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Attorney General: Mental health clinics in Lynn and Malden offered substandard care

South Bay Mental Health Center (SBMHC) faces allegations of fraudulently billing the state’s Medicaid program, MassHealth, for providing services by unlicensed staff in its clinics, including its Lynn and Malden locations.

Massachusetts Attorney General Maura Healey said the center, which operates 17 clinics in the Bay State, provided substandard care to vulnerable patients and billed the state for its inadequate services.

The AG’s Office claimed all of the clinics had gaps in licensing and supervision of its therapists since 2009. While many SBMHC employees performed mental health services, they lacked degrees in social work and were not license-eligible, the complaint filed in U.S. District Court said. Instead, some had degrees in expressive and creative arts therapy, and counseling.

For the past eight years, MassHealth and its contracted managed care entities paid SBMHC more than $123 million for outpatient services, such as psychiatric diagnostic evaluations and psychotherapy, Healey said. The AG’s Office estimates that much of the billing was based on fraudulent claims for services rendered by unlicensed staff to more than 30,000 MassHealth members.

“MassHealth members deserve competent treatment from qualified individuals, and our office will continue to take action in order to remove these significant barriers to accessing critical mental health care in our state,” Healey said in a statement.

The AG’s investigation began after a whistleblower lawsuit was filed by a former SBMHC employee in the U.S. District Court for the District of Massachusetts.

Healey’s investigation revealed that SBMHC had a pattern of employing unlicensed, unqualified, and unsupervised staff at its mental health facilities in violation of MassHealth regulations. The complaint alleges that submitting those claims was a violation of the Massachusetts False Claims Act.

The complaint was filed against SBMHC and Peter J. Scanlon, who founded and owned the company until 2012. The complaint also names HIG. Growth Partners LLC and HIG. Capital LLC, which created Community Intervention Services (CIS) to acquire SBMHC from Scanlon, as well as co-founder and CEO of CIS, Kevin P. Sheehan.

The AG’s Office alleges that HIG, CIS, Scanlon, and Sheehan knew that SBMHC was providing services in violation of regulatory requirements and did not bring SMBHC operations into compliance or make any attempts to repay the money owed to MassHealth, as required by law. HIG allegedly cited the large profit margins as a reason to acquire the company, Healey said.

Prosecutors are seeking triple damages, civil penalties, and interest.

Mike Pelletier, president and chief operating officer at South Bay Community Services, declined to be interviewed.

In a statement, the company said the allegations are untrue and they intend to make their case in court.

“We remain focused on the well-being of our consumers and employees,” the statement said. “Our daily operations have not been affected, and we will continue to provide the best possible behavioral health services to those who need it most in the New England area.”

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