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Catch of the Week: Private Equity Firm and Former Executives of a Mental Health Center Reach $25 Million Medicaid Settlement

Posted  October 15, 2021

In recent years there has been a proliferation of private equity firms taking oversight of healthcare entities. These private equity firms have increased their exposure to False Claims Act liability by playing active roles in the operation of healthcare entities, and multiple settlements have been reached over the last two years (on kickbacks and promotion of unapproved use of drug-device systems on pediatric patients).

This week, we focus on the $25 million settlement reached between the Commonwealth of Massachusetts and H.I.G. Growth Partners, H.I.G. Capital (collectively HIG), former CEO of South Bay Mental Health Center (“SBMHC”) Peter Scanlon, and CEO of Community Intervention Services (“CIS”) Kevin P. Sheehan. The settlement was to resolve allegations of SBMHC submitting fraudulent claims for mental health services to the Massachusetts Medicaid program called MassHealth. SBMHC itself had already reached a settlement with the Massachusetts government for $4 million in February 2018.

The Alleged Fraudulent Claims Scheme

The allegations centered on SBMHC allegedly having a significant issue in the licensure and supervision of therapists at its mental health clinics. An investigation by the Massachusetts Attorney General revealed that SBMHC routinely employed unlicensed, unqualified, and unsupervised staff at its various mental health clinics across the Commonwealth. SBMHC then submitted Medicaid claims to MassHealth for services rendered by the unlicensed, unqualified, and unsupervised staff. The original case was brought by a whistleblower who was a former employee of SBMHC. The Commonwealth of Massachusetts intervened in the matter in January 2018, and the settlement with SBMHC itself occurred shortly after

The Settlement with HIG and the Former Executives

This settlement pertained specifically to HIG, the private equity entities behind SBMHC, and the former executives of SBMHC and related entities. The settlement resolved allegations that HIG, Scanlon, and Sheehan had knowledge of SBMHC providing services and making claims on MassHealth while using unlicensed, unqualified, and unsupervised employees. The allegations also claimed that HIG, Scanlon, and Sheehan failed to follow recommendations that could have brought SBMHC into compliance. HIG, Scanlon, and Sheehan all allegedly played roles in the operation of SBMHC that justified liability under the Massachusetts False Claims.

HIG agreed to pay $19.95 million, and Scanlon and Sheehan will pay $5.05 million between the two. This $25 million settlement is the largest government healthcare fraud settlement involving private equity firm oversight or operation of a healthcare provider. It is also the largest Medicaid fraud settlement for Massachusetts.

This settlement demonstrates the importance of whistleblowers in not only exposing fraud by healthcare entities but in holding private equity operators of those healthcare entities accountable. The proliferation of private equity in healthcare can and should mean that private equity firms who operate healthcare entities must be responsible for the actions of the entities they operate. This includes ensuring that healthcare entities are compliant with licensure, qualification, and supervision requirements and if they are not that the private equity entities take action to correct the problems. The continued enforcement by state and federal entities against private equity firms and executives and the continued role of whistleblowers in bringing these matters to light paints a positive picture for eliminating healthcare fraud not only in the mental health space but in healthcare as a whole.

If you have information or would like to speak to a member of the Constantine Cannon whistleblower lawyer team, please contact us for a confidential consultation.

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Tagged in: Catch of the Week, Defendants, FCA State, Healthcare Fraud, Improper Medical Personnel, Medicaid, Provider Fraud,