As much as 20 percent of mental health funds lost to fraud, waste, abuse

Mental health fraud, waste and abuse cost Medicare and Medicaid as much as $8 billion annually, which translates to a 20 percent improper payment rate, according to estimates from mental health researchers.

Much of those improper payments can be traced back to for-profit managed care companies, according to an article published in Psychiatric Times by E. Fuller Torrey, M.D., founder of the Treatment Advocacy Center and associate director of the Stanley Medical Research Institute. Torrey references a research paper he co-authored in September detailing the pervasive fraud schemes that occur within the mental health sector and why the industry is so vulnerable to fraud and abuse.

Recently, a number of mental health scams have made headlines across the country, accompanied by tough sentencing for those involved, including a 115-year prison sentence for three administrators at Riverside General Hospital in Texas. Last year, former Department of Health and Human Services Inspector General Richard P. Kusserow said that fraud involving Medicare and Medicaid mental health benefits is "a special enforcement problem that stretches back decades."

Torrey places most of the blame on for-profit managed care companies, which have been pulling in a larger percentage of state funds. State funding paid to state hospitals has declined steadily over the last several decades, from 63 percent in 1981 to 26 percent in 2009. Specifically, Torrey points to companies such as WellCare, in which three former executives were sentenced to jail time in 2014 for making fraudulent statements on expenses for behavioral health services and diverting funds to circumvent a Florida law that requires managed care plans to spend at least 80 percent of Medicaid premiums on beneficiary services.

"For-profit medical companies, by their nature as investor-owned enterprises, usually place the interest of their shareholders above the interest of patients in order to maximize their profits and stock price," Torrey wrote. "As one critic phrased it, 'What's good for the shareholders is bad for patients.'"

In an effort to curb the high percentage of fraud, waste and abuse within the mental health industry, Torrey and his colleagues recommend expanding the Health Care Fraud Prevention and Enforcement Action Team, which has been praised for its high recoveries and healthy return on investment. More enforcement focus should be directed toward mental health claims along with routine audits of community health programs, the researchers say, but for-profit managed care companies should also be prohibited from overseeing mental health reimbursement.  

For more:
- read the Psychiatric Times article
- here's the report by Torrey, et al.

Related Articles:
Mental health scams target Medicare and Medicaid
Riverside sentencings should serve as warning shot to healthcare executives
Eye on enforcement: Mental health facilities face investigations and convictions
Lessons from WellCare's Medicaid fraud
Federal fraud recoveries skyrocketed

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