Skip to main content

Health Net looking for fraud among treatment centers

January 28, 2016

Health Net, a large California insurer, is investigating several residential and outpatient treatment centers for potential fraud. Among other things, the investigators are examining referral practices; medical necessity of services; and whether the providers failed to collect necessary out-of-pocket payments from patients.

In some cases, Health Net is suspending the providers’ reimbursements until documentation is evaluated. Experts say the investigation is aggressive and unusually broad, striking more than a dozen providers with the operations of perhaps hundreds of others potentially being questioned.

Patient payments

There are right and wrong ways to handle patient payment obligations. Experts recommend being above board when collecting copayments or deductibles and maintaining good documentation of the collection practices. There is no law in California that obligates providers to collect such payment from patients up front, and most providers typically bill after the services are delivered. Providers also can forgive unpaid bills in situations of financial distress, for example.

“We don’t agree that Health Net is right when it makes sweeping allegations that ignore providers’ right to discount patient share of costs, such as when patients are genuinely unable to pay,” says Harry Nelson, founding partner at Nelson Hardiman LLP, a Los Angeles-based healthcare law firm that represents substance use disorder facilities.

Even so, providers that routinely turn a blind eye to out-of-pocket payments—often in their efforts to convert more patient admissions—risk the consequences of having to return reimbursements paid by insurers because the action could be seen as a breach of contract. Failing to collect the patient’s portion could also incentivize the provider to tack on that uncollected amount to the claim ultimately submitted to the insurer, misrepresenting the actual charges.

“Under the law of some states, the insurer may be able to support a fraud cause of action, although few of these cases are prosecuted criminally, because most of the time, insurers only care about getting their money back or not having to pay as-of-yet unpaid claims,” Nelson says.

Fighting fraud

Throughout the healthcare system at large, fraud strikes are typically collective efforts among government agencies and commercial insurers. Nelson Hardiman experts say that treatment centers in California have seen a period of relatively light enforcement of compliance rules, prompting the insurers to expand their own fraud investigations.

Nelson says the Health Net actions might serve as a warning to the entire community of behavioral health providers.

“There has been explosive growth in the industry, thanks in part to insurance reimbursement available in the wake of the Mental Health Parity Act of 2008 and the Affordable Care Act, which mandated the inclusion of substance abuse treatment in the definition of ‘minimum essential coverage,’” he says.  “Health Net and other insurers have been hemorrhaging money and have been looking for more aggressive strategies to stop perceived abusive billing and deter others.”

Health Net investigators are also examining how certain patients who don’t appear to live in the state signed up for health insurance coverage in the first place and have alleged possible kickbacks to insurance brokers. Experts say treatment centers must pay careful attention to compliance requirements and watch for increased attention from regulators.

When contacted via email, a Health Net spokesperson said the organization cannot comment on “matters involving litigation.”

Also of note: Centene is currently looking to buy Health Net for $7 billion. The merger is now being reviewed by regulators.

Back to Top