HARRISBURG—Attorney General Josh Shapiro announced Medicaid Fraud charges recommended by the 45th Statewide Investigating Grand Jury against two Philadelphia-based drug and alcohol treatment facilities: Southwest Nu-Stop Philadelphia Inc. (Southwest) and its owner, Dr. Lloyd Reid, and New Journeys in Recovery (New Journeys) and its owner Lawrence Gallagher. Attorney General Shapiro has previously charged eleven individuals from Liberation Way for using Pennsylvanians’ insurance information to bill for premium plans, and make a profit while their patients suffered.
People with substance use disorder who stayed in these recovery homes were forced to attend certain substandard, outpatient treatment programs. Those outpatient treatment programs paid kickbacks to the recovery homes in return for those homes funneling patients to them, rather than giving the patients choice.
“While recovery staff worked overtime to help their patients recover from addiction and create better lives for themselves, Reid and Gallagher jeopardized the lives of their clients to make a buck,” said Attorney General Shapiro. “If a treatment provider puts profits over people in recovery, we are going to find them and hold them accountable.”
Since Attorney General Shapiro took office, the Office of Attorney General’s Medicaid Fraud section has made 560 arrests and obtained more than $16 million in court ordered restitution for the Commonwealth.
Southwest and New Journeys profited by receiving millions of dollars from Medicaid in exchange for providing poor quality treatment to recovery home residents who were forced to attend treatment at their facilities. Patients were required to live in overcrowded recovery homes and attend overcrowded group therapy sessions, including up to double the number of suggested patients for a group therapy session. Stripping the patients of their freedom of choice, the recovery homes threatened the residents with life on the streets if they choose to attend treatment at a different facility.
Between December 2016 and June 2019, Southwest received more than $12,662,864 in Medicaid funds for allegedly providing drug and alcohol treatment. During this time, Reid paid recovery homes over $1,178,453 in kickbacks. Similarly, between January 2016 and January 2021, New Journeys received more than $2,934,732 in Medicaid funds for allegedly providing drug and alcohol treatment. During this time, Gallagher paid recovery homes over $629,640 in kickbacks.
Therapists testified to the Grand Jury that due to the high caseload, Southwest employees regularly cut corners on paperwork and failed to complete patient records. The facility was repeatedly reprimanded by Philadelphia’s Community Behavioral Health (CBH) for providing substandard care to its patients. Southwest’s issues were so prevalent that CBH unsuccessfully attempted to remove the facility from its network of providers. Southwest continued to provide insufficient treatment to its patients, and in January 2020, a client fatally overdosed while at Southwest’s treatment facility.
The Office of Attorney General Medicaid Fraud Control Section partnered with the United States Department of Health and Human Services (HHS), to conduct this investigation. The case was investigated by Supervisory Special Agent James Conn, and is being prosecuted by Senior Deputy Attorney General Eric Stryd. All charges are accusations. The defendants are innocent unless and until proven guilty.
The Pennsylvania Medicaid Fraud Control Unit receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $9,536,968 for Federal fiscal year (FY) 2020. The remaining 25 percent, totaling $3,178,987 for FY 2020, is funded by Pennsylvania.
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