Federal prosecutors charged four defendants in an alleged substance abuse treatment fraud scheme involving over $1.6 billion in billings to private insurers for sham treatment, the largest case of its kind the Justice Department has ever prosecuted.
The case was part of a broader Los Angeles-area healthcare fraud takedown that resulted in charges against 15 defendants, including six medical professionals, in schemes involving over $1.8 billion in fraudulent claims to public and private insurance programs, according to an Oct. 22 press release from the Justice Department. Eight defendants were arrested Oct. 22.
Prosecutors alleged that father and son David and Nathan Young controlled dozens of purported substance abuse treatment companies in the Los Angeles area and across the country. The Youngs allegedly directed “body brokers,” including Honey Phipps and Cody Phipps, to recruit vulnerable people, including individuals who were unhoused and those attending substance abuse support groups.
The defendants allegedly sought out individuals whose insurance policies paid the highest reimbursements and often fraudulently enrolled people in policies they were not eligible for. Patients were allegedly lured to Southern California and elsewhere with free flights, money, apartments, hotel stays, cars, gift cards and drugs.
Some patients with high-reimbursing “premium” policies allegedly received hotel stays and dinners, while “non-premium” patients lived in cramped, unsanitary housing described as “trap houses.”
Prosecutors alleged that the defendants told employees to coach patients to fabricate symptoms to qualify for detox, and in some cases patients were allegedly encouraged to use drugs or alcohol to become eligible. After detox, the Youngs allegedly provided “therapy” that consisted of Zoom sessions with more than 100 attendees, in which patients had to do little more than turn on their cameras.
To keep billing insurers, the Youngs allegedly recycled patients through their facilities, cut them off from family members and physically blocked them from leaving. Prosecutors alleged the Youngs directed that patients who tried to leave be drugged with medication “to knock the client out.”
The four defendants face charges including conspiracy to commit healthcare fraud and wire fraud, healthcare fraud and violations of the Eliminating Kickbacks in Recovery Act. A fifth defendant, Nicholas Moore, who managed several of the Youngs’ facilities, pleaded guilty to conspiracy to commit healthcare fraud and wire fraud. He admitted to helping submit $199 million in fraudulent claims.
The broader enforcement action also included allegations involving medically unnecessary arterial procedures, hospice fraud, genetic testing kickbacks and a nearly $270 million Medi-Cal pharmacy fraud scheme.
The charges against the other defendants are allegations, and those defendants are presumed innocent until proven guilty.
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