Record Settlement for Allegedly Deficient Health Services – The National Law Review

Thursday, October 28, 2021

In a Press Release issued on October 14 2021 by the Office of Massachusetts Attorney General Maura Healy, a potentially groundbreaking settlement was announced. Below is an excerpt from the release, followed by our takeaways.

“In the largest settlement of its kind, a private equity (PE) firm and former executives of South Bay Mental Health Center, Inc. (SBMHC) have agreed to pay $25 million for allegedly causing fraudulent claims to be submitted to the state’s Medicaid Program, known as MassHealth, for mental health care services provided to patients by unlicensed, unqualified, and improperly supervised staff members at clinics across the state.

This 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 itself has agreed to pay to resolve fraud allegations involving health care portfolio companies. It is also the biggest Massachusetts-only Medicaid Fraud settlement.

“It’s vital that people who need mental health services receive treatment from qualified individuals,” said AG Healey. “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 former SBMHC employee against SBMHC, Peter J. 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 (CIS) to acquire SBMHC from Scanlon), and Kevin P. Sheehan (CEO of CIS).

SBMHC has operated mental health facilities across the state, including in Attleboro, Brockton, Cape Cod, Chelsea, Dorchester, Fall River, Lawrence, Leominster, Lowell, Lynn, Malden, Pittsfield, Plymouth, Salem, Springfield, Weymouth, and Worcester.

The AG’s Office alleged that the clinics named in the complaint suffered significant gaps in licensing and supervision of therapists during the relevant time period. The AG’s 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. According to the amended complaint filed by the AG’s Office and the whistleblower, by submitting fraudulent claims to MassHealth for mental health services provided by unlicensed, unqualified, and unsupervised …….


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