State Senator Anthony Cannella (R-Ceres) today announced that SB 1339, legislation to reduce fraud in California’s Drug Medi-Cal (DMC) outpatient treatment program has been signed into law by Governor Jerry Brown. The legislation was authored by Cannella in direct response to a yearlong investigation by CNN’s Special Investigations Unit and the Center for Investigative Reporting (CIR), which uncovered a widespread “rehab racket” in the DMC program, allowing fraud and abuse.
“The Drug Medi-Cal treatment program provides important services to some of our most vulnerable citizens. This new law will crack down on those bad actors taking advantage of a program that is looking to give people a second chance,” said Cannella. “I am pleased the Governor has signed SB 1339 to provide greater safeguards to protect taxpayers, people in need of rehabilitative services, and honest clinics that place patients over profits.”
In the 2013 report by CNN and the CIR, undercover reporters witnessed a Los Angeles drug and alcohol treatment center that received DMC funds accept fewer than 30 people in one operating day. Records revealed that the center billed the state for 179 patients that day, which was paid using taxpayer dollars. The investigation led to an audit which resulted in the suspension of 43 clinics.
In August, the State Auditor’s office released a report confirming widespread fraud in the program. The audit discovered $93.7 million in authorized payments that were potentially fraudulent and 323 reimbursement payments amounting to more than $10,000 for deceased beneficiaries.
This year’s budget created the standard for fraud prevention by designating a categorical risk for the owner and anyone with a 5% interest in a DMC facility. When SB 1339 goes into effect, it will extend current law to the officers and executive director of non-profit DMC providers and applicants. It will also authorize the Department of Health Care Services to implement consistent fraud prevention standards throughout the DMC program.