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Court papers: Mental health firm overbilled

Roanoke Times - 12/6/2017

Roanoke-based East Mental Health Services inflated its bills to become the state's second-highest-paid provider of life-skills training for the severely mentally ill, according to allegations in newly unsealed federal court papers.

In applications for federal search warrants, investigators said the Virginia Medicaid program unknowingly paid millions for care that was billed as one-on-one training but didn't qualify because it took place at group social events, such as bowling outings, supervised by East Mental Health clinicians. The billing clinicians in some cases spent as little as a few minutes face-to-face with clients, an investigator alleged.

Company principal Christopher Dean East was drawn to the higher compensation rate of $91 for a one-on-one care encounter lasting up to three hours, versus the $24 rate when clients attended a group event, according to a filing by special agent Jeffrey Overbeck with the U.S. Department of Health and Human Services' Office of the Inspector General.

Overbeck told a judge that East Mental Health employees upset by what they witnessed at work contacted police in December 2013, and that he joined the investigation the following fall. The investigative paperwork, dated in 2015, alleged that the private company inflated billings and submitted false records in a multiyear conspiracy to defraud the federal government and also engaged in Social Security fraud.

No one has been charged.

East and his company deny the allegations, said Justin Lugar, a Roanoke attorney who said he represents them.

"Neither Dean East nor East Mental Health have committed health care fraud. They have lots of checks and balances in the company to ensure there is no discrepancy in billings or anything else," Lugar said.

Before closing its offices in October following a loss of government funding, East Mental Health provided publicly funded training designed to enable hundreds of people with mentally illness to live independently.

But investigators allege the company cheated taxpayers by substituting large social and recreational outings for face-to-face training focused on such life skills as eating nutritious food, getting exercise, following medical advice, traveling safely and accessing community resources. The program is open to people with a clinical need for help because of a severe mental, behavioral or emotional illness that impairs their everyday functioning.

In a staff email filed with the court, a manager announced a 2013 activity calendar with encouragement to attend. "Clinicians," it said, "clear your schedules for Thursdays, fill your car with clients and come enjoy the opportunity to meet all our clients and your coworkers." After group events, managers typically circulated an email linking each client who attended to a clinician or clinician supervisor for billing purposes, investigators said.

According to a 2009 email filed with the court, an employee responded with concern to the designation of her assigned client, saying, "I think I know who [name redacted] is however I only spoke with her for approx. 2 minutes at the party. I do not feel comfortable stating I did one on one with her for three hours."

Overbeck called the practice of billing for individual time during a group event "stacking." He said he found evidence that employees who didn't engage in or support stacking received less pay. Those who stacked could earn $4,000 every two weeks, while those who didn't received $1,200 to $1,600, he said. And yet, the company circulated policy statements strictly warning against violating the one-on-one mandate, according to the filings.

While bowling was a common group event at the lanes near the company's offices on Brandon Avenue, clinicians also met clients for putt-putt golf, outings to parks and in-house gatherings. One event at the main office, a soap-making activity, drew a crowd of clients. Virginia Medicaid records show that East Mental Health received $24,153 for one-on-one training with 149 clients that day, court papers said.

East Mental Health operated in Roanoke for nearly 11 years before the limited liability company announced Oct. 10 it had "permanently closed."

Its client load had reached 300 people at times with an estimated 100 employees, court papers said. It drew clients exclusively from the greater Roanoke region, Overbeck said. East Mental Health also had a Rocky Mount office, which was searched like the Roanoke office by investigators in early 2015.

To justify the searches and the collection of employee email, investigators filed affidavits that were unsealed last week, the first significant batch of case records made public about the investigation. An employee lawsuit had made public the overbilling allegations; that suit is on hold while four former East Mental Health employees who filed it as a whistleblower action work to replace their lawyer, who withdrew from the case after East Mental Health closed.

When the agency closed nearly two months ago, following the loss of its Medicaid funding, it offered clients guidance on how to receive care from similar businesses in the area. Thomas Spurlock, a Roanoke Valley advocate for the mentally ill, said he personally regretted the disruption caused by East Mental Health's closing. He didn't know how many of the former East Mental Health clients have new caregivers, he said.

Medicaid has suspended funding to East for mental health support services and psychosocial rehabilitation, but Medicaid officials did not respond to questions about why.

Virginia Medicaid paid East Mental Health a total of $29.7 million from July 2007 to Oct. 21, 2014, during which time it was the second-highest-paid provider of mental health support services in Virginia. The period of alleged wrongdoing is shorter, at slightly more than six years, and ran until early 2015. The amount of the alleged fraud wasn't given in the 2015 records.

The highest-paid provider during the same time frame was a company with a similar-sounding name, East Health Services, operated by Carrie East, Dean East's wife. It received $55.4 million, court papers said.

East Health Services is a separate company with no past or present affiliation with East Mental Health Services, said Thomas Cullen, an attorney for East Health Services. Cullen added that to his knowledge, East Health Services, which sometimes goes by the name EHS Support Services, is not under federal investigation.


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