[A] three-year state investigation into the Brattleboro Retreat‘s Medicaid-billing practices has found “no criminal misconduct,” the Vermont attorney general announced Monday.
The probe did find “several areas of billing deficiencies that need to be corrected.” But officials said those deficiencies “did not result in net financial harm to the Vermont Medicaid program.”
The state and the Retreat have entered into a memorandum of understanding designed to promote “best practices” in Medicaid claims at the psychiatric and substance-abuse hospital.
“This agreement holds the Retreat accountable and is an example of problem-solving for a good result for all parties,” Attorney General TJ Donovan said. “We look forward to continuing to work with the Retreat.”
Retreat administrators said they are “obviously gratified” that the investigation did not result in criminal or civil charges. They also said they’ve been modernizing and improving their Medicaid operations, leading to upgrades that have “measurably improved the hospital’s financial operations.”
But Thomas Joseph, the former Retreat employee whose fraud allegations spurred the probe, said the end result was both predictable and unsatisfying.
“I’m not at all surprised with the outcome,” Joseph said. “It’s been a coverup since 2013. Nobody wants to acknowledge what’s going on.”
As for his next steps, Joseph said only, “stay tuned.”
The state’s Retreat investigation became public in August 2015. Documents showed that the state auditor’s office had asked the attorney general to get involved after reviewing allegations made by Joseph, who worked at the Retreat from January 2011 to November 2013.
Joseph has alleged millions of dollars in malfeasance, claiming the Retreat overcharged patients and kept government money to which it was not entitled.
The federal government declined to pursue an investigation of Joseph’s claims, and a federal judge in 2014 threw out a lawsuit he filed.
But a senior state auditor in 2015 wrote that “the matter merits investigation” after finding what he characterized as examples of financial pressures and possibly questionable billing practices at the Retreat.
That investigation continued for years and persisted through changes of leadership at the Retreat and at the state level. Louis Josephson became the Retreat’s president and CEO after Rob Simpson stepped down at the end of 2015, and Donovan succeeded longtime Attorney General Bill Sorrell in January 2017. 
Around the time Donovan took the job, an attorney in his office said the probe was mostly complete with only a “single issue that’s still under investigation.” But another year and a half passed before Monday’s announcement.
Linda Purdy, who directs the attorney general’s Medicaid Fraud and Residential Abuse Unit, said the investigation’s length was appropriate given the subject matter.
“We wanted to make sure that the review that was done was thorough and complete,” Purdy said. “These issues are complex with an entity that provides such vital services.”
In an interview Monday, Josephson said he was relieved that the ordeal is over. “It’s a distraction when a hospital has these issues, and it’s also expensive,” he said.
He added, though, that “we are not kicking back. We are kicking into overdrive to make sure we stay out of any (regulatory) problems and get the money we’re entitled to.”
For all of the attention that fraud allegations and the Retreat’s other regulatory troubles have generated in the past, Monday’s announcement focused mostly on the progress the hospital has made and the work still left to do at the hospital.
The state’s memorandum of understanding notes that the Retreat is a “key resource … providing a substantial portion of Vermont’s adult psychiatric and Level 1 inpatient capacity, and serving as the only inpatient child and adolescent psychiatric care facility in Vermont.”
Given that “prominent role,” the memorandum says, “the state requires confidence in the overall effectiveness of the Retreat’s Medicaid claims-filing.” But that hasn’t been the case in recent years.
“The parties acknowledge that, from January 2015 to the present, some of the Retreat’s Medicaid claims and billing practices have been suboptimal, imposing costs and inefficiencies on the Retreat’s business operations and the state,” the memorandum says.
“The parties further acknowledge that improving the Retreat’s Medicaid claims procedures and practices will benefit both the Retreat and the state.”
To that end, the memorandum – which Purdy said is “the result of multiple agency reviews of the Brattleboro’s Retreat’s billing and accounting practices” — details how the Retreat should go about its Medicaid-related business for the next few years.
First, the Retreat is required to find an independent third party to conduct a thorough review of “billing and claims practices and procedures,” along with related business operations. That review will result in a report “making recommendations either for additional investigation, or for improvements to the Retreat’s systems, processes, staffing and training.”
Also, the memorandum — signed by Josephson, Donovan and Human Services Secretary Al Gobeille — lays out a series of “compliance obligations” for the Retreat. Those obligations include decreasing the hospital’s Medicaid-claims error rate; filing timely claims; and ensuring that all claims are properly prioritized.
That latter provision is necessary, the memorandum says, because Medicaid is the “payer of last resort.” The Retreat must bill all other applicable insurers before seeking Medicaid reimbursement.
That’s been an issue in part because the Retreat hasn’t consistently kept up with its patients’ latest insurance-coverage information, Josephson said.
In addition to new obligations outlined in the state’s memorandum, the Retreat also has been doing its own work to fix Medicaid-claims problems. That included outsourcing billing functions for about a year, giving administrators time to “reimagine the service” Josephson said in a 2017 interview.
The Retreat has hired and provided “extensive training” to new staffers in its Patient Financial Services Department. And the hospital has worked with the Department of Vermont Health Access to improve Medicaid-claims practices.
“We have absolutely made concrete progress,” Josephson said. “But I think we still have more to do. It’s hard to quantify it without that third-party review.”
The stakes are high, both for the state and for the Retreat. Josephson said Medicaid makes up about half of the Retreat’s overall business and about 70 percent of its inpatient psychiatric business.
By not properly billing over the years, he said, the Retreat has lost out on hundreds of thousands of dollars.
The state’s new performance benchmarks and the Retreat’s in-house improvements are “to our benefit, because we’re going to get paid in a more timely way and not have any claims fall through the cracks,” Josephson said.
