient drug-free services.


The audit was requested by Assemblyman Ted Lieu after stories appeared in the media revealing that substance abuse clinics were fraudulently billing for patients who did not use the clinics, including some who were deceased or incarcerated.


The report concluded that failure to properly administer the program created opportunities for fraud. “Using five high-risk indicators that we believe are symptomatic of fraud, our analysis of four years of statewide program claims billing data identified....more than 2.6 million outpatient drug-free services that are potentially indicative of  fraudulent activity,” the report said.


The state audit looked at claims from outpatient drug‑free services provider submitted from July 1, 2008, to December 31, 2013, for Los Angeles, Fresno and Sacramento counties, and found that the DHCS approved nearly $1 million to potentially ineligible providers. They also found 323 instances amounting to more than $10,000 that the state reimbursed for services to beneficiaries that were deceased. 


The audit found that DHCS could have accessed the data necessary to prevent fraudulent payments. “They failed to use information that was available in a timely manner,” the report states.


The state auditor recommended that DHCS coordinate with counties to recover unauthorized payments, develop new administrative practices to identifying fraudulent payments and to take disciplinary action against providers who commit fraud and to better coordinate with counties to monitor for fraudulent activities.


To read the report, click here.

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