New Life Lodge Agrees To Resolve TennCare Fraud Allegations For $9.25 Million

Wednesday, April 16, 2014

CRC Health Group has agreed to pay $9.25 million to settle allegations of TennCare fraud related to its New Life Lodge Facility in Burns, Tennessee, Attorney General Bob Cooper announced today.

The State alleged that between 2006 and 2012 CRC provided substandard services, repeatedly exceeded its state-licensed patient capacity, and caused third party pharmacies to bill the TennCare program for prescription drugs that New Life Lodge was obligated to provide to TennCare beneficiaries as part of their TennCare-paid per diem.

The settlement is the result of a joint investigation between the State of Tennessee and the United States. The recovery will be divided between the state and federal governments with the State of Tennessee slated to receive approximately $3.4 million.

“New Life Lodge accepted millions of dollars of TennCare funds with the understanding that it would provide necessary substance abuse treatment services to some of the State’s most vulnerable citizens,” Attorney General Cooper stated in response to the settlement. “Instead, far too often those operating the facility failed to meet their obligations by falling short of minimum necessary standards of care or using third-party pharmacies to double-bill the program.”

In addition to double-billing and licensure issues, the agreement identified several ways the facility allegedly failed to meet acceptable TennCare standards. Among the allegations were that New Life Lodge relied on personnel who were not appropriately licensed or supervised; billed for services that were not documented or provided; failed to conform to the facility’s own patient treatment  plans; failed to provide required access to a psychiatrist; and failed to meet legal “medical necessity” requirements that are prerequisites for payment under TennCare. The settlement agreement provides that it is neither an admission of liability by CRC nor a concession by the State that its claims are not well founded.

Attorney General Cooper emphasized the state’s focus on healthcare fraud in mental health: “Safeguarding TennCare's mental and behavioral health support system is a particular focus of this Office.” The allegations arose from a whistleblower suit filed by former New Life Lodge employee Angela Cederoth on behalf of the State of Tennessee and the United States.  Under the Tennessee Medicaid False Claims Act, a TennCare fraud whistleblower can file a qui tam suit on behalf of the State and receive a portion of the funds recovered. 

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