May 31, 2016

The state and federal government have reached a $1.5 million joint settlement with a former Connecticut group home operator to resolve allegations that the company submitted claims paid by Medicaid for interest expenses that were not allowable under the state's cost reporting guidelines, Attorney General George Jepsen said today.

REM Connecticut Community Services, Inc. (REM) entered into contracts with the state of Connecticut – including the Departments of Developmental Services (DDS) and Children and Families (DCF) – to operate group homes that provided residential and day services to the intellectually disabled and to at-risk youth. REM operated group homes in the state under the contracts at issue from July 2007 until December 2014. REM is no longer operating group homes in Connecticut.

The state and federal government alleged that REM reported certain interest costs as allowable costs in its annual cost reports that were not allowable under the state's Cost Standards, which are set by the state Office of Policy and Management and establish criteria to determine the types of costs state agencies will pay for under purchase-of-service contracts that reimburse provider costs. The state and federal government alleged that the Cost Standards allow only for submission of interest costs incurred on loans to buy capital assets or on lines of credit used to pay for contracted services when a provider experiences gaps in its cash flow.

The state and federal government alleged that the reported interest expense included interest incurred by REM's parent company due to its acquisitions and other financial restructuring and that, as a result of these reports, REM received overpayments that it was not entitled to receive from the state's Medicaid program. REM has denied the allegations.

Per the settlement agreement, REM will make a cash payment of $310,975 to the state and federal government and will forfeit $1,189,025 in funds the state withheld paying REM during the pendency of the investigation. The state and federal government will equally split the settlement proceeds.

"My office is committed to protecting Medicaid and other state healthcare programs as well as the taxpayers who fund them, and I'm pleased that we have reached a resolution to this case," said Attorney General Jepsen. "I appreciate the continued coordination and partnership with our client agencies and our law enforcement partners to ensure that our most vulnerable citizens as well as our taxpayer interests are protected."

Attorney General Jepsen thanked the United States Attorney's Office for the District of Connecticut and the United States Department of Health and Human Services Office of the Inspector General-Office of Investigations for their assistance and coordination in this case.

"The Department of Developmental Services is grateful to the Attorney General's office for its work in uncovering the billing irregularities in this case," said Morna Murray, Commissioner of DDS. "While we support our private provider network and value their services, DDS will remain vigilant that reimbursable costs meet our state cost standards and thus fulfill our obligation, on multiple levels, to serve the best interests of individuals with disabilities."

Department of Social Services (DSS) Commissioner Roderick L. Bremby said, "This action to resolve inappropriate billing is another example of the need for strong quality assurance and program integrity oversight by state and federal agencies. DSS greatly appreciates the work of the Attorney General's Office and our other partners in the investigation and resolution of this matter." DSS is the administering state agency for Medicaid.

Today's action is part of a larger effort by the State of Connecticut's Interagency Fraud Task Force, which was created in July 2013 to wage a coordinated and proactive effort to investigate and prosecute healthcare fraud directed at state healthcare and human service programs. The Task Force includes a number of Connecticut agencies and works with federal counterparts in the U. S. Attorney's Office and the U.S. Health and Human Services, Office of Inspector General – Office of Investigations. For more information about the Task Force, please visit www.fightfraud.ct.gov.

Anyone with knowledge of suspected fraud or abuse in the public healthcare system is asked to contact the Attorney General’s Antitrust and Government Program Fraud Department at 860-808-5040 or by email at ag.fraud@ct.gov; the Medicaid Fraud Control Unit in the Office of the Chief State’s Attorney at 860-258-5986 or by email at conndcj@ct.gov; or the Department of Social Services fraud reporting hotline at 1-800-842-2155, online at www.ct.gov/dss/reportingfraud or by email at providerfraud.dss@ct.gov.

Assistant Attorney General Richard Porter, Forensic Fraud Examiner Dave Boucher and Assistant Attorney General Michael Cole, chief of the Antitrust and Government Program Fraud Department, assisted the Attorney General with this matter.

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