Top Audit Warning Signs for Behavioral Health Providers

As the behavioral health industry draws more government funding, it’s also getting newfound scrutiny from state and federal regulators. Enforcement actions against behavioral providers are on the rise, especially for those organizations that participate in Medicare and Medicaid.

Consequently, compliance planning is more important than ever — and so is identifying warning signs that suggest the government could come after an organization. 

Any provider that works with government payers is vulnerable to an audit, even the ones that think they’re doing everything right, according to attorney Jennifer Evans. She’s a shareholder at the national law firm Polsinelli, where behavioral health is one of her focus areas.


She pointed to Clean Slate Centers as an example of a seemingly well-intentioned organization currently facing regulatory enforcement action.

Back in October, Massachusetts Attorney General Maura Healey sued the substance use disorder (SUD) treatment chain for allegedly defrauding the state Medicaid program. Meanwhile, Clean Slate has denied any wrongdoing.

“It looks like from the complaint that … Clean Slate was cognizant of these laws [associated with the program], and they were trying to get it right,” Evans told Behavioral Health Business.

While providers can’t ensure they’ll never face a government audit, they can be on the lookout for these tell-tale warning signs and respond accordingly. Below are some of the main red flags to keep an eye out for.

1. An ill-fitting compliance plan

When considering the likelihood of a government audit or enforcement action, providers should take a good look at their compliance plans, Polsinelli shareholder Asher Funk told BHB.

Has the program grown with the organization or is it still built for a smaller business? If the latter is true, that’s a red flag, Funk said. For one, issues and employee complaints can be easily overlooked if the program isn’t right-sized to the organization. Plus, it makes proactively identifying and addressing potential problems before they escalate more difficult, he said.

“If a provider starts to find themselves in a situation where … their compliance program isn’t appropriately scaled for the size of their operations, that’s something they want to take seriously,” Funk said. “You don’t know what you don’t know.”

As such, it’s important that providers appropriately scale their compliance plans and identify problems before regulatory authorities do. But that’s not always possible — and providers can still face audits and enforcement action, even if their programs are the right size.

2. Civil investigative demands, subpoenas

The first indication that the government is looking into a provider’s operations usually comes in the form of a civil investigative demand or subpoena.  

Organizations should take such requests very seriously, immediately engaging outside counsel to help them navigate the process and send along the requested information.

Oftentimes, the government’s concerns stem from whistleblower complaints, which means they aren’t always well-founded. In those instances, counsel will work to educate the government on the reality of the situation — or litigate the case if it’s not dismissed before then.

Meanwhile, if the allegations have merit, counsel will advise providers on how to proceed.

While receiving a request from the government is usually the first step in the process, that’s not always the case.

“It’s possible sometimes that there could be a case where the government doesn’t do that, and the first notice you get is getting a copy of the unsealed False Claims Act complaint served on you,” Funk said. “That’s happened to some of our provider clients.”

3. Payment changes, issues

Payment changes can be another indication that something’s amiss. Evans said she’s seen that occur especially to providers in the Medicaid program.

“Sometimes you just stop getting paid,” she said. “Or you’re getting paid in a very different fashion, like you used to get paid every 10 days, and now you start getting paid every 45 days.”

Sometimes when that happens, Medicaid sends a letter notifying providers that they’ve been put on pre-payment review, thus prompting them to up their compliance game. But that’s not always the case. 

“What I’ve seen happen so many times to clients is the payments just stop for a particular code,” Evans said. “Maybe not for all your payments, but for a particular code. So the diligent billing staff picks up the phone, calls the Medicaid agency and … may inadvertently be making an admission … that will later be held against them.”

As such, Evans advised providers faced with payment changes to do an internal evaluation before calling Medicaid.

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