Addiction Treatment Fraud: Reporting Billing and Controlled Substance Violations
Addiction treatment fraud occurs when a facility bills Medicare, Medicaid, or federal employee health plans for treatment that was not provided, not documented, or not medically necessary, or when it mishandles controlled substances. Both create False Claims Act liability, and insiders who report can recover 15 to 30 percent.
$2 million False Claims Act settlement with Recovery Centers of America
What this fraud looks like from the inside
Substance use disorder treatment has grown quickly, funded heavily by federal programs. The billing rules are detailed and the patient population is unlikely to complain, which is a combination that produces fraud.
- Billing for individual therapy sessions that were delivered in a group or not at all
- Documentation created after the fact to support claims already submitted
- Treatment provided by staff without the required credentials or supervision
- Excessive or medically unnecessary urine drug testing
- Patient brokering and kickbacks for referrals into treatment
- Extending residential stays beyond medical necessity to keep billing
- Controlled substance diversion, missing inventory, and recordkeeping failures
Controlled substance violations create parallel exposure
Treatment facilities dispense controlled substances, which places them under the Controlled Substances Act and Drug Enforcement Administration oversight. Failures in dispensing practice, inventory, and recordkeeping carry their own liability.
When a facility both mishandles controlled substances and bills federal programs for deficient care, the two theories reinforce each other. That combination is what drove the case our attorneys resolved.
A case we handled
Our attorneys represented the whistleblower in a False Claims Act case against Recovery Centers of America that settled for 2 million dollars, announced by the United States Attorney for the Eastern District of Pennsylvania.
The government alleged that DEA audits revealed unlawful dispensing practices, missing controlled substances, and recordkeeping failures at RCA facilities in Pennsylvania and Maryland, and that RCA billed the Federal Employees Health Benefits Program and Medicaid for treatment services not properly provided or documented.
The relator was a former Outcomes Supervisor at the company’s King of Prussia headquarters. She received 230,000 dollars as her share, and separately settled an FCA anti-retaliation claim for 450,000 dollars plus costs and fees.
Who reports these cases
The people who see this are the people who document it. Clinical directors, outcomes and quality staff, nurses, counselors, billing and intake staff, and pharmacy technicians hold the records that show the gap between what was delivered and what was billed.
Why this concentrates in Pennsylvania and New Jersey
Southeastern Pennsylvania and southern New Jersey carry one of the heaviest concentrations of substance use disorder treatment capacity in the country, built out through the opioid crisis with substantial federal and state funding behind it.
Philadelphia, Bucks, Montgomery, and Delaware counties host residential facilities, detox units, intensive outpatient programs, and sober living operators, many owned by multi-state operators or private equity. Camden and Burlington counties in New Jersey mirror it. The Kensington neighborhood of Philadelphia in particular has drawn treatment infrastructure and, with it, patient brokering activity that has been the subject of federal enforcement.
Rapid growth funded by federal programs, a patient population unlikely to complain, and detailed billing rules is a combination that reliably produces fraud. It is also why the Eastern District of Pennsylvania has been active in this area.
The Recovery Centers of America case in detail
Our attorneys represented the whistleblower in a False Claims Act case that settled for 2 million dollars, announced by United States Attorney David Metcalf for the Eastern District of Pennsylvania.
The government alleged that audits and investigations by the Drug Enforcement Administration revealed unlawful dispensing practices, missing controlled substances, and recordkeeping failures at RCA facilities in Pennsylvania and Maryland between 2019 and 2024. Separately, from 2017 through 2019, RCA allegedly billed the Federal Employees Health Benefits Program and Medicaid for treatment services that were not properly provided or documented.
The relator was a former Outcomes Supervisor at the company headquarters in King of Prussia, Pennsylvania. The matter was handled by Assistant United States Attorneys Peter Carr and Charlene Keller Fullmer with the DEA, the HHS Office of Inspector General, and the OPM Office of Inspector General.
She received 230,000 dollars as her share and separately settled a False Claims Act anti-retaliation claim for 450,000 dollars plus litigation costs and attorney fees.
Frequently asked questions
I work at a treatment center and the notes do not match the sessions. Is that fraud?
It can be. Billing for services not rendered as documented is a classic False Claims Act theory. What matters is whether claims for federal payment were submitted based on that documentation, and whether the practice was knowing rather than isolated error.
Does this apply if the facility bills commercial insurance?
The False Claims Act covers federal money, including Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program. Purely commercial billing falls outside it, though many facilities bill both.
What about patient brokering?
Paying for patient referrals into treatment implicates both the Anti-Kickback Statute and the Eliminating Kickbacks in Recovery Act. Claims resulting from those referrals are false claims.
I was fired after raising concerns. Do I still have a case?
Yes, and you may have two. The qui tam claim addresses the fraud, and a separate retaliation claim under section 3730(h) provides reinstatement, double back pay, and attorney fees. In our RCA matter the retaliation settlement exceeded the relator share.
The attorneys who handle these cases
Related reading
Talk to a whistleblower attorney before you report
A conversation costs nothing and is confidential. We will tell you honestly whether what you have describes a case, and what the first-to-file rule means for your timing.