Private equity-owned SUD clinics settle false claims allegations

In July, four Virginia substance use disorder (SUD) treatment clinics owned by Crossroads Treatment Centers – a private equity-owned chain – agreed to pay $863,934 to settle allegations by Virginia and the U.S. Department of Justice that from 2016 through mid-2023 the clinics submitted false and fraudulent claims to the Medicaid program in violation of the False Claims Act.[1]

The clinics allegedly submitted claims indicating that patient meetings involved at least two of the following: a comprehensive medical history, a comprehensive medical examination, and medical decision-making of high complexity. However, according to a DOJ press release, the clinics knew the meetings were regular check-ins that did not meet these criteria.[2]

Crossroads Treatment Centers has been owned by private equity firm Revelstoke Capital Partners since 2014.[3] In 2022, Revelstoke and private equity firm Caisse de dépôt et placement du Québec (CDPQ) announced a recapitalization of Crossroads to support the company’s continued growth.[4] As of July 2024, Crossroads provides substance use disorder (SUD) treatment to over 25,000 patients each month at more than 100 locations across 9 U.S. states.[5]

In recent years, private equity firms have acquired stakes in nearly a third of U.S. opioid treatment programs (OTPs), according to STAT.[6] In March 2024, six U.S. Senators signed letters sent to seven OTP chains, including Crossroads Treatment Centers, as part of a bipartisan investigation into how private equity investment in opioid treatment programs may impact access to and the use of methadone for opioid use disorder (OUD).[7]

In the last four decades, the U.S. Justice Department has recovered more than $75 billion under the False Claims Act, including more than $10 billion since January 2021. In 2023, the U.S. Justice Department recovered nearly $2.7 billion in 543 separate false claims settlements and judgments, including $1.9 billion related to healthcare fraud schemes.[8]

The U.S. Justice Department has identified private equity as a recent False Claims Act enforcement priority. In remarks prepared for the Federal Bar Association this February, one high-level official, speaking of investors such as private equity firms or venture capital firms, said:

These entities may influence patient care by providing express direction for how a provider should conduct their business, or more indirectly by providing revenue targets or other indirect benchmarks intended to prioritize reimbursement.[9]

In a 2021 report, PESP found substantial overlap between activities targeted by the False Claims Act and the profit-seeking behavior exhibited by private equity healthcare owners, i.e., companies may be incentivized to commit fraud in efforts to meet the financial demands of private equity ownership.[10]

Resources

[1] Office of Public Affairs. “Substance Use Disorder Treatment Clinics to Pay More than $850,000 to Resolve Allegations They Knowingly Overbilled Medicaid for Office Visits.” U.S. Department of Justice, July 25, 2024. https://www.justice.gov/opa/pr/substance-use-disorder-treatment-clinics-pay-more-850000-resolve-allegations-they-knowingly.

[2] Office of Public Affairs. “Substance Use Disorder Treatment Clinics to Pay More than $850,000 to Resolve Allegations They Knowingly Overbilled Medicaid for Office Visits.” U.S. Department of Justice, July 25, 2024. https://www.justice.gov/opa/pr/substance-use-disorder-treatment-clinics-pay-more-850000-resolve-allegations-they-knowingly.

[3] Revelstoke Capital Partners. “Revelstoke Invests in Crossroads Treatment Centers,” December 23, 2014. https://www.revelstokecapital.com/news/revelstoke-capital-partners-completes-investment-in-crossroads-treatment-centers/.

[4] Revelstoke Capital Partners. “Revelstoke Capital Partners and CDPQ Announce Significant Investment in Crossroads Treatment Centers.” PR Newswire, January 11, 2022. https://www.prnewswire.com/news-releases/revelstoke-capital-partners-and-cdpq-announce-significant-investment-in-crossroads-treatment-centers-301457764.html.

[5] Crossroads Treatment Centers. “Why Crossroads.” Accessed July 29, 2024. https://www.crossroadstreatmentcenters.com/why-crossroads/.

[6] Lev Facher. “The Methadone Clinic Monopoly: Opioid Treatment Chains Backed by Private Equity Are Fighting Calls for Reform.” STAT, March 19, 2024. https://www.statnews.com/2024/03/19/methadone-clinics-opioid-addiction-private-equity/.

[7] U.S. Senator Ed Markey of Massachusetts. “Senator Markey Leads Colleagues in Bipartisan Investigation into the Role of Private Equity in Restricting Access to Methadone Treatment for Opioid Use Disorder,” March 13, 2024. https://www.markey.senate.gov/news/press-releases/senator-markey-leads-colleagues-in-bipartisan-investigation-into-the-role-of-private-equity-in-restricting-access-to-methadone-treatment-for-opioid-use-disorder.

[8] Office of Public Affairs. “Principal Deputy Assistant Attorney General Brian M. Boynton Delivers Remarks at the 2024 Federal Bar Association’s Qui Tam Conference.” U.S. Department of Justice, February 22, 2024. https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-brian-m-boynton-delivers-remarks-2024.

[9] Office of Public Affairs. “Principal Deputy Assistant Attorney General Brian M. Boynton Delivers Remarks at the 2024 Federal Bar Association’s Qui Tam Conference.” U.S. Department of Justice, February 22, 2024. https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-brian-m-boynton-delivers-remarks-2024.

[10] Eileen O’Grady. “Money for Nothing: How Private Equity Has Defrauded Medicare, Medicaid, and Other Government Health Programs, and How That Might Change.” Private Equity Stakeholder Project, February 2021. https://pestakeholder.org/wp-content/uploads/2021/02/Private-Equity-False-Claims-Act-PESP-022221-.pdf, p. 3.