Claims of insurance fraud lead to scrutiny of group-home industry

Editor’s note: This is a part of an ongoing Daily Courier series of articles on group homes in Prescott.

PRESCOTT – Fraudulent practices by some in the group-home industry reportedly have led to a large-scale insurance-practice audit that is putting reputable companies – and clients – in jeopardy.

A number of local recovery treatment providers say a months-long audit of insurance practices has been underway, which has led to a blanket shut-down of claim payments.

That, in turn, has resulted in clients in recovery being turned out of their treatment programs, say the local experts.

Earlier this year, two group-home residents from New York told The Daily Courier they were asked to leave their group home immediately for minor rules infractions. The real reason, they maintained: Their insurance company had stopped paying for their treatment.

Although numbers are not available, local recovery officials say such discharges have become common in some Prescott group homes.

Rep. Noel Campbell, R-Prescott, who sponsored a bill this year that aimed to give local governments more authority over the group home industry, says the matter is of concern to him because of the impacts it has on the community and the clients.

“It exacerbates the problem in Prescott,” said Campbell, who has long contended that clients were being discharged onto the streets of Prescott, rendering many of them homeless.

Claims of fraud

Kickbacks for referrals, failure to collect deductibles, procurement of insurance for out-of-state clients: These are just a few of the questionable practices that reportedly have been in use in some local group homes.

Since about December 2015, Health Net, a major player in providing insurance for clients in drug and alcohol recovery, reportedly has been auditing the industry in Arizona and California to root out such practices. During that time, say local providers, the company has not been paying its claims.

Although Health Net officials did not respond to Daily Courier requests for comment, a health care attorney familiar with the investigation explained the issues.

Harry Nelson, a Los Angeles-area attorney looking into the matter, wrote in an email earlier this year that a special investigations unit within Health Net had launched an investigation into “suspicious indicia of newly insured patients.”

Nelson noted that “there is nothing wrong” with addicts or their families signing up for insurance in advance of seeking treatment for their addiction. In fact, he said, the Affordable Care Act specifically eliminated pre-existing conditions as a disqualification from insurance.

But, Nelson said, Health Net is looking into situations in which addicts have been offered housing in a sober-living home at no cost and signed up for insurance by the sober-living operator, who then “shops the patient to an outpatient treatment center for a fee (sometimes called a ‘bed voucher’).”

Added Nelson: “Essentially, the sober living in this scenario is acting as a broker, paying for the patient’s insurance so that it can get paid for the referral to the treatment center which then bills the insurance.”

That leads to a number of other problems, he said, such as weak documentation of medical necessity at intake, and failure to collect deductibles. “In short, it’s really a kickback problem that leads to a host of other sins,” Nelson said.

At the local level

While several local group-home industry officials say such practices have been in use in some Prescott programs, they say reputable homes do not use the practices, and have taken an official stand against them.

Ben Justiniano Jr., spokesman for the Northern Arizona Recovery Association (NARA), said the organization is against patient brokering and referral fees, and is working on an official set of standards on the matter.

But Justiniano points out that NARA has about a dozen members, and many local group homes are not a part of the organization and do not subscribe to its standards.

Basically, Justiniano says, the set of standards would oppose any practices “that endanger the patient.”

Meanwhile, group homes that reportedly do not use the fraudulent practices are involved in the same Health Net audit that has halted the payment of claims.

“Since Dec. 20, all new claims have been withheld,” Peter Thomas, executive director of Chapter 5 Treatment Centers, said this past week.

While noting that it is common for insurance companies to conduct smaller audits, Thomas says the current situation with Health Net is unusual because of its breadth and length.

Thomas also emphasized that Chapter 5 and other group homes that are part of NARA have taken a stand against the fraudulent practices used by some in the industry.

“There has been quite a bit of fraud, and it needs to be exposed,” Thomas said. “It has a huge impact on client care.”

Still, Thomas said, the Health Net audit is “also putting good providers in jeopardy.”

Tim Michael, co-owner of Compass Recovery Center in Prescott, also voiced concerns about the impacts of the ongoing audit.

He says the audit stemmed, in part, from recovery centers in California that were finding homeless people on the streets, signing them up for insurance, and falsely indicating that they were in treatment.

“That’s a pretty good reason to do something like this (the audit),” Michael said, adding that the scrutiny appears to have “eliminated quite a few of these shady operations.”

But, like Thomas, he said, “A number of reputable facilities are being affected by that. It has definitely affected us. We have cut our staff back greatly, cut our housing back greatly.”

Campbell says he had heard from a number of local group homes about the problem, and had been in touch with Health Net officials.

“I have received calls from what I perceive to be good providers,” Campbell said. “They haven’t been paid since December. It’s a problem.”

Basically, local providers say the audit is not only hurting the group homes, but the clients as well. “What we want is people who need help to get help,” Michael said.

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