By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA.
A Health Care Provider Defense and Compliance Firm

In a cautionary tale for drug treatment providers nationwide, Minnesota-based NUWAY Alliance has agreed to pay $18.5 million to settle claims that it violated the False Claims Act (FCA) and the Anti-Kickback Statute (AKS) by submitting false Medicaid claims and inducing patients with “free housing” in exchange for participating in intensive outpatient (IOP) services.

The government’s investigation, launched after a qui tam whistleblower complaint filed by a behavioral health executive, alleged that NUWAY provided patients with free housing conditioned upon their attendance in Medicaid-reimbursable IOP services. The inducement was allegedly not disclosed as part of the treatment plan, and housing was often in unlicensed, unregulated sober homes. Compounding the issue, NUWAY reportedly double-billed for overlapping treatment hours, charging for services that were either not delivered or inflated in duration.

What Makes This Case So Important?

1. Patient Inducements Violate Federal Law

   Offering free housing, valued at approximately $500 to $1,500 per month depending on the location was allegedly used to coerce Medicaid beneficiaries into NUWAY’s outpatient programs. This arrangement falls squarely within the scope of “remuneration” under the AKS, which prohibits offering anything of value to induce referrals for items or services payable by state and/or federal healthcare programs.

2. False Claims and Overbilling

   The qui tam complaint outlines how NUWAY allegedly billed Medicaid for services not actually rendered or medically necessary, including by:

   • Double-billing hours as separate units of care.
   • Placing patients in lower-than-indicated levels of care based on manipulated or ignored clinical assessments.
   • Failing to document legitimate justifications for IOP placement, despite known clinical needs for residential care.

3. Housing-as-Inducement is Now a DOJ Priority

   This case reinforces DOJ’s renewed emphasis on behavioral health fraud, particularly where programs are “coercive” or use enticements to drive volume rather than clinical necessity. It also highlights the regulatory vulnerabilities surrounding unlicensed housing used as bait to funnel patients into reimbursable care.

Compliance Takeaways for Treatment Providers

The NUWAY case offers urgent compliance lessons:

• Do Not Tie Housing to Treatment: If free housing is conditional on attending treatment, and the services are paid for by Medicaid or Medicare, it likely implicates the AKS.
• Document Medical Necessity: Assigning a level of care based on reimbursement strategy rather than clinical need is a fast track to fraud liability.
• Monitor Your Affiliates and Sober Homes: Even if your organization isn’t the direct housing provider, if your business model depends on “free housing” tied to treatment, you’re responsible for compliance.
• Audit Your Billing: Duplicate billing for overlapping timeframes or services that lack documentation can balloon your exposure in an investigation.

Final Word

This $18.5 million settlement should serve as a wake-up call for the addiction treatment industry: compliance is not just a hospital problem. The DOJ, HHS-OIG, and state Medicaid authorities are actively targeting community-based providers with innovative, aggressive enforcement actions.

If your organization operates housing, provides outpatient treatment, or partners with recovery residences, now is the time to review your patient inducement policies, medical necessity protocols, and billing compliance.

If you have any questions or concerns about the subject of this blog, please contact Parrella Health Law at 857.328.0382 or Chris directly at cparrella@parrellahealthlaw.com.

Access the full complaint here: NUWAY Qui Tam Complaint PDF