Feds serve search warrants in autism fraud investigation

The FBI served search warrants Thursday at two autism treatment providers, as part of a wide-ranging Medicaid fraud investigation first reported by the Reformer in June.

The search warrants were served at Smart Therapy Center in Minneapolis and Star Autism in St. Cloud.

FBI Special Agent Kurt Beulke wrote in an unsealed warrant application that the state autism program has exploded in both the number of providers and cost in recent years: “The investigation has found substantial evidence that many of these companies have been submitting fraudulent claims for (autism) services that were not actually provided or that were not covered.”

According to the warrant application, employees of Smart Therapy were “18 or 19-year old relatives of the owners who had no formal education beyond high school and no training or certification related to the treatment of autism.” Many of the children did not appear to be autistic, according to a witness. The same witness said they believed parents were being paid to bring their children as part of the scheme.

Both Smart Therapy and Star Autism billed the state even when the provider — who was ostensibly giving treatment to a child on the autism spectrum — was out of the country, according to the warrant.

Star Autism “billed Medicaid for (autism) services purportedly provided by medical providers who did not work for Star Autism or who received little or no wages from the company.”

During one three-year period, according to the warrant, Smart Therapy billed Medicaid more than $850,000 for autism services for a single client, and was paid $438,000 by Medicaid based on the claims.

The Reformer reported in September that a former supervisor at Smart Therapy made repeated attempts to report what she said were negligence and fraud to state officials. Smart Therapy formed in 2019 and quickly became one of the highest-paid autism treatment providers in Minnesota, paid the ninth most out of 142 providers in 2021, when it was reimbursed $2.1 million. It was paid the third most out of 206 providers in 2022, at $2.8 million, and the seventh most out of 280 providers last year, when it was paid $2.6 million.

Growth of spending on the Minnesota autism program has exploded in recent years. The number of providers — who are supposed to diagnose and treat people with autism spectrum disorder — has increased 700% in the past five years, climbing from 41 providers in 2018 to 328 last year.

The amount paid to providers during that time has increased 3,000%, from about $6 million to nearly $192 million — according to data provided to the Reformer by the Department of Human Services, which administers the state’s Medicaid program for low-income people and Minnesotans with disabilities.

Earlier this year, DHS Assistant Commissioner Natasha Merz told the Reformer that the growth of the autism program has been “pretty consistent” with other DHS programs, such as housing stabilization services, a new Medical Assistance benefit to help people with disabilities and seniors find and keep housing. (Some autism centers advertise both of those services.)

“I don’t think we are surprised or particularly disturbed by the rate of growth,” Merz said at the time. “We know that having early intervention and access to service is a really, really important part of putting these kiddos on a good trajectory for the rest of their lives.”

She added, “Anytime we’re operating Medicaid programs, we have to ensure we’re good stewards of taxpayer money, and that we have the right level of protections in place against fraud, waste and abuse.”

Later, DHS told the Reformer that the agency was investigating 15 autism providers and has already completed other investigations, withheld payments due to credible fraud allegations and forwarded cases to law enforcement “when appropriate.” In September, the Star Tribune reported that DHS investigations expanded to 29 providers of early intervention services.

DHS Commissioner Jodi Harpstead released a statement Thursday: “DHS has open investigations into these providers. We work closely with our state and federal law enforcement partners in oversight of these and other Medicaid programs.”

Due to concerns about program integrity, Harpstead said, the agency is visiting every single autism treatment provider. “We are digging further into cases where we note concerns and will conduct formal investigations if and where needed.”

If allegations in the federal search warrant are substantiated, the situation is shaping up to be another instance of state government struggling to stop a wave of fraud that has beset a number of safety net programs in the past decade. The case brought quick condemnation from Republicans, who won a share of power in the Minnesota House in November and say they are focused on rooting out fraud in Minnesota government programs.

“It is incumbent upon us to start implementing guardrails within our state agencies to protect taxpayers from being defrauded in incidents like this,” said Sen. Mark Koran, R-North Branch.

As the Reformer has previously reported, Attorney General Keith Ellison’s office has prosecuted a bevy of Medicaid fraud cases in recent years, including what it dubbed PIT STOP, named for the providers, interpreters and transportation companies involved in the scheme to defraud Medicaid.

The autism investigation is the work of the feds, even as U.S. Attorney Andy Luger continues the office’s yearslong prosecution of culprits in the so-called Feeding Our Future scandal, the $250 million theft of federal money intended to feed hungry children but instead spent on pricey cars, real estate and jewelry as part of the largest pandemic relief fraud in the country.

Indeed, the cases are linked. As the Reformer first reported, some Minnesota autism centers were also part of the food aid program. The search warrant says “at least a dozen of the defendants charged for their role in the Feeding Our Future scheme owned, received money from, or were associated with autism clinics and other health care companies that received state funds for providing (autism) services.”

Smart Therapy claimed it served over 199,400 meals and snacks in 2020 and 2021 under the sponsorship of Feeding Our Future — the nonprofit at the center of the federal fraud. No one at Smart Therapy has been charged in the Feeding Our Future case.

Asked about the autism investigation recently, Gov. Tim Walz seemed to be unaware and asked for clarification.

In the wake of the federal raids, however, Walz reacted swiftly Thursday: “This pisses me off unlike anything else,” Walz told the Star Tribune. “They’re stealing from us … You’ve got to increase the penalty on these crimes. These are crimes against children, in my opinion.”