On June 26, the Department of Justice announced an $18,500,000 settlement agreement with NUWAY Alliance (NUWAY), a substance use disorder treatment clinic, arising out of medical necessity and kickback allegations. The complaint, filed first in 2021 by a whistleblower and unsealed last month, alleges that NUWAY and its CEO, David Vennes, engaged in a scheme to induce Medicaid patients to participate in NUWAY’s intensive outpatient treatment.
The underlying allegations center around free housing and free food conditioned on participation in NUWAY’s intensive outpatient (IOP) treatment services. If a patient attended a required number of treatment hours per week, NUWAY would pay third parties who housed the patients in non-clinical sober homes up to $550 for housing and food for the patient. Patients who stopped attending treatment immediately lost their housing support. The complaint notes NUWAY marketed this housing support in the community and the free housing offer was widely known among the patients that selected NUWAY for their services.
The complaint alleged that this offer led to clinically unnecessary outpatient care. Certain patients received higher levels of outpatient care than necessary so as to meet the weekly treatment requirements to get the free housing. Affidavits to the complaint suggest many patients did not require that level of outpatient care when discharged from inpatient care. In addition, the complaint also noted the reverse. In other words, many of the patients receiving IOP care from NUWAY were actually underserved, selecting this treatment option for free housing/food when another treatment program would have provided more appropriate levels of care to the patient.
DOJ also viewed the free housing offer as an unlawful kickback under the Federal Anti-Kickback Statute (AKS). The complaint described the housing offer as conditioning free services on their participation in NUWAY’s treatment services. As the AKS can apply to anyone including patients, remuneration to the patients selecting NUWAY’s treatment program could also constitute a kickback. Patient offers may also constitute violations of the Civil Monetary Penalties Law’s beneficiary inducement prohibitions, although these were not at the center of this case. That said, this settlement serves as a reminder for the potential of such incentive programs to hurt healthcare providers offering them. Experienced counsel can help with advisement on these programs.
The whistleblower was an executive with a competing company. He discovered the alleged conduct when he saw former patients that their team believed needed a different level of care being admitted to the NUWAY IOP treatment. It is yet another reminder to healthcare providers that fraud can be uncovered by both insiders and outsiders they interact with, particularly when such factual allegations were successful, as they appear to have been here. The complaint alleges that as a direct result of these offered incentives, NUWAY’s revenues grew from just over $1 million in 2005, before they began to offer the free housing incentive, to over $38 million in 2019 alone.
The authors thank McGuireWoods’ summer associate, Zachary Abbas, for his assistance in preparing this legal alert. He is not licensed to practice law.