California officials reviewing rehab centers in wake of fraud reports

SACRAMENTO — California officials are conducting a statewide review of taxpayer-funded drug and alcohol rehabilitation centers in the wake of reports detailing fraud in the multimillion-dollar program.

"We are deeply concerned," said Toby Douglas, director of the California Department of Health Care Services. "We have to put all our resources into fighting fraud in this program."

The Center for Investigative Reporting and CNN, in a series of joint reports beginning earlier this week, said some clinics have been billing the state for patients who don't show up or don't have substance-abuse problems.

In the last two fiscal years, $94 million was sent to 56 clinics in Southern California where there was evidence of improper billing, the reports said.

The rehabilitation program, which funds 1,064 clinics with $206 million in state and federal money, is part of Medi-Cal, the state's healthcare system for the poor.

Sixty-six companies have been reviewed so far, and taxpayer money has been temporarily cut off for 29 of them as the investigation continues. The 29 companies operate a total of 83 clinics.

State officials are also reviewing allegations that some of the companies hired ineligible employees, who had previously been convicted of neglecting a patient or committing fraud in a government program.

Information on the clinics has been sent to the California Department of Justice for a possible criminal case, officials said.

"We take it very seriously and we're going to look into it," said Lynda Gledhill, a spokeswoman for Atty. Gen. Kamala Harris.

The rehabilitation program is also facing scrutiny from the Legislature.

State Sen. Ted Lieu (D-Torrance) said he was in the process of requesting more funding for drug treatment when he saw the reports of fraud. He stopped writing the request and is pushing for an audit instead.

"I was very concerned that if the fraud is not remedied, it would jeopardize the public's support for this very vital program," he said.

Lieu said state officials should have done a better job of keeping tabs on rehabilitation clinics.

"It takes tax dollars away from legitimate clinics," he said. "You're not helping clinics that are doing a good job and the right thing."

Douglas acknowledged that "it's our responsibility to root out all fraud." But he would not say whether he thought state oversight had been lax.

He noted that his department recently finished merging with the California Department of Alcohol and Drug Programs as part of an effort to consolidate government services.

chris.megerian@latimes.com

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