Partial Hospitalization Fraud: Ineligible Patients, False Attendance and Bought Referrals

Partial hospitalization fraud turns ineligible patients, invented treatment or bought referrals into Medicare claims for intensive psychiatric care. This health care fraud cheats taxpayers and patients whose charts describe care they never received. The patient may come through the door every morning while the treatment described in the chart never happens. If you work in admissions, therapy, billing or a referring facility, you may see the gap between the patient’s condition, the care delivered and the program Medicare pays for.

What Partial Hospitalization Pays For

Medicare pays for a partial hospitalization program that provides intensive outpatient psychiatric care for patients who would otherwise require inpatient psychiatric care. The treatment plan must call for at least 20 hours of therapeutic services each week. Patients must be able to participate, have adequate support outside the program and not need 24-hour care.

The physician certifies why the patient needs this intensity of treatment, and an individualized written plan identifies the care the patient will receive. The plan and physician review connect the patient’s condition to the program being billed.

Partial hospitalization operates through hospital outpatient departments and community mental health centers, as Medicare’s mental health coverage guidance explains. Intensive outpatient programs have a separate benefit, with a minimum of nine planned hours weekly and no requirement that the patient would otherwise need inpatient psychiatric care.

The Program Day Has to Contain Treatment

A payable partial hospitalization day must include a service from Medicare’s primary service list. The Medicare claims manual ties the daily payment to reported component services, dates, units and charges. A patient can be marked present on a day when no treatment happened. Billing by the day lets that false claim recur each day the program keeps charging for care it does not deliver.

The billing also distinguishes professional services from work included in the program payment. For a billing employee, the useful connection runs from the particular service and the person who performed it to the claim that charged for it.

When Partial Hospitalization Patients Cannot Benefit

Partial hospitalization patients who cannot benefit from the intensive program have been central to documented fraud schemes. For PHP billed for patients with dementia, the question is whether they can participate in and benefit from the planned treatment.

The HHS Office of Inspector General’s five-state partial hospitalization review, published in 1998, gives a concrete example of that examination. Reviewers found patients whose organic degenerative conditions prevented them from benefiting, patients who needed only recreation and socialization, and patients who would not have needed inpatient treatment without partial hospitalization.

The review also described an older woman whose depression was controlled with medication and periodic outpatient visits. She attended arts, crafts and exercise activities through the program. Her progress notes were almost identical from day to day, and the medical review found her ineligible for the benefit.

Another example showed how recruitment could obscure what was being billed. Program staff promoted a free activity program to an assisted-living owner, who sent all the residents. One beneficiary’s guardian understood the placement as social and recreational activity and did not know Medicare was paying for the services.

In that five-state review, covering the year ended September 30, 1997, 229 of 250 sampled claims failed Medicare requirements or were highly questionable.

Partial Hospitalization Recertification and False Continued Need

Partial hospitalization recertification addresses the patient’s response, persisting symptoms or risk, and coordination of discharge. The first recertification is due as of service day 18, followed by recertification at least every 30 days.

A false continued-need statement keeps the clinical justification alive on paper. The comparison is between the patient’s progress and what the physician certified about the continuing need for intensive care. A copied progress note, a repeated admission account and a recertification all deserve to be read against the treatment actually delivered.

Discharge and readmission can also become part of the billing design. A whistleblower’s complaint concerning Universal Health Services’ Bellaire facility alleged that patients took brief breaks from partial hospitalization while remaining in group homes, with an understanding that they would seek readmission:

The allegation concerns PHP patients readmitted after inpatient hospitalization as part of a planned cycle. The claimed change in mental status supplied the reason for another admission. An admissions employee or clinician may know who arranged that return and whether the new assessment reflected the patient they saw.

When Attendance Is Not Treatment

A program can bill a psychiatric treatment day for a patient who was absent, or present and given no treatment. The OIG review found centers giving everyone the same group sessions regardless of individual diagnosis or treatment plan, including patients unable to participate.

When a psychiatrist signs charts without seeing PHP patients, the signature has to be connected to the clinical assessment it represents. In the American Therapeutic Corporation criminal case, the court’s opinion described clerks turning pages for rapid signing and a physician signing treatment plans and recertifications without making the required clinical determinations. The signature made the record look complete while the necessary clinical judgment was missing.

The mental health medical director who signs blank treatment plans presents a related documentation problem. In a separate case involving Universal Health Services and Keystone Marion Youth Center, a residential youth treatment facility, the government’s complaint alleged that the facility’s medical director failed to direct and supervise treatment:

That allegation shows why the sequence matters: an assessment, a treatment decision and a signature should describe the same clinical work. A signature obtained before the document is completed can conceal who actually wrote the treatment record. The same complaint about Keystone Marion alleged that unlicensed therapists provided therapy without supervision by a licensed practitioner.

Psychiatric hospital staffing matters when claims describe active treatment that the facility did not provide. The government alleged in the Universal Health Services civil settlement that facilities lacked required therapy, adequate staffing and supervision, current assessments or treatment plans. That inpatient and residential case also addressed unnecessary admissions and failures to discharge patients when they no longer needed that level of care.

A whistleblower’s Havenwyck complaint alleged that administrators urged reconsideration of discharge decisions when patients still had Medicare or Medicaid benefits. An unnecessary psychiatric admission or a discharge delayed for insurance billing gives a Medicare whistleblower a specific decision to examine alongside the claim. In partial hospitalization, the examination returns to the certification that inpatient care would otherwise be required and the continuing need described in recertification.

How Does Patient Brokering Work?

Patient brokering in partial hospitalization buys access to people whose attendance can generate claims. The person controlling that access may work at a hospital, operate a group home or assisted-living facility, or recruit patients for the program. The financial relationship can sit outside the treatment chart.

Hospital staff paid for psychiatric PHP referrals appear in the Health Care Solutions Network criminal case. The court’s opinion described cash kickbacks to hospital employees and assisted-living owners for referrals. The gatekeeper supplied patients, and the clinic supplied the claims.

Housing can provide the same financial connection. In a 2024 civil settlement, Bournewood Hospital agreed to pay a minimum of $5.5 million, with contingent payments bringing the amount to as much as $6.5 million. Bournewood admitted paying sober homes while patients enrolled in and attended its partial hospitalization program, then stopping those payments when attendance stopped, regardless of housing need.

The hospital paid for attendance, not housing need. A whistleblower brought the case, and the federal government and Massachusetts joined it.

For someone who sees the referral side of the operation, we trace who received the money, what they supplied and what made the payments start and stop. A contract can describe one service while the payments buy something else.

Partial Hospitalization Fraud Cases: How the Networks Worked

Bought referrals, rewritten charts and invented treatment recur across these partial hospitalization fraud cases. The criminal records show how those practices worked inside different operations.

American Therapeutic Corporation Rewrote the Charts

In their guilty pleas described by the Justice Department, American Therapeutic Corporation’s owners admitted paying assisted-living operators, halfway houses and brokers to supply beneficiaries, then altering diagnoses, medication information and therapist notes to make patients appear eligible for partial hospitalization.

A therapist might recognize the rewritten note. Someone handling medications might recognize the altered information.

Health Care Solutions Network Billed Movies and Missing Patients

In his guilty plea, Health Care Solutions Network’s owner admitted a scheme involving ineligible patients, fabricated records, movies and barbecues billed as treatment, and claims for patients who were absent. The Justice Department’s account described approximately $63 million billed and more than $28 million paid by Medicare.

A barbecue became psychiatric treatment on a Medicare claim. A staff member who knew the day’s activities could contradict a chart even when the attendance list was accurate.

Biscayne Milieu Put Referral Payments Behind Contracts

At Biscayne Milieu Health Center, criminal trial evidence described by the Justice Department showed ineligible patients, unprovided or unreimbursable services and falsified psychiatric records. The evidence also described sham case-manager contracts and more than $1 million in recruiter payments.

The sham contracts made recruitment payments look like payment for case management. An employee handling vendor payments could see that arrangement without ever preparing a Medicare claim.

Shifa and Serenity Coached the Symptoms

In the criminal trial account involving Shifa Community Mental Health Center and Serenity Center, patients came from nursing and group homes, beneficiaries were coached about supposed symptoms, and psychotherapy records were falsified. Interrupted admissions were used to prolong billing.

The false symptoms came before the treatment note. Someone who heard the coaching could explain how the apparent clinical justification was manufactured.

Spectrum Care Turned Recreation Into a Clinical Record

According to the Justice Department’s account of the criminal trial, Spectrum Care patients who did not qualify for partial hospitalization watched movies, colored or played games. Physicians signed admission and progress records, and owners paid group-home operators and recruiters.

The signatures described intensive care while the patients watched movies and played games.

Riverside General Hospital Connected Readmissions and False Services

The Justice Department’s account of the Riverside General Hospital criminal trial described evidence of unnecessary partial hospitalization admissions and readmissions, kickbacks to recruiters and group homes, forged records, and individual psychiatric services billed without being delivered. The Justice Department’s trial account described a psychiatrist repeatedly admitting or readmitting patients unable to benefit from partial hospitalization.

That pattern reaches both the decision to bring a patient into the program and the services charged afterward. An admissions record can explain why billing began. A clinician’s schedule and notes can explain whether the separately billed encounter happened.

What Evidence Is Needed to Prove Fraud?

Evidence of partial hospitalization fraud connects what the claim represented with the patient, the treatment and the people responsible for the difference. Those records include assessments, certifications, recertifications, treatment plans, attendance, service notes, staff schedules and referral payments.

For the clinical side, we examine the condition described at admission, the patient’s ability to participate, the services in the plan and the progress used to justify continued care. For the billing side, we connect the payer, service date, code and units to the actual worker and the treatment delivered. The comparison follows the care from admission through the paid claim. A whistleblower’s complaint involving Forest View Psychiatric Hospital alleged that a psychiatrist billed more inpatient, partial hospitalization and outpatient work than he could perform. The day’s schedule can expose a problem that each note, read alone, conceals.

The court’s opinion in the American Therapeutic Corporation criminal case described billing summaries and patient logs used to calculate cash referral payments. Those ordinary operating records connected the patient stream to the money paid for it.

An insider may know who changed a note, supplied a diagnosis, arranged a return admission or approved payment to a referring home. We work with that knowledge to connect the decisions inside the business to the claims outside it. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know What Happened During the Program Day

If you know the patients, the treatment or the referral payments behind a partial hospitalization claim, speak with our whistleblower experts about the gap you see. We work beside you to build your strongest partial hospitalization whistleblower case and bring in healthcare fraud whistleblower lawyers who understand psychiatric eligibility, program billing and referral payments.