A private equity firm and former executives of South Bay Mental Health Center Inc., which runs a clinic in Attleboro, have agreed to pay $25 million to settle claims they defrauded the state’s Medicaid program, Attorney General Maura Healey said Thursday.
The agreement is the largest publicly disclosed government health care fraud settlement in the nation involving private equity oversight of health care providers, Healey said.
It is also the largest amount of money a private equity company has agreed to pay to resolve fraud allegations involving health care portfolio companies of its kind, she said.
The company was alleged to have submitted fraudulent claims to MassHealth for mental health care services provided to patients by unlicensed, unqualified and improperly supervised staff members.
“It’s vital that people who need mental health services receive treatment from qualified individuals,” Healey said in a statement.
“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,” she said.
The AG’s office intervened in January 2018 in a lawsuit initially filed by a whistleblower and former South Bay employee.
In addition to a clinic at 607 Pleasant St. in Attleboro, the company has operated mental health facilities in Brockton, Chelsea, Dorchester, Fall River, Lawrence, Leominster, Lowell, Lynn, Malden, Pittsfield, Plymouth, Salem, Springfield, Weymouth, Worcester and on Cape Cod.
The AG’s office alleged that the clinics named in the complaint had significant gaps in licensing and supervision of therapists during the relevant time period in violation of MassHealth regulations.
When it intervened in the lawsuit in January 2018, the AG’s office said the Attleboro clinic had 125 employees and only two licensed supervisors. The clinic could not possibly have provided the necessary supervision to all of the other unlicensed clinicians, the AG’s office said.
The investigation allegedly revealed that the company had a widespread pattern of employing unlicensed, unqualified, and unsupervised staff at its mental health facilities.
According to an amended complaint filed by the AG’s office and the whistleblower, the company violated the Massachusetts False Claims Act.
The defendants in the lawsuit were 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.
The limited liability corporations were known collectively as HIG, which created Community Intervention Services to acquire South Bay from Scanlon and Kevin P. Sheehan, CEO of Community Intervention Services.
The settlement resolves allegations that the equity firm and former executives knew South Bay was providing unlicensed, unqualified and unsupervised services and failed to adopt recommendations to bring the company into compliance with regulations, the AG’s office said.
In February 2018, South Bay agreed to pay $4 million for its role in the scheme and entered into a five-year compliance program overseen by an independent monitor to ensure that its clinics came into full compliance with MassHealth regulations, the office said.