Medicaid providers of substance use treatment under scrutiny in California | Addiction Professional Magazine Skip to content Skip to navigation

Medicaid providers of substance use treatment under scrutiny in California

September 3, 2013
by Alison Knopf, Contributing Writer
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(First of two parts)

Treatment programs in California are being scrutinized by the state Department of Health Care Services (DHCS) as part of a statewide investigation of local Drug Medi-Cal (DMC) centers. Drug Medi-Cal is the state’s Medicaid program for substance abuse treatment. The investigation comes in the wake of a July report by CNN and the Center for Investigative Reporting (CIR) that substance abuse treatment programs were fraudulently billing Drug Medi-Cal, with many of the problems concentrated in Los Angeles County. The report’s allegations included those of programs billing for sham patients.

The first programs to be targeted are those that “have the most questionable practices,” according to Norman Williams, Deputy Director of DHCS, which on July 1, 2012 officially took over the jurisdiction of the state Department of Alcohol and Drug Programs (ADP). On July 1 of this year, ADP shut down completely, making the transfer complete. In another development in California, called realignment, all substance abuse treatment funding except for the federal Substance Abuse Prevention and Treatment (SAPT) block grant is now administered through the state’s 58 counties.

“Through field investigations, DHCS has temporarily suspended Medi-Cal payments to 43 centers that encompass 116 total sites,” Williams told Addiction Professional on Aug. 16.

The state agency is not revealing the locations of the programs, says Williams, “because that could compromise the integrity of our investigations.” And while DHCS has not prohibited the programs from treating patients while the programs are under investigation, they are not allowed to bill Drug Medi-Cal, the state’s Medicaid program.

These cases also have been referred to the state Department of Justice (DOJ) for further fraud investigation, says Williams, adding that DHCS is “working closely with the DOJ to prosecute all violations to the fullest extent possible.”


Currently, more than 1,000 alcohol and drug treatment clinics in California are certified to bill DMC for providing substance use treatment services. Some of these clinics “failed to inform the state when they changed management or moved, as required by law,” says Williams. “This hampered the state's ability to ensure that felons who should be excluded from managing the clinics were kept out.”

Some programs are suspected of providing services that are not medically necessary, and of billing DMS for services that were not rendered, in violation of state and federal laws, says Williams.

Treatment providers support an investigation that roots out bad players, but as long as the state keeps the identity of those programs secret, they all feel tarnished by the negative publicity, says Warren Daniels, CEO of Community Recovery Resources, a multi-county treatment program based in Grass Valley.

 “We as providers feel they need to talk about the fact that this was a small number of programs focused primarily in southern California,” says Daniels, who is also past president of the California Association of Alcoholism and Drug Abuse Counselors (CAADAC). “Nobody talks about all the great work that the programs that are complying with the regulations are doing. They should figure out a way to legally state who is under investigation, and that pending an outcome of that investigation these programs are not allowed to provide services.”

Daniels adds, “At the same time, I am ecstatic that the legislature and DHCS are taking a hard look at this.”

The providers named in the CNN/CIR report were not well known. The feeling is that if the full list were revealed, people would be able to better judge the nature of the fraud—for example, it could reveal the presence of fly-by-night uncertified treatment providers that could set up a program just for the purpose of bilking the government payment system.


DHCS in August sent a notice to providers advising them that they will all have to recertify within the next two years. While this constitutes an imposition on programs, it’s something Daniels believes is necessary. “We don’t get paid for it—it’s not a billable service, it’s the price of providing service,” he says.

DHCS is requiring every certified DMS clinic in the state to reapply for certification, “thus ensuring that DHCS has up-to-date information on all aspects of each clinic,” confirmed Williams. As part of the process, DHCS will conduct on-site visits to each facility as it reapplies, he says. The goal of certification is to ensure that all clinics “meet the standards DHCS sets for the treatment and safety of Medi-Cal members,” he says.


Coming on Wednesday: With changes in the bureaucratic structure for overseeing California’s treatment system, who bears regulatory responsibility?