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Santorum addresses investigation of Medicaid fraud by company for which he was a board member

Chris Moody, Yahoo News
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Rick Santorum in 2007. (Steve Pope:AP)

Three months after Rick Santorum gave up his Senate seat on April 16, 2007, he was appointed to the board of directors of United Health Services, a Pennsylvania-based hospital management company. While Santorum served on the board, a clinic operated by UHS began being investigated for Medicaid fraud by the Justice Department, documents show.

United Health Services ran a psychiatric clinic in Marion, Virginia, that offered care to adolescent boys with mental health problems. According to the Justice Department investigation, filed jointly with the Commonwealth of Virginia on March 2, 2010, the clinic--known as the Marion Youth Center--billed "Medicaid for inpatient psychiatric care that was not provided, in violation of federal and state Medicaid requirements, and falsified records to cover up their serious violations."

The Marion clinic allegedly misrepresented the cost of the services it provided to the children and profited from the taxpayer-funded reimbursements.

"We intend to prove that these defendants billed Medicaid for providing troubled children with much-needed psychiatric medical care when, in fact, they provided no such service," said Timothy J. Heaphy, the United States attorney for the Western District of Virginia, in a March 2010 statement. Heaphy added that the company took "advantage of troubled children in order to feed their own desire for wealth."

In an interview with Yahoo News, Santorum said that he cooperated with the investigation when it was brought to the board's attention.

"Any investigation, you obviously engage and fully cooperate with it, and that's what we did. You try to get to the bottom of it. There's always accusations that take place and that's part of the responsibility of directors to make sure that we investigate that and get to the bottom of it," Santorum said. "I don't have any stock options. I did, but I exercised them and they're gone."

Representatives with UHS did not immediately reply to a request for comment from Yahoo News. This past June, however, the company released a statement addressing an earlier report on the controversy in the Huffington Post. "UHS has always made quality and patient safety its highest priorities at all of our facilities," the statement read in part.

UHS  went on to add that "Marion Youth Center denies the allegations contained in the lawsuits currently pending and is defending these cases vigorously. All patients at Marion Youth Center received appropriate treatment in accordance with standards of mental healthcare for the community and all reasonable rules and regulations"

The original suit, filed on June 14, 2007, by three therapists formerly employed by the Marion Youth Center, cited allegedly fraudulent practices dating back to 2004, before Santorum joined the board. The suit claimed that health care professionals within the company routinely billed Medicaid for services they did not provide. They alleged that employees at the Marion facility claimed reimbursement for 30-minute consultations with patients, when instead they conducted what the plaintiffs term "drive-by therapy sessions." The suit alleges that these consultations took place in the facility's hallways, and lasted only a few seconds.

Barbara Jones, a former employee at the facility who had been allegedly tasked with fabricating a Medicaid form, testified in a complaint filed with the U.S. District Court for the Western District of Virginia on July 29, 2010, that her superior retaliated against her for reporting the allegedly falsified claim to the authorities. If Jones's charge is borne out, the supervisor's action would be a possible violation of laws protecting corporate whistleblowers. According to court documents, the company filed a motion to dismiss the case in December 2010, arguing that Jones was not entitled to whistleblower protection because she did not sufficiently prove that she was employed by the company.

While all this legal activity was going on, as a board member, Santorum accumulated 45,000 class B common stock options, acquiring the last 15,000 options as late as January 2011, according to documents filed with the Securities and Exchange Commission. Santorum stepped down from his position on the company's board on June 15, 2011, citing his plan to pursue his candidacy for president, and exercised his stock options.

In the company's 2010 annual SEC filings--a document that has Santorum's signature at the bottom--UHS said that it was fighting the federal suit and "will continue to defend ourselves vigorously against the government's and the former employees' allegations," adding, "there can be no assurance that we will prevail in the litigation or that the case will be limited to the Marion Youth Center."

The facility at the center of the accusations announced in November 2011 that it would be closing its doors.

Although Santorum is a former board member and stockholder, he is no longer affiliated with the group and did not personally make the decisions that led to the investigation.

As of this writing, the case is still under investigation.

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