WASHINGTON – The Justice Department announced today that Allegiance Health Management, Inc., (Allegiance), a post-acute healthcare management company based in Shreveport, Louisiana, and four hospitals owned and operated by Allegiance (collectively, the Allegiance Defendants), have agreed to pay more than $1.7 million to resolve False Claims Act allegations that the Allegiance Defendants submitted, and caused other hospitals to submit, claims for reimbursement from Medicare for services that were not medically reasonable or necessary.

Beginning in 2005, Allegiance entered into arrangements with numerous hospitals located throughout the Southeastern United States to provide Intensive Outpatient Psychotherapy (IOP) services to patients on the hospitals’ behalf. At each of these hospitals, Allegiance established an Inspirations Outpatient Counseling Center at which Allegiance employees and those acting under the direction and control of Allegiance were responsible for, among other things, identifying potential patients, creating patient treatment plans, and performing IOP services. This settlement resolves allegations that at each of the Inspirations Outpatient Counseling Centers, Allegiance provided IOP services to Medicare beneficiaries that did not qualify for Medicare reimbursement because: 1) the patients’ medical condition(s) did not necessitate IOP treatment; 2) the patients’ treatments were not provided pursuant to an individualized treatment plan designed to help individual patients address specific mental health needs and reach achievable goals; 3) the patients’ progress was not being adequately tracked or documented; 4) the patients received an inappropriate level of treatment; or 5) the therapy provided was primarily recreational or diversional in nature, and was not therapeutic.

“The Department of Justice recognizes the value of accessible mental healthcare, but will not tolerate companies that seek to exploit our most vulnerable populations by delivering inappropriate or worthless services” said Acting Assistant Attorney General Chad D. Readler for the Civil Division. “The Department of Justice is committed to holding accountable those who waste taxpayer dollars and place profit above the legitimate needs of patients.”

“Federal funding for mental health services must be wisely and prudently spent,” said United States Attorney Cody Hiland for the Eastern District of Arkansas. “Allegiance sought this taxpayer money by targeting and taking advantage of vulnerable members of our population who sought mental health treatment, including those in the Eastern District of Arkansas. This office is dedicated to pursuing all appropriate remedies against companies who behave in such a manner.”

The Allegiance defendants that are party to this settlement are: Allegiance Health Management, Inc.; Allegiance Behavior Health Center of Plainview, LLC; Allegiance Specialty Hospital of Kilgore, LLC; North Metro Medical Center a/k/a Allegiance Hospital of North Little Rock, LLC, and Sabine Medical Center a/k/a Allegiance Hospital of Many, LLC. The United States previously reached settlements with more than twenty other hospitals in this matter.

“Medicare funds must be targeted to those with a legitimate need,” said Special Agent in Charge CJ Porter for the Office of Inspector General of the U.S. Department of Health and Human Services. “Entities that bill for needless services – as alleged here – cheat taxpayers and threaten the integrity of government health programs.”

The settlement with Allegiance resolves a lawsuit filed in the Eastern District of Arkansas under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The civil lawsuit was filed by Ryan Ladner, who formerly worked for Allegiance as a Program Manager at the Inspirations Outpatient Counseling Center located at Wesley Medical Center in Hattiesburg, Mississippi. Mr. Ladner will receive approximately $300,000 as his share of the current settlement.

This and prior settlements in this matter were the result of a coordinated effort by the Civil Division of the Department of Justice, the United States Attorney’s Office for the Eastern District of Arkansas, and the Department of Health and Human Services, Office of Audit Services and Office of Inspector General.

The claims settled by the current agreement are allegations only, and there has been no determination of liability. The lawsuit is captioned U.S. ex rel Ladner v. Allegiance Health Management, Inc., et al, No. 4:10-CV-170 (E.D. Ark.).