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Federal Mental Health Billing Fraud Charges

Federal Mental Health Billing Fraud Charges – What You Need to Know

Federal agents are investigating mental health clinics across the country. The Department of Health and Human Services Office of Inspector General has made psychiatric billing fraud an enforcement priority. If your clinic has been billing for partial hospitalization programs, intensive outpatient services, or psychotherapy sessions that may not meet medical necessity requirements, you need to understand what your facing. Here is the first thing you should know: mental health billing fraud prosecutions result in devastating federal prison sentences. Earnest Gibson III received 45 years in federal prison for his role in the Riverside General Hospital scheme – a $158 million Medicare fraud involving partial hospitalization services. Karen Kallen-Zury received 25 years for the Hollywood Pavilion scheme. A Houston psychiatrist received 150 months for a $150 million scheme. These are not theoretical outcomes.

Welcome to Spodek Law Group. We handle federal healthcare fraud defense cases regularly, including cases where mental health providers first realize they are facing serious criminal exposure through exactly this kind of contact. The second thing you need to understand is this: the government systematically targets the entire mental healthcare industry including clinical psychologists, psychiatrists, clinical social workers, licensed professional counselors, and mental health counselors. Federal prosecutors view mental health billing as a fraud-prone sector – and the sentences are devastating.

Heres something most mental health providers dont realize about how these cases develop. The paradox is brutal. Patients with dementia and Alzheimers were admitted to intensive psychiatric programs that required active participation. People who couldnt participate were enrolled in “participation” programs. Patients with intellectual disabilities were admitted to programs designed to help them “recover” – you cant recover from intellectual disability. The crime isnt treating mental illness. The crime is treating patients who dont have treatable mental illness and billing as if they do.

The PHP Fraud That Devastates Clinics

Heres the uncomfortable truth about partial hospitalization program fraud. PHP is supposed to be intensive outpatient treatment for severe mental illness. Patients are supposed to actively participate in therapy. Patients are supposed to benefit from the treatment. But clinics across the country enrolled patients who could never participate and could never benefit.

HCSN admitted dementia and Alzheimers patients to PHP services. The Miami mental health company operated community mental health centers at multiple locations. They routinely admitted patients who suffered from conditions that could not be effectively treated by PHP services. Mental retardation. Dementia. Alzheimers disease. These patients couldnt participate in intensive psychiatric treatment. But HCSN billed Medicare anyway – $63 million in fraudulent claims.

The medical necessity requirement is the entire basis for Medicare coverage. Medicare only pays for services that are medically necessary. Treating dementia with intensive psychiatric programming is not medically necessary. Enrolling patients with intellectual disabilities in recovery programs is not medically necessary. Every claim submitted for treatment that wasnt medically necessary is a false claim.

Gwendolyn Gibbs falsified records to make patients appear sicker. The Daybreak Rehabilitation Center owner operated her scheme from 2007 until 2016. For nine years, she submitted fraudulent claims for PHP services that were not provided or not medically necessary. She admitted patients with intellectual disabilities who didnt need PHP services. She falsified medical records to make it appear that patients were sicker then they actualy were. She paid kickbacks to group home owners and patient recruiters. She received 84 months in federal prison.

Think about what that means for any mental health clinic billing PHP services. Every patient who doesnt meet medical necessity requirements creates false claims exposure. Every record that exaggerates symptoms is evidence of fraud. Every kickback to a referral source is an Anti-Kickback violation. The billing practices that maximize revenue are the same practices that create federal criminal liability.

The Billing Patterns That Trigger Investigation

Heres something about mental health billing fraud that should terrify every provider. The billing patterns themselves become evidence of fraud – patterns that are impossible for any legitimate provider to achieve.

Gustavo Kinrys billed for 24 hours of therapy in a single day. On 382 separate occasions, the Wellesley psychiatrist billed Medicare and private insurers for more then 24 hours worth of psychotherapy services in a single day. One day in July 2017, he claimed he had provided hour-long psychotherapy sessions to 70 different patients. He was on vacation outside the United States. Seventy patients in one day. While on vacation. The billing pattern itself proved the fraud.

Impossible billing volumes trigger automatic investigation. Heres the consequence cascade. You bill for 70 patients in one day. Medicare flags the impossible volume. Auditors review your billing history. They discover you were on vacation. Your billing records become evidence of wire fraud. The pattern that maximized your revenue is now the pattern that proves your guilt.

Riyaz Mazcuri submitted $150 million in fraudulent claims. The Houston psychiatrist falsified medical records and wrote false reports to make patients qualify for PHP services. He billed Medicare for services he never actualy rendered. He was convicted after a five-day trial and sentenced to 150 months in federal prison. Twelve and a half years. Becuase he certified patients for services they didnt need.

Heres the irony that destroys mental health providers. The psychiatrists who never saw patients certified those patients for intensive psychiatric care. The rubber-stamp certifications that seemed like efficient practice were actualy evidence of a conspiracy to defraud. Every certification without adequate evaluation becomes a separate act in the fraud scheme.

The Group Home Pipeline

Heres something about mental health fraud that creates massive criminal exposure. The referral relationships that fill your clinic may be illegal kickback arrangements.

Group home owners were paid to send their residents to treatment. Heres the hidden connection. A group home owner sends residents to your mental health clinic. Your clinic admits them for PHP services. Your clinic bills Medicare. Kickbacks flow back to the group home owner. Everyone profits except the residents who received treatment they didnt need and Medicare which paid for services that werent medically necessary.

A group home owner received 54 months for sending residents to Spectrum Care. The Houston scheme involved paying kickbacks to owners of group homes in exchange for referring Medicare beneficiaries. The group home owner sent her residents to the clinic. The clinic enrolled them in PHP whether they needed it or not. The kickbacks flowed. The scheme generated $97 million in fraudulent claims. The clinic owners received 148 months and 120 months. The group home owner received 54 months.

Hollywood Pavilion paid patient brokers to falsify invoices. Christopher Gabel, the Chief Operating Officer, instructed patient brokers to falsify invoices and marketing reports to hide the true nature of the bribes and kickbacks. From 2003 through 2012, the hospital billed Medicare approximately $67 million for services that werent properly rendered, for patients who didnt qualify, and for patients procured through bribes. The CEO Karen Kallen-Zury received 25 years in federal prison.

The ALF pipeline operates the same way. Assisted living facility operators become patient suppliers for mental health clinics. HCSN obtained Medicare beneficiaries by paying kickbacks to ALF owners and operators. The facilities were supposed to care for residents. Instead they sold them to clinics that billed for treatment they couldnt benefit from.

Heres the consequence cascade that destroys everyone involved. You pay a referral source for patients. That payment is a kickback under federal law. Every claim you submit based on those referrals becomes a tainted claim. The referral source cooperates with investigators and confirms the arrangement. Every participant in the pipeline faces federal prosecution.

The Cases That Show What Happens

If you think federal mental health fraud prosecutions are theoretical, look at what actualy happens to psychiatrists, clinic owners, and everyone connected to these schemes.

Earnest Gibson III received 45 years in federal prison. The Riverside General Hospital scheme submitted approximately $158 million in false and fraudulent claims for PHP services. Medicare beneficiaries for whom Riverside billed Medicare did not recieve PHP services. Most rarely saw a psychiatrist. They did not recieve intensive psychiatric treatment at all. Gibson IV received 20 years. Mohammad Khan received 40 years. Sharon Iglehart received 144 months.

Karen Kallen-Zury received 25 years. The Hollywood Pavilion CEO orchestrated a $67 million scheme involving bribes and kickbacks to patient brokers. Twenty-five years in federal prison for a mental health billing scheme. The COO pleaded guilty to conspiracy. The scheme lasted nine years.

Spectrum Care owners received 148 months and 120 months. The $97 million Medicare fraud scheme operated from 2006 until their arrest in December 2011. They purportedly provided PHP services but actually enrolled patients who didnt need intensive psychiatric treatment. They paid kickbacks to group home owners. They falsified documentation. Combined, the two physician owners will serve over 22 years in federal prison.

Riyaz Mazcuri received 150 months. The Houston psychiatrist was convicted after trial. He falsified medical records. He wrote false reports. He made patients “qualify” for PHP services they didnt need. He billed Medicare for services he never rendered. Twelve and a half years becuase certification was a rubber stamp.

Gustavo Kinrys received 99 months. The Wellesley psychiatrist billed for $19 million in services he never provided. He billed for treating 70 patients in one day while on vacation abroad. He billed for 24+ hours of therapy on 382 separate days. Over eight years in federal prison for billing patterns that were impossible for any legitimate provider.

These arnt unusual cases. They represent standard enforcement outcomes. The sentences reach 45 years. The restitution orders are in the tens of millions. The schemes that seemed sustainable collapse when investigation begins.

A Philadelphia mental health clinic paid $900,000 to resolve fraud allegations. The settlement resolved False Claims Act liability for alleged Medicaid fraud. Even civil settlements destroy practices. Even avoiding criminal prosecution still means nearly a million dollars in payments and permanent reputational damage. The line between civil settlement and criminal prosecution is often just a matter of scale and timing.

The forfeiture provisions compound the devastation. When the government prosecutes mental health fraud, they dont just seek restitution. They seek forfeiture of assets purchased with fraud proceeds. Your clinic. Your vehicles. Your bank accounts. Your home if it was purchased with scheme proceeds. Gwendolyn Gibbs was ordered to pay $8,680,380.42 in restitution. The scheme that seemed profitable becomes total financial destruction.

How Mental Health Fraud Investigations Begin

Heres something about how these cases develop that should concern every mental health provider. Investigations often begin long before anyone contacts you – and by the time you recieve a subpoena, the government has probly been building the case for months.

Billing analytics identify impossible patterns. Your claims are analyzed by sophisticated software. If you bill for more then 24 hours of services in a single day, thats flagged. If your PHP enrollment rates exceed regional averages, thats flagged. If your patient population has diagnoses inconsistent with PHP treatment, thats flagged. The investigation starts with data.

Whistleblowers have massive financial incentive to report. Under the False Claims Act qui tam provisions, whistleblowers can recieve 15-30% of government recoveries. Your billing staff, your therapists, your former employees, group home operators who want immunity – anyone who sees something questionable has powerful financial motivation to report it.

One cooperator exposes the entire network. When the government arrests a patient broker, that broker identifies every clinic they sent patients to. When they arrest a group home owner, that owner identifies every clinic that paid kickbacks. You may become a target becuase someone in your referral chain was arrested first.

Auditors compare certification to patient condition. Heres the consequence cascade. Auditors review your PHP certifications. They examine the patient records. They discover patients certified for intensive psychiatric treatment had dementia. They discover patients certified for recovery programs had permanent intellectual disabilities. The certifications that generated revenue become the evidence that proves fraud.

What You Cannot Do When Investigated

Heres what people do when they learn about mental health fraud investigations. They panic. They try to fix things. They make decisions that create additional criminal exposure.

Do NOT destroy or alter patient records. Treatment notes, certification documents, billing files, contracts with referral sources. Destroying any of this is obstruction of justice. The government probly already has copies through Medicare claims data and records seized from referral partners. Destruction proves consciousness of guilt while accomplishing nothing.

Do NOT contact group homes, ALFs, or patient brokers to coordinate stories. If you had problematic referral arrangements, your natural instinct is to talk to others involved. Dont. Coordinating testimony is witness tampering. They may already be cooperating with the government. Your conversation could be recorded.

Do NOT continue questionable billing practices. If your enrolling patients who may not meet medical necessity requirements, stop. But dont try to “clean up” by restructuring contracts or creating backdated documentation. Thats additional fraud.

Do NOT assume cooperation will protect you. Mental health providers often think full cooperation will result in leniency. Cooperation might help at sentencing if your convicted. But it dosent prevent prosecution. Earnest Gibson III cooperated. He got 45 years. Everything you say to investigators can be used against you. You need an attorney before you say anything.

The False Claims Math

Heres something about mental health billing fraud that exponentialy increases legal exposure. PHP services are billed daily – and every unnecessary day creates seperate false claims exposure.

How the daily billing multiplier works. A patient is enrolled in PHP. You bill Medicare daily for their participation. If that patient shouldnt have been enrolled, every daily bill is a false claim. Each false claim carries penalties of up to $27,894 (as of 2024). Plus treble damages – three times the governments loss. A single improperly enrolled patient generating daily bills for one year creates 260+ false claims.

The math compounds rapidley. If you enroll 50 patients who shouldnt be in PHP, and each generates daily billing for six months, thats over 6,500 false claims. At $27,894 per claim in penalties alone, thats over $180 million in exposure. Before treble damages. Before restitution. Before forfeiture.

The Daybreak scheme lasted nine years. Gwendolyn Gibbs operated her scheme from 2007 to 2016. Nine years of daily billing for patients who didnt need PHP services. Nine years of false claims. Nine years of Anti-Kickback violations. The scheme that seemed sustainable for nearly a decade collapsed into federal prosecution.

$158 million in fraudulent claims at Riverside General. That wasnt $158 million in one submission. It was years of daily billing. Thousands of patients. Tens of thousands of individual false claims. Each claim a seperate count. Each day another violation.

Civil monetary penalties stack on top of criminal exposure. The Office of Inspector General can pursue civil monetary penalties seperate from criminal prosecution. Up to $100,000 per kickback. Up to $50,000 per false claim. Plus treble damages. Plus permanent exclusion from Medicare and Medicaid. Even if you avoid prison, the civil liability can bankrupt you. Even if you keep your freedom, you lose your ability to ever bill federal healthcare programs again.

Upcoding creates its own exposure. Billing for 60-minute therapy sessions when you provided 15-minute sessions is fraud. A psychiatrist was fined $400,000 and permanantly excluded from Medicare and Medicaid for exactly this practice. The billing code that seemed like it was “close enough” becomes the evidence that proves intent to defraud. Every upcoded session is a seperate false claim. Every pattern of upcoding demonstrates systematic fraud.

What You Should Do Right Now

If federal investigators have contacted you about mental health billing, or if your enrollment and certification practices might trigger scrutiny, heres exactly what you should do:

Contact a federal healthcare fraud defense attorney immediatly. Not a general business lawyer. Not your malpractice carrier. Someone who specificaly handles federal healthcare fraud cases and understands HHS-OIG enforcement priorities.

Do NOT speak to investigators without counsel. Federal agents may approach you or your staff for “voluntary” interviews. There is nothing voluntary about it. Anything said can be used to build the case against you. Politely decline and contact an attorney immediatly.

Preserve all documentation exactly as it is. Patient records, certification documents, billing files, contracts with referral sources, treatment notes. Do not alter, destroy, or organize anything. Document preservation is critical.

Identify all potentially problematic referral sources. Group home relationships. ALF arrangements. Patient broker payments. Any payments connected to patient volume. Your attorney needs to understand the full scope.

Do NOT discuss the investigation with staff, referral sources, or patient brokers. Anyone you talk to can be compelled to testify. They may already be cooperating with the government. Only attorney-client communications are protected.

Todd Spodek tells every mental health provider in this situation the same thing: federal mental health billing investigations are serious criminal matters. Earnest Gibson III got 45 years. Karen Kallen-Zury got 25 years. Mazcuri got 150 months. Your response in the next few days could determine wheather this becomes a matter that resolves favorably – or federal charges that destroy your practice and your freedom.

Call Spodek Law Group at 212-300-5196. Before you speak to investigators. Before you make decisions that create additional exposure. Before a billing pattern becomes a federal prosecution.

Federal mental health fraud is an enforcement priority. The sentences reach decades. What you do next matters enormosly.