Two former leaders of a North Carolina-based substance abuse treatment company have pleaded guilty to their roles in a scheme involving kickbacks to Medicaid patients, according to an August 25, 2025, press release from the US Attorney’s Office for the Eastern District of North Carolina. The former compliance director and an office manager admitted to participating in the scheme, which included paying illegal incentives to patients and committing tax violations.
According to court documents, the defendants and others used Medicaid reimbursement funds to purchase more than $1 million in gift cards. In some cases, these purchases were routed through personal bank accounts. The gift cards were then routinely distributed to patients on a weekly basis to encourage them to attend treatment services.
Over a four-year period, the defendants, along with employees and agents of the company, regularly paid patients based on the number of days per week they attended services. The more days a patient showed up, the more money the company received from Medicaid reimbursements.
To further the scheme, the compliance officer made false statements to Medicaid auditors, while the office manager created false documents to conceal the illegal conduct.
According to court documents, the defendants also received kickbacks from a laboratory they contracted for drug testing services. They failed to report this income on their tax returns, resulting in additional charges for failure to file.
Sentencing is scheduled for November 2025. The former compliance officer faces up to 11 years in prison, while the former office manager faces up to 6 years.
Compliance Perspective
Issue
Under federal and state Anti-Kickback Statutes, it is illegal to knowingly and willfully offer, pay, solicit, or receive anything of value to induce or reward referrals for services covered by federal or state healthcare programs. While incentivizing referrals may be common in other industries, it is a criminal offense in healthcare. The prohibition applies equally to individuals or entities that offer kickbacks and to those who accept them. Kickbacks can take many forms, including cash, gift cards, bribes, or in-kind rewards such as free services. Failing to promptly report a suspected kickback can result in significant legal consequences, including lawsuits, fines, and administrative sanctions.
Discussion Points
- Ensure that organizational policies clearly prohibit both financial incentives for referrals and improper inducements to patients. This includes offering or receiving anything of value—such as cash, gift cards, or in-kind benefits—to influence either the referral of individuals or their decision to receive services reimbursed by Medicaid, Medicare, or other federal programs. Policies should outline acceptable practices and define clear procedures for reporting suspected violations. Facilities may benefit from working with experienced compliance consultants to evaluate policies, identify high-risk practices, and support ongoing regulatory readiness.
- Provide comprehensive education for all staff on applicable laws and organizational policies regarding fraud, abuse, and compliance. Training should include a focus on the prohibition of both referral-based kickbacks and improper patient inducements. Med-Net Academy offers the course, Business Ethics, which addresses core ethical principles in healthcare, potential conflicts of interest, honest communication, the duty to report misconduct, and practices to avoid.
- Conduct regular audits of billing records, clinical documentation, and financial transactions to verify accuracy and detect potential fraud or abuse. Include reviews of compliance with referral and incentive policies. Evaluate whether staff are correctly following reporting protocols and whether effective financial controls are in place to prevent misappropriation or false claims. Consider using external mock surveys or specialized audit support to help identify vulnerabilities.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*