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$25M settlement reached in mental health service scam

Eagle-Tribune - 10/14/2021

Oct. 14—Massachusetts Attorney General Maura Healey has announced the largest settlement of its kind after a private equity firm and former executives of South Bay Mental Health Center agreed to pay $25 million for allegedly causing fraudulent claims to be submitted to MassHealth for mental health services provided by unlicensed, unqualified and improperly supervised staff members across the state.

SBMHC has operated mental health facilities across the Commonwealth, including in Lawrence and Salem.

In a statement, Healey explains that the settlement is the largest publicly disclosed government health care fraud settlement in the nation involving private equity oversight of health care providers, as well as the largest amount a private equity company has agreed to pay to resolve allegations of fraud.

It is also the biggest Massachusetts-only Medicaid fraud settlement, according to Healey.

"It's vital that people who need mental health services receive treatment from qualified individuals," she said. "We took action against these defendants for leaving thousands of MassHealth patients with unlicensed and unsupervised care, while MassHealth paid millions of dollars for fraudulent services. We will go after bad actors who jeopardize people's health and well-being to make a profit."

In January 2018, the AG's Office intervened in a lawsuit initially filed by a whistleblower and a former SBMHC employee against the company, Peter Scanlon (who founded, owned, and served as the CEO of the company until April 2012), H.I.G. Growth Partners, LLC and H.I.G. Capital, LLC (collectively, HIG, which created Community Intervention Services to acquire SBMHC from Scanlon), and Kevin Sheehan (CEO of CIS).

The AG's Office alleged that the clinics named in a legal complaint suffered significant gaps in licensing and supervision of therapists during the relevant time period.

An investigation revealed that SBMHC had a widespread pattern of employing unlicensed, unqualified, and unsupervised staff at its mental health facilities in violation of MassHealth regulations.

Under the terms of the settlement, HIG will pay $20 million, while Scanlon and Sheehan will pay $5 million.

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