State explores heightened enforcement of mental health agencies, following alleged fraud by Richfield nonprofit

The state is reviewing its regulatory oversight of dozens of mental health agencies in the wake of allegations that an unlicensed provider defrauded the state's public health insurance program of millions of dollars.

Complementary Support Services, a nonprofit based in Richfield, is accused of billing Medical Assistance for mental health treatment for hundreds of patients without providing adequate supervision by licensed mental health professionals, as well as padding claims with extra hours. The alleged violations began as early as 2007 and have continued to the present, according to a civil complaint filed last month by the U.S. Attorney for Minnesota and State Attorney General Lori Swanson.

As a result of this and other recent fraud reports, the Minnesota Department of Human Services (DHS) has begun exploring whether to license providers that offer mental health therapy for children and adults in their homes and communities.

DHS Inspector General Jerry Kerber said the case underscores the need for closer supervision of mental health services provided in the community and outside of licensed facilities. Currently, more than 200 unlicensed providers in Minnesota offer specialized psychiatric care, independent life skills and other therapeutic services in people's homes, schools and other community settings. Unlike state mental hospitals and other psychiatric facilities, they are not subject to regular audits and on-site reviews.

"These services are wonderful because they are very flexible and because they can be provided in people's own homes. But what makes those services so wonderful and so flexible is also what makes them in some cases more susceptible to fraudulent billing," Kerber said.

An attorney for Complementary Support Services said it denies the allegations but is cooperating with the investigation. "They want to resolve this issue and get back to what they are good at doing — serving their clients," said Priscilla Lord, a Minneapolis attorney.

Prosecutors allege that the nonprofit defrauded Medical Assistance by failing to ensure that in-home mental health therapy was supervised by licensed professionals, as required by state law. Rather than personally reviewing claims for patient care, the agency's president and licensed social worker, Teri Dimond, "batch signed" thousands of documents, or progress notes, that formed the basis of the agency's claims to Medicaid, the lawsuit alleges.

The nonprofit submitted more than 85,000 claims for payment since July 2007, prosecutors say. It serves hundreds of people in more than a dozen counties.

Citing e-mails from employees, prosecutors allege that Dimond signed off on claims without personally reviewing them. "Teri did a mass sign off last night … so I guess they were just done," wrote a staff member in an e-mail. Dimond even instructed one billing specialist to "continue to mass sign off" on progress notes while she was on maternity leave, prosecutors allege.

The lawsuit alleges that Complementary Support Services also illegally billed Medical Assistance for time spent on paperwork rather than patient care, which is prohibited under state law. Employees routinely added 15 minutes of extra record-keeping time for each patient visit, and then attempted to conceal the fraudulent billings, the lawsuit alleges. The nonprofit paid employees commissions based on a percentage of billings within their regions, which gave them an incentive to engage in fraudulent billing practices, the lawsuit says.

Officials declined to disclose the amount of the alleged fraud, except to say that it cost taxpayers millions of dollars.

Complementary Support Services reported revenue of $4.4 million and expenses of $2.9 million in 2013. The nonprofit is "dedicated to assisting individuals and their families with special circumstances to remain in their community, live independently and enjoy life," according to its regulatory filings.

The alleged fraud was first revealed by a whistleblower, William Schwandt, who worked at the nonprofit from 2009 to 2012. Schwandt sued his former employer in 2013 under the federal and state False Claims Act, which allows individuals to bring lawsuits on behalf of the government and share in any recovery.

Schwandt met with state and federal authorities several times over the course of a 2½-year investigation, said his attorney, Justin Cummins of Minneapolis.

"This emphasizes that the government alone cannot be responsible for detecting all the [fraud] in public programs," Kerber said. "We really need to rely on the public to help us. And this case hopefully will show that there is a real incentive for the public to do so."

Chris Serres • 612-673-4308

Twitter: @chrisserres