Behavioral Health Compliance Under Scrutiny: Recent Enforcement Actions and Lessons Learned

September 8, 2025 | Posted by : Picture of CJ Wolf

CJ Wolf

compliance, whitepaper, healthcare fraud, fraud, behavioral health, Compliance Enforcement

According to the National Alliance on Mental Illness (NAMI)1, there has been a significant increase nationally in the number of individuals suffering from mental health conditions. Some of the numbers NAMI reports include the following:

1 in 5 U.S. adults experience mental illness each year
1 in 20 U.S. adults experience serious mental illness each year
1 in 6 U.S. youth aged 6-17 experience a mental health disorder each year
50% of all lifetime mental illness begins by age 14, and 75% by age 24
Suicide is the 2nd leading cause of death among people aged 10-14

Given these numbers, it should come as no surprise that the offering of mental health therapy and services is also on the rise. And in the compliance world, whenever there is an increase in the number of services provided and billed for, there is often an accompanying increase in auditing, monitoring and enforcement.

Mental health services are definitely seeing an increase in compliance oversight and enforcement. Some of the recent cases are highlighted below.

Substance Abuse Company Woes

Many mental and behavioral health providers offer services to those struggling with substance abuse.

Two individuals associated with a North Carolina-based substance abuse treatment company pleaded guilty to their roles in a scheme to pay kickbacks to Medicaid patients. One of the individuals was the Compliance Director and the other was the office manager. Both admitted their roles in a scheme involving the payment of kickbacks to patients.

Court documents showed these individuals used Medicaid reimbursement funds to purchase more than $1 million in gift cards. The gift cards were then routinely handed out to patients on a weekly basis to incentivize the patients to show up for services. Over four years, those involved in the scheme routinely paid patients based on the number of days per week that the patients showed up to receive services. Every day a patient showed up money was paid as a kickback.

In addition, those involved made false statements to Medicaid auditors, and they created false documents to support their crimes. They also received kickbacks from a lab company that they hired for drug testing services for their patients.

The U.S. Attorney’s Office said, “These two fraudsters not only targeted federal tax dollars but also took advantage of vulnerable individuals who were trying to turn their lives around. The more kickbacks that they paid to vulnerable addicts, the more they were able to help the company steal from Medicaid. This case leaves no doubt: Medicaid kickback thieves face serious consequences.”

Compliance programs should regularly audit or monitor financial relationships that could potentially violate the anti-kickback statute. Tools like Healthicity’s Compliance Manager can assist compliance professionals in developing policies as well as checklist for auditing and monitoring such activities.

Psychotherapist Pays Over $1 Million

A Licensed Clinical Social Worker (LCSW) from Virginia was convicted of criminal health care fraud and agreed to pay a settlement total of $1,201,174.55 which includes restitution, forfeiture, and fines.

The court documents demonstrated that during a five-year period, the social worker knowingly submitted fraudulent claims for reimbursement to Virginia Medicaid and Medicare for services that weren’t rendered. These included claims that billed for more than 16 hours in services in one day or that used billing codes for more complex services with higher rates than the services that were provided. To support his fraudulent claims, the provider used false psychotherapy progress notes reflecting the patients’ supposed receipt of services. He pled guilty to health care fraud and was sentenced to three months in prison.

Psychiatrist Pays to Resolve False Claims Act Allegations

An Oklahoma psychiatrist agreed to pay $173,143 to the State of Oklahoma to settle a lawsuit alleging he knowingly submitted false claims to the Oklahoma Medicaid program, SoonerCare.

The government alleged the doctor upcoded claims for evaluating and managing patients and submitted them to SoonerCare for payment. The settlement also resolved allegations that the psychiatrist caused his agents and employees to fabricate records supporting the false claims after the Oklahoma Health Care Authority notified him, they intended to audit his patient records.

The investigation was directed by the Attorney General’s Medicaid Fraud Control Unit.

Missouri Psychiatrist Pays Over $500,000

The psychiatrist agreed to pay this amount to settle allegations that he violated the False Claims Act. The government alleged that for over four and a half years, the doctor falsely indicated to both Medicare and Missouri Medicaid that he provided face-to-face psychotherapy to patients, including by submitting false claims for payment when he was out of town and for services that were provided by other practitioners.

The total amount of the settlement was $501,556. The amount was determined by doubling the amount of dollars owed in restitution which was $250,778 in restitution.

The doctor pleaded guilty to making false statement in federal health care related matters and admitted submitting claims for payment to Medicare, Medicaid and private health insurers in which he falsely claimed to have performed in-person services when he was out of Missouri or out of the country.

The HHS OIG special agent in charge said, “Holding health care professionals accountable for submitting false claims for financial gain is crucial for maintaining public trust and ensuring that critical resources are appropriately utilized. HHS-OIG, the U.S. Attorney’s Office, and our law enforcement partners will continue to collaborate our efforts to protect the integrity of the Medicare and Medicaid programs.”

Psychotherapy Add-on Codes and $2.75 Million Settlement

A California psychiatric services company agreed to pay $2.75 million to resolve allegations that they violated the False Claims Act by submitting false claims to government healthcare payors for certain psychotherapy services.

The government alleged that during a seven-year period, the company and its healthcare providers inappropriately submitted claims to government payors using Current Procedural Terminology (CPT^®) codes 90833 and 90836. These codes are “add-on” codes and are intended to be used when psychotherapy services are performed in conjunction with an evaluation and management visit, and which require specific documentation.

The alleged fraud happened when the healthcare providers either had not provided the services described by those codes or had failed to sufficiently document that such services had been provided.

Training health care providers on proper coding and billing rules as well as best practices in medical documentation standards are important proactive activities compliance professionals should perform. Fortunately, tools like Healthicity’s Compliance Manager can assist in training offerings as well as systems to roll out and track completion of such training.

The U.S. Attorney involved in the case said, “Providers that participate in federally funded health care programs must abide by the rules and submit proper claims for care that was in fact rendered. To do otherwise is to drain resources from our fellow Americans who rely on Medicare and other government programs. This settlement sends a clear message that we will continue to investigate and pursue any entity that fraudulently seeks to increase profits at taxpayers’ expense.”

Psychiatric Medication Management

A behavioral health practice in Connecticut entered into a civil settlement agreement with the federal and state governments and agreed to pay more than $614,000 to resolve allegations that they violated the federal and state False Claims Acts by causing false claims to be submitted to Medicare and Connecticut Medicaid.

The principal person involved is licensed as an Advanced Practice Registered Nurse (APRN) in the practice which specialized in psychiatric medication management. The federal and state governments alleged that during a four-and-a-half-year period practice violated the federal and state False Claims Acts by improperly billing Medicare and Connecticut Medicaid for services not rendered, the services of an unlicensed provider, and for upcoded or duplicative claims.

This included claims billed by the APRN for impossible numbers of hours per day; when he was not physically present, including when he was out of the country, on vacation, or not in the office; for patients who were hospitalized or deceased; and for having a staff member call in a medication refill without the APRN interacting directly with the patient or the patient’s medical record. The medical practice also allegedly created false medical records or had no medical records for such visits.

The practice was also accused of billing for services to patients who were seen by an individual with no qualified health professional license or medical qualifications. Additionally, the government claims they also caused false claims to be submitted for both evaluation and management visits and psychotherapy during the same visit when, in fact, only evaluation and management services were provided during that visit.

The APRN and practice have entered into a Suspension Agreement and Consent Order with the Connecticut Department of Social Services (“DSS”) to be suspended from participating in all programs administered by DSS for two years, and to not reapply for reinstatement in Connecticut Medicaid or any state-funded program thereafter.

Conclusion

All of these enforcement actions related to behavioral health have been announced within the last four to five months. This demonstrates the focus that enforcement agencies have on these behavioral health types of services.

Compliance professionals should evaluate their risks associated with behavioral health services. They should also consider tools, such as Healthicity’s Compliance Manager which can help them manage such risks.

To download this blog post as a pdf, click the button below.