Recovering drug addicts and homeless residents in New York City have been the target of an ongoing scam involving unregulated "three-quarter houses" and drug treatment programs that paid kickbacks on Medicaid reimbursement, according to a New York Times investigation.
An emerging industry in New York City, three-quarter houses--also known as sober or transitional houses--developed the moniker because, like halfway houses, they offer services to thousands of homeless and recovering drug addicts looking for a place to live. However, unlike halfway houses, three-quarter houses remain largely unregulated, according to the Times.
The Times zeroed in on one particular owner of these houses, Yuri Baumblit, described as "longtime hustler and two-time felon." According to former employees and residents, Baumblit forced residents into outpatient treatment programs, often persuading them to relapse in order to continue treatment or face eviction. In many cases, the home violated building codes, packing multiple tenants into small, windowless rooms that often turned into drug dens.
In 2005, before founding his current company, Back on Track Group, Baumblit and his wife operated medical clinics that defrauded insurance companies with fake injury claims, according to the Times. Baumblit pleaded guilty to two felony charges and served three months in prison in September 2009.
As the owner of three-quarter houses, Baumblit required all tenants to go to addiction and support treatment groups, even those who weren't there for addiction. Once tenants finished a treatment program, they were often enrolled in another one in order to remain in the house. In one instance, Medicaid paid nearly $20,000 for one tenant's treatment in three different programs.
The Times noted that the drug treatment programs were all owned by the same cluster of people. Owners of one such treatment program, Narco Freedom, were indicted by the New York Attorney General in January on allegations they billed Medicaid tens of millions of dollars and orchestrated a kickback scheme in which patients were offered housing in exchange for enrolling in outpatient drug treatment programs, FierceHealthPayer: AntiFraud previously reported.
A day after The Times investigation, New York City Mayor Bill de Blasio announced an emergency task force would investigate three-quarter houses in the city to uncover health and safety concerns and building code violations. The mayor indicated that the city would also "partner with law enforcement to address Medicaid fraud that it has been investigating at three-quarter houses."