According to the indictment, the Government alleged that Dr. Ehn and Dr. Seifert directed their employees to perform both presumptive and definitive urine testing from patients during office visits. Presumptive urine testing identifies which substances, if any, are present in the urine specimen and is usually performed via a cup and the results read by direct optical observation. Presumptive urine testing is generally deemed to be medically necessary in the treatment of chronic pain patients by federal health care programs and therefore, appropriately reimbursable. However, federal payors do not consider “blanket orders” or routine presumptive testing medically necessary.

Definitive urine testing is more complex than presumptive testing. Generally, for definitive testing, the specimen may be sent to a laboratory for analysis and test results will identify the amount of a particular substance that was provided in the specimen. Federal payors consider definitive testing to be medically necessary, and appropriately reimbursable, in the treatment of chronic pain to certain limited circumstances, including when members or beneficiaries had a specific and documented need for definitive testing. Similar to presumptive testing, federal payors do not consider “blanket orders” or routine presumptive testing medically necessary.

The government alleged that Dr. Seifert and Dr. Ehn engaged in a scheme to bill for medically unnecessary urine drug tests. According to DOJ, Dr. Ehn and Dr. Siefert continued in their scheme even though their expensive drug testing machine malfunctioned and caused the machine to produce results that falsely suggested patients were testing positive for street drugs like ecstasy or heroin. Insurance proceeds from urine drug testing ended up comprising three-quarters of the clinic’s revenue.

The indictment also alleged that Dr. Ehn and Dr. Siefert prescribed opioids and other controlled substances to patients who should not have received the prescriptions. According to the indictment, seven patients died of opioid overdoses shortly after receiving prescriptions written by Dr. Siefert yet the clinic did not change its prescribing practices.

As a result of their schemes, Dr. Siefert, 70, was sentenced to one year and six months in prison and ordered to pay $1,968,763.10. Dr. Ehn, 51, was sentenced to two years and ordered to pay $3,773,569.30 in restitution.

For additional information, read the Indictment and DOJ’s press release.

Reddy’s Rule #2:

Learning about prosecutions by the Government help providers understand areas of enforcement, risks and general awareness of relevant issues. If you are a provider that conducts urine testing, evaluate your current practices and policies to ensure that the urine testing is medically necessary and that the type of urine testing being conducted is medically appropriate and properly documented in the patient’s medical file.

 Be well.

The initial rule, passed in the 1970s, was well-intentioned, and it meant to protect records of patients undergoing SUD treatment from discrimination or stigma. However, many changes have occurred since then, including electronic medical records and the passage of Health Insurance Portability and Accountability Act of 1996 (HIPAA), which provided for differing standards for SUD records than those of regular health care records.

The Final Rule codifies several changes to patient rights and provider obligations regarding Part 2 records, including:

• A Single Patient Consent Form for General Use: The Final Rule allows all future uses and disclosures for treatment, payment, and health care operations of SUD records through a single patient consent form (aligning with HIPAA patient requirements).
  • Redisclosure: The rule also permits redisclosures of SUD records to HIPAA covered entities and business associates that receive records under this consent in accordance with the HIPAA regulations.
• Additional Limitations on the Release of Patient Records for Legal Proceedings:  The Final Rule expands the prohibitions on the use and disclosure of Part 2 records in civil, administrative, or legislative proceedings absent patient consent (separate from the patient consent form discussed in the above bullet) or a court order to retain patient protections against use of Part 2 records in legal proceedings.
• Additional Limitations on the Release of SUD Counseling Notes:  The Final Rule identifies and provides greater protections for a subset of SUD records — “SUD counseling notes” (similar to HIPAA’s definition of psychotherapy notes), including a separate patient consent to authorize the disclosure of SUD counseling notes. Counseling notes are notes by a “program provider who is an SUD or mental health professional documenting or analyzing the contents of conversation during a private counseling session or a group, joint, or family counseling session and that are separated from the rest of the patient’s record.”
• Enforcement:  The Final Rule provides for civil and criminal enforcement (that also apply to HIPAA violations).
• Complaints: For an alleged violation of Part 2, the Final Rule permits patients to file a complaint with the Part 2 program and to file a complaint directly with the Secretary.
• Patient Rights:  The Final Rule allows patients to obtain an accounting of Part 2 record disclosures for the previous three years and the right to request restrictions on disclosures of Part 2 records. Note, however, that the Final Rule does not grant patients an explicit right to access their own SUD records.

For additional information, see:

1. Confidentiality of Substance Use Disorder (SUD) Patient Records
2. HHS Fact Sheet: 42 CFR Part 2 Final Rule
3. FACT Sheet: SAMSHA 42 CFR Part 2 Revised Rule

Reddy’s Rule #1

It is vital for Part 2 providers to review the Final Rule and make necessary changes. At a minimum, SUD providers should: (i) should create or revise their consent forms and patient notices to comply with the Final Rule, (ii) evaluate the use, disclosure and segregation of SUD counseling notes, and (iii) implement training and processes regarding the handling of SUD records. Compliance with the Final Rule is required by February 16, 2026.

Be well.

The scheme generally involved managers of unregulated sober homes, patient brokers, substance use disorder treatment providers, and vulnerable individuals.¹ For example, a treatment provider may pay a patient broker $150 for each patient that the broker referred to an AHCCCS-approved outpatient treatment facility. The treatment provider would pay the patient broker for the referral because the amount it would receive in reimbursements from AHCCCS for each patient far exceeded the broker fee. To attract patients, the patient broker would often target homeless individuals or Native Americans and transport them to live in “free” illegal sober homes. While the illegal sober home was free to the patient, the treatment provider paid the patient broker a sufficient amount such that it paid for both the referral as well as for the sober home, or it would directly pay the organizer of the sober home. Alcohol and substance use were rampant in the sober homes, and the treatment by the providers was often nonexistent, as the goal for many of the providers and organizers was not to provide rehabilitation services, but rather their own financial gain, according to the allegations.² The behavioral health treatment provider, who was reimbursed by AHCCCS, often engaged in fraudulent billings including billing for excessive hours of services in a 24-hour period for a single member, providing for multiple services for the same member at the same time, billing for patients that were not present for services, or billing for medically unnecessary services.³

The scheme has had significant emotional, geographical, and financial impact. Some individuals that have been taken to these homes have been reported dead or missing, leaving their family members distraught. The scheme was far reaching and impacted citizens of multiple states including Florida, Minnesota, Montana, New Mexico, North Dakota, Oklahoma, and South Dakota. Certain tribes were significantly impacted, and the Navajo Nation and the Blackfeet tribe of Montana declared a public health emergency over the fraud.⁴ Further, this scheme may have cost the state of Arizona as much as one billion dollars.

Arizona has made great efforts to immediately gain control of this situation. It implemented a moratorium on the enrollment of Behavioral Health Outpatient Clinics, Integrated Clinics, Non-Emergency Medical Transportation, Community Services Agencies, and Behavioral Health Residential Facility providers for six months. The moratorium was set to expire last December, but Arizona has now extended it to June 8, 2024.⁵ It also eliminated the ability for a Medicaid member to switch enrollment from a Medicaid managed care health plan to the American Indian Health Program over the phone, as that promoted fraudulent enrollments.⁶ In addition, it hired a forensic auditor to review all claims by behavioral health treatment providers since 2019. Further, AHCCCS has accused more than 300 treatment providers of fraud and suspended their licenses and reimbursements.⁷ It also implemented emergency rules to enhance and expand AHCCCS authority to exclude providers affiliated with bad actors.⁸

AHCCCS also announced a “system overhaul” and took steps to make numerous long-term changes to its policies and procedures. For example, it now requires behavioral health providers to submit additional assessment, treatment plan, and medical records documentation with their claims. AHCCCS also now requires fee-for-service providers billing more than two units of hourly codes or four units of 15-minute codes on a single date of service to provide additional documentation⁹: Fingerprinting, onsite visits, background checks, and additional disclosures are being required by all new behavioral health provider registrants. ¹⁰ Further, it eliminated the ability for providers to bill on behalf of other providers. ^ll Finally, it set billing thresholds and imposed prepayment review based on the age of patients or for various scenarios including multiple providers billing the same client on the same day for similar services or billing excessive number of hours per day.^l2

AHCCCS also plans to strengthen the agency’s ability to detect and prevent fraud by requiring visual attestation of individual billers and requiring third-party billers to disclose terms of compensation. In addition, it plans on hiring additional staff to ensure proper implementation of these changes and greater monitoring.

Unfortunately, behavioral health treatment providers engaging in fraud schemes is not limited to Arizona. In 2021, the Department of Justice (DOJ) prosecuted a series of cases in California relating to substance use disorder facility owners and patient recruiters who provided kickbacks for the referral of patients to substance use disorder treatment facilities, recovery homes, and laboratories.^l3 Also in 2021, DOJ prosecuted and convicted two operators of addiction treatment facility operators in Florida for a $112 million scheme involving false billings and patient brokering.¹⁴ Further, in a nationwide takedown in 2020, DOJ charged more than a dozen individuals in connection with more than $845 million of allegedly false and fraudulent claims for tests and treatments.¹⁵ The subjects of the charges include physicians, owners and operators of substance use disorder treatment facilities, as well as patient recruiters.

Based on this history, states should use the Arizona matter as a case study, and they should consider a thorough review and assessment of their current policies and practices. Arizona is making programmatic changes in direct response to fraudulent practices in the addiction treatment industry, and other states can benefit from Arizona’s experience and deter similar schemes. As each state has its own rules and regulations, it must consider the effectiveness of its current regulations, policies, and practices, identify loopholes and gaps, and proactively address issues that may later cause the state great emotional and financial toll.

This article is brought to you by AHLA’s Behavioral Health Practice Group.

Copyright 2024, American Health Law Association, Washington, D.C., Reprint Permission Granted. AHLA ‘s Behavioral Health Practice Group thanks Jéna Grady (Nixon Peabody) for editing this article.

Reddy’ Rule #3:
Simply because a provider is getting reimbursed does not mean that the government believes that the provider’s actions were lawful or compliant. The statute of limitations for the federal government to bring an action under the False Claims Act (FCA) is six years from the FCA violation or three years from when the government knew or should have known the violation. Thus, the federal government has a lengthy period of time to bring a False Claims Act action, and providers should not relax their compliance or practices simply because they are not facing any immediate scrutiny for their billing.

Be well.

1. See https://www.fox10phoenix.com/news/the-sober-truth-inside-arizonas-medicaid-scandal.
2. See https://www.fox10phoenix.com/news/preying-people-inside-scheme-trafficking-health-care-fraud-victimizes-nativeamericans-fbi.
3. See https://www.azahcccs.gov/Shared/Downloads/News/2023/ProviderPaymentSuspensionFactSheet.pdf.
4. See https://www.cnn.com/2023/06/29/us/navajo-nation-native-americans-medicaid-providers/index.html; https://www.ktvq.com/news/montana-news/blackfeet-nation-declares-state-of-emergency-over-arizona-treatment-homescandal.
5. See https://www.azahcccs.gov/PlansProviders/Downloads/ClaimsClues/2024/ClaimsCluesJan2024.pdf.
6. See https://www.azahcccs.gov/Shared/Downloads/News/2023/ProviderPaymentSuspensionFactSheet.pdf.
7. Id.
8. Id.
9. Id.
10. Id.
11. Id.
12. Id.
13. See https://www.justice.gov/opa/pr/justice-department-announces-series-cases-combat-addiction-treatment-kickbackschemes.

14. See https://www.justice.gov/opa/pr/addiction-treatment-facility-operators-sentenced-112-million-addiction-treatmentfraud-scheme.
15. See https://www.justice.gov/opa/pr/national-health-care-fraud-and-opioid-takedown-results-charges-against-345defendants.

The scheme generally involved managers of unregulated sober homes, patient brokers, substance use disorder treatment providers, and vulnerable individuals.¹ For example, a treatment provider may pay a patient broker $150 for each patient that the broker referred to an AHCCCS-approved outpatient treatment facility. The treatment provider would pay the patient broker for the referral because the amount it would receive in reimbursements from AHCCCS for each patient far exceeded the broker fee. To attract patients, the patient broker would often target homeless individuals or Native Americans and transport them to live in “free” illegal sober homes. While the illegal sober home was free to the patient, the treatment provider paid the patient broker a sufficient amount such that it paid for both the referral as well as for the sober home, or it would directly pay the organizer of the sober home. Alcohol and substance use were rampant in the sober homes, and the treatment by the providers was often nonexistent, as the goal for many of the providers and organizers was not to provide rehabilitation services, but rather their own financial gain, according to the allegations.² The behavioral health treatment provider, who was reimbursed by AHCCCS, often engaged in fraudulent billings including billing for excessive hours of services in a 24-hour period for a single member, providing for multiple services for the same member at the same time, billing for patients that were not present for services, or billing for medically unnecessary services.³

The scheme has had significant emotional, geographical, and financial impact. Some individuals that have been taken to these homes have been reported dead or missing, leaving their family members distraught. The scheme was far reaching and impacted citizens of multiple states including Florida, Minnesota, Montana, New Mexico, North Dakota, Oklahoma, and South Dakota. Certain tribes were significantly impacted, and the Navajo Nation and the Blackfeet tribe of Montana declared a public health emergency over the fraud.⁴ Further, this scheme may have cost the state of Arizona as much as one billion dollars.

Arizona has made great efforts to immediately gain control of this situation. It implemented a moratorium on the enrollment of Behavioral Health Outpatient Clinics, Integrated Clinics, Non-Emergency Medical Transportation, Community Services Agencies, and Behavioral Health Residential Facility providers for six months. The moratorium was set to expire last December, but Arizona has now extended it to June 8, 2024.⁵ It also eliminated the ability for a Medicaid member to switch enrollment from a Medicaid managed care health plan to the American Indian Health Program over the phone, as that promoted fraudulent enrollments.⁶ In addition, it hired a forensic auditor to review all claims by behavioral health treatment providers since 2019. Further, AHCCCS has accused more than 300 treatment providers of fraud and suspended their licenses and reimbursements.⁷ It also implemented emergency rules to enhance and expand AHCCCS authority to exclude providers affiliated with bad actors.⁸

AHCCCS also announced a “system overhaul” and took steps to make numerous long-term changes to its policies and procedures. For example, it now requires behavioral health providers to submit additional assessment, treatment plan, and medical records documentation with their claims. AHCCCS also now requires fee-for-service providers billing more than two units of hourly codes or four units of 15-minute codes on a single date of service to provide additional documentation⁹: Fingerprinting, onsite visits, background checks, and additional disclosures are being required by all new behavioral health provider registrants. ¹⁰ Further, it eliminated the ability for providers to bill on behalf of other providers. ^ll Finally, it set billing thresholds and imposed prepayment review based on the age of patients or for various scenarios including multiple providers billing the same client on the same day for similar services or billing excessive number of hours per day.^l2

AHCCCS also plans to strengthen the agency’s ability to detect and prevent fraud by requiring visual attestation of individual billers and requiring third-party billers to disclose terms of compensation. In addition, it plans on hiring additional staff to ensure proper implementation of these changes and greater monitoring.

Unfortunately, behavioral health treatment providers engaging in fraud schemes is not limited to Arizona. In 2021, the Department of Justice (DOJ) prosecuted a series of cases in California relating to substance use disorder facility owners and patient recruiters who provided kickbacks for the referral of patients to substance use disorder treatment facilities, recovery homes, and laboratories.^l3 Also in 2021, DOJ prosecuted and convicted two operators of addiction treatment facility operators in Florida for a $112 million scheme involving false billings and patient brokering.¹⁴ Further, in a nationwide takedown in 2020, DOJ charged more than a dozen individuals in connection with more than $845 million of allegedly false and fraudulent claims for tests and treatments.¹⁵ The subjects of the charges include physicians, owners and operators of substance use disorder treatment facilities, as well as patient recruiters.

Based on this history, states should use the Arizona matter as a case study, and they should consider a thorough review and assessment of their current policies and practices. Arizona is making programmatic changes in direct response to fraudulent practices in the addiction treatment industry, and other states can benefit from Arizona’s experience and deter similar schemes. As each state has its own rules and regulations, it must consider the effectiveness of its current regulations, policies, and practices, identify loopholes and gaps, and proactively address issues that may later cause the state great emotional and financial toll.

This article is brought to you by AHLA’s Behavioral Health Practice Group.

Copyright 2024, American Health Law Association, Washington, D.C., Reprint Permission Granted. AHLA ‘s Behavioral Health Practice Group thanks Jéna Grady (Nixon Peabody) for editing this article.

Reddy’ Rule #3:
Simply because a provider is getting reimbursed does not mean that the government believes that the provider’s actions were lawful or compliant. The statute of limitations for the federal government to bring an action under the False Claims Act (FCA) is six years from the FCA violation or three years from when the government knew or should have known the violation. Thus, the federal government has a lengthy period of time to bring a False Claims Act action, and providers should not relax their compliance or practices simply because they are not facing any immediate scrutiny for their billing.

Be well.

1. See https://www.fox10phoenix.com/news/the-sober-truth-inside-arizonas-medicaid-scandal.
2. See https://www.fox10phoenix.com/news/preying-people-inside-scheme-trafficking-health-care-fraud-victimizes-nativeamericans-fbi.
3. See https://www.azahcccs.gov/Shared/Downloads/News/2023/ProviderPaymentSuspensionFactSheet.pdf.
4. See https://www.cnn.com/2023/06/29/us/navajo-nation-native-americans-medicaid-providers/index.html; https://www.ktvq.com/news/montana-news/blackfeet-nation-declares-state-of-emergency-over-arizona-treatment-homescandal.
5. See https://www.azahcccs.gov/PlansProviders/Downloads/ClaimsClues/2024/ClaimsCluesJan2024.pdf.
6. See https://www.azahcccs.gov/Shared/Downloads/News/2023/ProviderPaymentSuspensionFactSheet.pdf.
7. Id.
8. Id.
9. Id.
10. Id.
11. Id.
12. Id.
13. See https://www.justice.gov/opa/pr/justice-department-announces-series-cases-combat-addiction-treatment-kickbackschemes.

14. See https://www.justice.gov/opa/pr/addiction-treatment-facility-operators-sentenced-112-million-addiction-treatmentfraud-scheme.
15. See https://www.justice.gov/opa/pr/national-health-care-fraud-and-opioid-takedown-results-charges-against-345defendants.