The watchdog group points to the estimated $8 billion in annual mental health fraud, including in for-profit behavioral facilities, revealing how they exploit insurance by keeping patients hospitalized for financial gain.

By CCHR International
The Mental Health Industry Watchdog
April 12, 2024

The Citizens Commission on Human Rights International wants an overhaul of fraudulent practices in behavioral hospitals that put mental health patients at risk. It has launched a campaign asking for current or former employees of psychiatric hospitals, particularly in the for-profit behavioral “troubled teen” treatment industry to report abuses witnessed. The group is posting ads for whistleblowers to confidentially report any observed fraud and abuse.

A psychiatrist quoted in the Psychiatric Times estimated between 10% and 20% of state mental health funds—$4 to $8 billion—are lost to fraud, waste, and excess profits to for-profit managed care companies. Studies report that the administrative costs of for-profit psychiatric hospitals are 32% higher than non-profit psychiatric hospitals and 83% higher than public psychiatric hospitals.[1] Research also shows psychiatric inpatients with voluntarily legal status were most frequently served in private psychiatric hospitals (46%) and only 6% of patients voluntarily admitted were in state and county psychiatric hospitals.[2]

It makes the potential for fraud in the private sector a high risk. Mental healthcare fraud schemes include facilities paying kickbacks to doctors and others for referral; making inaccurate or untruthful diagnoses to increase payments from Medicaid and Medicare; providing unnecessary treatment; and billing for treatment when the provider was not there to deliver it, or billing for multiple patients over a period in which it would be impossible to deliver that amount of treatment.[3] For example, on April 8, 2024, the U.S. Attorney General’s Office filed a civil complaint against a behavioral center and its owner, a psychiatrist, alleging False Claims Act violations by billing Medicaid for fictitious psychiatric services. Thousands of medication management appointments, or “med checks,” were billed, including for more than 84 full-length med checks on the same day, which would amount to at least 21 hours of appointments.[4]

CCHR’s call for whistleblowers, says:

“If you are or have been employed at a mental health facility, you have likely witnessed patient abuse, fraud, or other things you felt were wrong or illegal. You may also know of substandard institutional conditions or other situations you feel need to be made known. CCHR can help you. CCHR has been investigating and exposing the for-profit mental health industry and its hospital chains since the early 1990s. These businesses are widely acknowledged as putting profit above patient care and safety, resulting in physical and sexual assaults of patients (including children), deaths, and fraud.”

Medicaid and Medicare are lucrative income sources for the for-profit industry. In 2019, Medicaid was the second biggest payer of mental disorder treatment, with expenditures of $27.6 billion, or a little over one-fourth (25.9%) of the total spent for the treatment of mental disorders among adults ages 18 and older. Following this, almost one-fifth (19.1%) of such treatment expenditures were paid by Medicare, for a total of $20.4 billion. A third avenue is individuals and families paying out-of-pocket $15.6 billion (14.7%).[5] In March 2024, the Centers for Medicaid and Medicare Services (CMS) issued its proposed payment rates for inpatient psychiatric facilities in 2025 which could see $70 million more in Medicare payments.[6] All of this, CCHR says, is an incentive to misuse the funds.

In 2020, mental health expenditures in the U.S. had reached $280 billion a year, with nearly 25% from Medicaid. In November 2023, the investment management firm Colliers reported the behavioral health market continues to grow and gain steam as a desirable investment sector.[7] That concerns CCHR, because increased investment is occurring despite the “bad business” models of psychiatry and for-profits, and in an industry that does not self-correct.

Already, scandals involving for-profit psychiatric care companies are common.

In July 2020, Universal Health Services, Inc., UHS of Delaware, Inc. (together, UHS), and its facility Turning Point Care Center, LLC (Turning Point) agreed to pay a combined total of $122 million to resolve civil False Claims Act allegations in two separate settlements, of which $117 million was UHS. Allegedly, facilities knowingly submitted false claims for payment to Medicare, Medicaid, TRICARE, Veteran Affairs, and The Federal Employees Health Benefits Program for inpatient behavioral health services that were not reasonable or medically necessary and/or failed to provide adequate and appropriate services for adults and children admitted to UHS facilities. Turning Point paid $5 million.[8]

Medicaid accounts for 27% of UHS’ total revenue. In 2015, nearly 40% of the $8 billion in all revenue (acute care and behavioral) UHS generated annually came from Medicare and Medicaid reimbursements.[9]

In 2019, the U.S. Attorney settled healthcare fraud allegations against Acadia Healthcare, another giant behavioral hospital chain, for $17 million in West Virginia.[10] According to Acadia’s annual report in 2023, 51% of its revenue was from Medicaid, 30% from commercial payors; 15% from Medicare and 4% from other payors.[11]

The U.S. Department of Justice reported False Claims Act recoveries involving healthcare (generally) were $1.8 billion in 2023.[12] In 2022, the healthcare industry was far and away the primary driver of civil fraud enforcement activity, accounting for 90% of total recoveries.[13] This included a $10.25 million fine in 2021 against behavioral services company, Oglethorpe Inc. and three of its Ohio psychiatric facilities, which were accused of knowingly submitting false claims by billing for unnecessary inpatient psychiatric hospitalizations and for psychiatric evaluations that either were not performed or did not meet Medicare’s requirements. It was also alleged that patients were misled into voluntarily admitting themselves.[14]

Increased funding and insurance coverage does not translate to better treatment, according to CCHR. Numerous cases of patient sexual assault are reported. Recent major lawsuits against Acadia Healthcare and UHS resulted in combined jury verdicts of over $1.2 billion in the past year. A jury verdict awarded $485 million in relation to a foster care child sexually assaulted in Acadia-owned Desert Hills hospital in New Mexico. Acadia is to pay $325 million of this.[15] In March this year, UHS and its Pavilion Behavioral Health in Illinois were ordered to pay $535 million in damages over a sexual assault of a 13-year-old patient by another patient.[16] UHS is appealing.[17] The company faces another $387 million lawsuit from multiple former patients of Cumberland Children’s Hospital in New Kent County, Virginia, who alleged its medical director sexually abused them.[18] Yet another UHS facility, Laurel Oaks Behavioral Center in Dothan, Alabama, and UHS are being sued following the sexual assault of an 8-year-old resident.[19]

CCHR says whistleblowers are sometimes the only means by which patients can be safeguarded against fraud and abuse.  Whistleblowers should email CCHR’s Director of Legal Affairs at humanrights@cchr.org and visit https://www.cchrint.org/whistleblowers/

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[1] “Fraud, Waste, and Excess Profits,” Psychiatric Times, 18 Nov. 2015, https://www.psychiatrictimes.com/view/fraud-waste-and-excess-profits

[2] “Trends in Psychiatric Inpatient Capacity United States and Each State, 1970-2018,” National Assoc. of State Mental Health Program Directors Research Institute, Inc. (NASMHPD), Sept. 2022 

[3] Rylee Wilson, “8 recent behavioral health billing fraud cases,” Becker’s Behavioral Health, 21 Nov. 2023, https://www.beckersbehavioralhealth.com/behavioral-health-news/8-recent-behavioral-health-billing-fraud-cases.html; “Universal Health Services, Inc. And Related Entities To Pay $122 Million To Settle False Claims Act Allegations Relating To Medically Unnecessary Inpatient Behavioral Health Services And Illegal Kickbacks,” U.S. Department of Justice, 10 July 2020, https://www.justice.gov/usao-mdfl/pr/universal-health-services-inc-and-related-entities-pay-122-million-settle-false-claims

[4] “United States Files Lawsuit Alleging Medicaid Fraud by Philadelphia Mental Health Clinic and Its Owner,” Dept. of Justice, 8 Apr. 2024, https://www.justice.gov/usao-edpa/pr/united-states-files-lawsuit-alleging-medicaid-fraud-philadelphia-mental-health-clinic

[5] Anita Soni, PhD, MBA, “Healthcare Expenditures for Treatment of Mental Disorders: Estimates for Adults Ages 18 and Older, U.S. Civilian Noninstitutionalized Population, 2019,” Agency for Healthcare Research and Quality (AHRQ), Feb. 2022

[6] Rylee Wilson, “CMS proposes bump for inpatient psychiatric Medicare payments,” Becker’s Behavioral Health, 1 Apr. 2024, https://www.beckersbehavioralhealth.com/behavioral-health-government-policies/cms-proposes-bump-for-inpatient-psychiatric-medicare-payments.html?origin=BHE&utm_source=BHE&utm_medium=email&utm_content=newsletter&oly_enc_id=3257B5846812I1X

[7] https://knowledge-leader.colliers.com/justin-butler/navigating-the-behavioral-health-market-a-growing-investment-frontier-with-evolving-real-estate-dynamics/

[8] “Annual Report of the Departments of Health and Human Services and Justice— Health Care Fraud and Abuse Control Program FY 2020,” DOJ, HHS, July 2021, pp. 29-30, https://oig.hhs.gov/publications/docs/hcfac/FY2020-hcfac.pdf

[9] Ryan Briggs, “Profitable mental health service provider under Medicaid/Medicare investigation,” WHYY, 27 Nov. 2015, https://whyy.org/articles/profitable-mental-health-service-provider-under-medicaidmedicare-investigation/; Chris Larson, “How Acadia Healthcare, UHS Are Prepping for Medicaid Redeterminations,” Behavioral Health Business, 5 May 2023, https://bhbusiness.com/2023/05/05/how-acadia-healthcare-uhs-are-prepping-for-medicaid-redeterminations/

[10] “United States Attorney Announces $17 Million Healthcare Fraud Settlement,” U.S. Department of Justice, 6 May 2019, https://www.justice.gov/usao-sdwv/pr/united-states-attorney-announces-17-million-healthcare-fraud-settlement

[11] Chris Larson, “How Acadia Healthcare, UHS Are Prepping for Medicaid Redeterminations,” Behavioral Health Business, 5 May 2023, https://bhbusiness.com/2023/05/05/how-acadia-healthcare-uhs-are-prepping-for-medicaid-redeterminations/; Acadia Healthcare U.S. Securities and Exchange Commission, Form 10-K for the fiscal year ended 31 Dec. 31, https://www.sec.gov/Archives/edgar/data/1520697/000156459023002737/achc-10k_20221231.htm

[12] “False Claims Act Settlements and Judgments Exceed $2.68 Billion in Fiscal Year 2023,” U.S. Department of Justice, 22 Feb. 2024, https://www.justice.gov/opa/pr/false-claims-act-settlements-and-judgments-exceed-268-billion-fiscal-year-2023  

[13] “The False Claims Act and Health Care: 2021 Recoveries and 2022 Outlook,” K&L Gates, 7 Apr. 2022, https://www.klgates.com/The-False-Claims-Act-and-Health-Care-2021-Recoveries-and-2022-Outlook-4-7-2022

[14] “Ohio Treatment Facilities and Corporate Parent Agree to Pay $10.25 Million to Resolve False Claims Act Allegations of Kickbacks to Patients and Unnecessary Admissions,” U.S. Department of Justice, 5 Mar. 2021, https://www.justice.gov/opa/pr/ohio-treatment-facilities-and-corporate-parent-agree-pay-1025-million-resolve-false-claims

[15] Colleen Heild. Olivier Uytterbrouck, “Foster child sexual assault results in $485 million jury award,” Albuquerque Journal, 11 July 2023, https://www.abqjournal.com/news/foster-child-sexual-assault-results-in-485-million-jury-award/article_bfdf6e86-1f70-11ee-b4e3-c7c608def4fe.html

[16] “Jury renders $535 million judgment against The Pavilion in 2020 rape of patient,” The News Gazette, 29 Mar. 2024, https://www.yahoo.com/news/jury-renders-535-million-judgment-145500758.html

[17] David Muoio, “UHS to appeal ‘unexpected’ $535M negligence decision against behavioral health subsidiary,” Fierce Healthcare, 1 Apr. 2024, https://www.fiercehealthcare.com/providers/uhs-appeal-535m-negligence-decision-against-subsidiary-warns-potential-adverse-material

[18] Laura French, “New information in $387 million lawsuit against Cumberland Children’s Hospital,” WTVR CBS 6, 31 July 2023, https://www.wtvr.com/news/local-news/cumberland-childrens-hospital-lawsuit-update-07-31-2023

[19] “Alabama Youth Facility Sued Over Another Child Sexual Assault Incident,” LR News, 8 Feb. 2024, https://levin-papantonio-rafferty.prowly.com/290507-alabama-youth-facility-sued-over-another-child-sexual-assault-incident