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Retreat subject of criminal probe

State confirms an investigation of ‘broad scope’ of Brattleboro psychiatric hospital after years-long crusade by former employee alleging financial improprieties

With additional reporting by Olga Peters and Jeff Potter.

BRATTLEBORO—State officials have launched a criminal probe of the Brattleboro Retreat in the wake of Medicare fraud allegations raised repeatedly by a former employee.

The investigation — first reported by the Associated Press — was confirmed by Vermont Attorney General William Sorrell on Aug. 25.

And documents show that at least some of the state’s concerns arose from the complaints of whistleblower Thomas Joseph, who has alleged millions of dollars of malfeasance at the psychiatric hospital.

“The investigation will be of broad scope,” said Bill Griffin, Vermont’s chief assistant attorney general. “We will look at the information, and decide how to proceed.”

Also in the mix — apparently as an observer at this point — is the Centers for Medicare & Medicaid Services, a federal agency that administers those insurance programs. The Retreat has come under CMS scrutiny several times in recent years.

“CMS is aware of the ongoing investigation and will continue to monitor the situation closely,” spokeswoman Courtney Jenkins wrote in an email. “We will determine if additional action is required once the state’s investigation is complete.”

Retreat administrators are saying little, noting that they were notified of the attorney general’s investigation last week.

“We were not provided any further detail regarding the scope of the investigation, except to say that the attorney general’s office would be contacting our attorneys in due course,” spokesman Jeff Kelliher wrote in a prepared statement.

“The Retreat takes this matter very seriously,” he wrote. “We are fully cooperating with state officials but are unable to comment further at this time.”

Blowing the whistle

The probe comes years after Joseph, who worked for the Retreat from January 2011 to November 2013 as a self-pay collections representative, began complaining of financial wrongdoing at the facility.

Essentially, he alleges that the institution has been keeping government money to which it was not entitled, as well as overcharging patients.

Joseph initially pursued a federal complaint. In an August 2013 letter to a federal prosecutor, Joseph’s attorney at the time, Michael Lesser, summed up his client’s arguments this way:

“The Retreat’s history of management issues and cash shortfalls has been well-document[ed] and led to the Retreat’s intentional and fraudulent billing and accounting practices. Instead of correcting its shortcomings and improving its business practices, the Retreat took a shortcut; it simply generated maximum government funds — through overbilling and accounting tricks — from federal and state government payors and retained overpayments.”

The federal government declined to pursue the matter after an initial investigation. Joseph said this decision not to allocate federal resources to the problem was based on automatically triggered mandated budget cuts due to the federal budget in 2013.

This theory is supported by the Center for Public Integrity, which reported that year that the loss of 400 of its 1,800 employees at the Department of Health and Human Services’ Office of the Inspector General led to the government failing to investigate at least 1,200 complaints of Medicare and Medicaid fraud and abuse.

A judge last summer threw out Joseph’s federal lawsuit.

Joseph had claimed that the Retreat defrauded the government of $11 million between 2005 and 2012, but U.S. District Court Judge William Sessions pointed to a lack of specific evidence and ruled that “[Joseph] provides no facts to indicate that anyone at the Retreat knew about allegedly unlawful retained government funds.”

This week, Joseph said that the $11 million figure is partially based on costs unique to the Retreat and relative to the amount of money it costs to deliver its health care to patients. “The attorneys said we need to recalculate to get the most accurate cost data,” he said.

Joseph found a more sympathetic ear at the state level in Auditor Doug Hoffer, who advanced the case to the Program Integrity division of the Office of Vermont Health Access and to the Attorney General’s Medicaid Fraud Unit.

Hoffer came to his defense in response to an Aug. 28 editorial by the Brattleboro Reformer in defense of the Retreat.

“I think we should let the pros do their job before coming to judgment,” the state auditor responded in a comment on the daily newspaper’s website.

In one of dozens of state documents released via a public records request, Hugh Pritchard — a senior auditor in the state auditor’s office — wrote that “[Joseph’s] allegation is that when the Retreat received an overpayment, rather than return it, they would write off the resultant credit balance in the receivable account.”

“He also alleges that the Retreat deliberately double-billed in order to generate overpayments additional to those that are normally received for various reasons,” Pritchard wrote.

Pritchard added that, “based on [the state auditor’s office’s] very brief and incomplete review of the materials, it appears that there may be some substance to the allegations. We believe that the matter merits investigation, though the extent to which it has already been investigated is not apparent from the information received.”

The auditor’s office sought additional state resources to look into the claims. On May 1, Pritchard wrote to Steven Monde, an assistant attorney general with the Medicaid fraud unit: “I have not been through the entire set of documents that Thomas Joseph supplied, but I did see some specific instances that seemed to me to warrant investigation.”

Pritchard then highlighted two examples of possibly questionable billing. In both cases, the Retreat had reversed a patient’s expense.

For instance, an expense of $1,239 was listed but did not match any invoices. The Retreat wrote this expense off three years later as a “reversal discount from insurance,” a practice that is “at the heart of Joseph’s allegation,” Pritchard wrote.

In his second example, Pritchard noted a series of patient expenses for which Medicaid reimbursed the Retreat. A portion of these expenses were written off because Medicaid did not pay the entire bill — a practice he deemed proper — but an additional reimbursement caught Pritchard’s attention.

“It is a receipt applied to the wrong patient or the wrong charges,” he wrote. “In that case, it becomes difficult to disentangle what happened — which is a poor way to manage accounts receivable but a good way to disguise malfeasance.”

Notes from a May 5 phone conversation state that an official from the Vermont Department of Health was starting work on a similar allegation regarding the Retreat.

Pritchard also, in a March document, detailed his review of the Retreat’s finances from 2011 to 2013 and made a theoretical connection to possible fraud.

Some evidence “suggests financial pressures, although it is not definitive evidence,” Pritchard wrote.

“A very brief and incomplete review of the material presented suggests that all three elements of the ‘fraud triangle’ were in place,” he added. “Financial pressures forcing the Retreat to choose which of its obligations to meet; an opportunity to acquire funds by writing off credit balances; and a conjectural rationalization — that if payers do not request refunds then they do not want or deserve them.”

The exact nature of the attorney general’s investigation — and how much it utilizes information from Joseph — is unclear. The AP has reported that state documents variously credit Joseph and cast doubt on his claims.

Griffin said only that, in a criminal investigation, the attorney general’s office determines the potential for a criminal charge and from there “matches activity to the statutes.”

‘Validation’ of allegations

Joseph, in an interview last week, praised the Vermont auditor’s office and said it was the first agency to take him seriously. The state investigation, he believes, “definitely gives my core allegations validation.”

Asked what result he was seeking, Joseph replied, “I want the Brattleboro Retreat to be held accountable for their ghastly behavior.”

News of the attorney general’s investigation provoked varying reactions on Tuesday. A spokesman for Gov. Peter Shumlin’s office declined comment, referring questions to the attorney general’s office.

State Rep. Ann Pugh, D-South Burlington and chairwoman of the House Human Services Committee, was reluctant to draw any conclusions from the fact that the Retreat is under investigation.

“I have really no ability to comment on what it is and what it isn’t,” Pugh said.

For Pugh, it would be “an exercise in guesswork” to predict whether her committee might act on the matter — or seek more information — when the Legislature reconvenes in January.

But she did say that “clearly, the role of the Human Services Committee is to be there to shine a light, to understand what’s going on, to see what’s working and what isn’t working and what needs to be fixed.”

Pugh added that “the Retreat is an essential element in our mental health system [...] so any trouble the Retreat may be in is concerning.”

Rep. Mike Mrowicki, D-Putney, said the Human Services Committee — on which he also serves — recently held a hearing on mental-health delivery issues in Vermont.

“The money that’s spent on mental health services — we have to provide due diligence and oversight,” he said.

But Mrowicki also lauded Retreat administrators.

“I’m confident that the funds we’re spending are buying the services we hope for,” Mrowicki said. “The Retreat has been very open about inviting legislators and other stakeholders in to see what’s happening there. [...] I think there’s a lot of good work going on.”

Rep. Anne Donahue, R-Northfield, a longtime advocate on mental-health issues, said it is “always important to recognize that an investigation is just that: There may be smoke, but we don’t know for sure whether there is a fire yet.”

“However, these are very clearly serious allegations, and there appear to be enough issues identified to warrant a significant investigation,” said Donahue, who serves on the House Health Care Committee and served on the now-defunct Joint Mental Health Oversight Committee.

Donahue said she believes the Retreat has been “trying to preserve relevance and, indeed, its survival, in a time when integration of health care — not freestanding psychiatric institutions — is state-of-the-art.”

The facility’s financial and regulatory issues, she added, “continue to put Vermont in a very difficult situation, when a critical partner is at risk. We are in an ongoing crisis for adequate acute care hospital space, with continued long waits in emergency rooms for admission despite the opening of [Vermont Psychiatric Care Hospital].”

“The Retreat has been forced to weigh financial issues heavily in its attempts to survive, and hopefully fraud is not a route it chose towards that end,” Donahue said.

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Originally published in The Commons issue #321 (Wednesday, September 2, 2015). This story appeared on page A3.

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