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Justice News

Department of Justice
U.S. Attorney’s Office
Middle District of Tennessee

Wednesday, April 16, 2014

Tennessee Substance Abuse Treatment Facility Agrees To Resolve False Claims Act Allegations For $9.25 Million

New Life Lodge in Burns, Tennessee at Center of Allegations

U.S. Attorney David Rivera announced today that CRC Health Corporation (CRC) has agreed to pay $9.25 million to the United States and the State of Tennessee to settle allegations that CRC knowingly submitted false claims by providing substandard treatment to adult and adolescent Medicaid patients suffering from alcohol and drug addiction at its facility in Burns, Tennessee.  CRC, based in Cupertino, California, is a nationwide provider of substance abuse and mental health treatment services. 

“Substance abuse of varying levels is rampant here and across the country,” said U.S. Attorney David Rivera of the Middle District of Tennessee.  “Fortunately, when needed, Medicaid or TennCare covers substance abuse treatment and certain mental health assistance.  “When those services are required, that treatment must be provided with the highest possible quality of care to those patients.  Anything less is unacceptable.”

CRC owns and operates a residential substance abuse treatment facility in Burns, Tennessee, called New Life Lodge.  The United States alleged that, between 2006 and 2012, New Life Lodge billed the Tennessee Medicaid program for substance abuse therapy services that were not actually provided or were provided by therapists who were not properly licensed by the State of Tennessee.  The United States also alleged that New Life Lodge failed to make a licensed psychiatrist available to patients at the facility, as required by the state’s regulations, failed to maintain patient-staffing ratios required by the Tennessee Department of Mental Health regulations, and billed for Medicaid patients in excess of the state-licensed bed capacity at the facility.  In addition, the United States alleged that New Life Lodge caused Medicaid to be double-billed for prescription substance abuse medications given to residents at the facility.  New Life Lodge is not currently treating Medicaid patients at its facility.  

“Medicaid patients who enter residential treatment programs for alcohol and drug addiction deserve to have treatment provided by appropriately qualified personnel according to the appropriate standard of care,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “We will not tolerate health care providers who prioritize profit margins over the needs of their patients.” 

“The FBI is committed to investigating allegations of wrong doing and false claims related to federally- funded health care programs,” said A. Todd McCall, Special Agent in Charge of the Memphis Division of the Federal Bureau of Investigation. “The resolution of this matter is the result of the hard work by the individual investigators and the coordinated effort of all the agencies involved.”

“Providers of health care services must not place profits above patients,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services- Office of Inspector General in Atlanta.  “This was a vulnerable population of individuals who were seeking treatment for their substance abuse problems.  We will pursue these cases in order to ensure proper treatment is afforded to those seeking treatment.”

Director Mark Gwyn of the Tennessee Bureau of Investigation said, “This resolution is indicative of a great collaborative effort to combat egregious and fraudulent activity against health care, which ultimately impacts everyone in Tennessee.”

The allegations covered by the settlement were originally raised in a lawsuit filed by Angie Cederoth, who was previously employed in New Life Lodge’s billing department, under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to sue on behalf of the United States for the submission of false claims and to receive a share of any recovery.  Ms. Cederoth will receive a payment of $1,526,260.01 as her share of the settlement proceeds.

The investigation of this matter reflects a coordinated effort among the, the U.S. Attorney’s Office for the Middle District of Tennessee; the Commercial Litigation Branch of the Justice Department’s Civil Division; the Tennessee Attorney General’s Office; the FBI;  the Tennessee Bureau of Investigation; and the Department of Health and Human Services’- Office of Inspector General. 

The lawsuit is captioned U.S. ex rel. Cederoth v. CRC Health Corporation, Inc.3-11-CV-00897 (M.D. Tenn.).

 The claims asserted against the defendants are allegations only, and there has been no determination of liability.

Updated March 19, 2015