The Service Line

David Young and his son Nathan, both of Los Angeles, are accused of running more than 20 addiction treatment centers that billed commercial insurers about $1.62 billion. Federal prosecutors in the Central District of California call it the largest substance abuse treatment fraud case the Justice Department has charged. The indictment, filed October 21 and announced October 22 as part of a Los Angeles health care fraud takedown, alleges the centers collected more than $210 million between May 2020 and May 2026. According to Behavioral Health Business, brokers recruited unhoused and low-income people who held generous commercial coverage, patients were coached to fabricate symptoms to qualify for detox billing, and therapy was largely a single muted phone on a video call, with outings billed as group therapy. Eighteen of the 20 locations carried different nominal owners through shell companies, which is how the group stayed below any single payer’s alarm. The counts include health care fraud, conspiracy, and violations of the Eliminating Kickbacks in Recovery Act (EKRA), the federal law that makes paying for patient referrals to recovery homes, clinical treatment facilities, and labs a crime regardless of payer. These are allegations, and no pleas have been entered. We could not open the Justice Department release this run, so the details rest on the trade report. Confidence: High that charges were filed, Medium on the specific figures.

Reimbursement

Medicaid work requirements start January 1, 2027, and the substance use exemption is narrower than the statute. The Centers for Medicare and Medicaid Services (CMS) issued its interim final rule on community engagement June 1, 2026, with compliance required by January 1, 2027, per an Epstein Becker Green summary. Secondary summaries say the rule exempts people with a substance use disorder in treatment or active recovery but not those in recovery five years or longer, and ties medical frailty to a two-part functional test rather than a diagnosis alone. The burden of documenting and verifying status falls on states and, in practice, on treatment providers, according to Behavioral Health Business. For an operator with a Medicaid-heavy outpatient census, the so-what is revenue at the edge: patients who lose coverage over paperwork stop showing up on your schedule, and clinical notes that record function and recovery status are now billing infrastructure. Also due in early November: the CY2027 physician fee schedule and outpatient final rules, which include the last year of the timed behavioral health code phase-in and the intensive outpatient per diems we covered October 15. Confidence: Medium. We could not retrieve the Federal Register text, and the five-year recovery line comes from secondary summaries.

Enforcement

The Los Angeles case is the pattern in our stack, scaled up. It combines the three signatures investigators screen for: patient brokering, recycled patients across many locations, and group therapy that was not group therapy. The operator screen is structural. Payers and prosecutors are now linking facilities through shared patients, shared billing agents, and nominal owners, so a network of clean-looking single-site entities no longer hides a common control person. If you buy or partner with a recovery operator, ask for the patient-level census overlap across its sites and the referral-source ledger before you look at revenue. Confidence: Medium, as an inference from the charged conduct.

Who’s Buying

PsychPlus, the Houston-based psychiatry platform founded in 2020 by Dr. Faisal Tai, bought Precision Psychiatric Services on October 27. Precision, founded in 2018 by Dr. Harjeet Brar, supplies in-person and telehealth psychiatrists to emergency departments, inpatient units, and addiction facilities, and the deal adds more than 100 psychiatrists, per Behavioral Health Business. The price was not disclosed. It lands in a week of exit chatter: the same trade outlet’s list of eight companies to watch for a sale in 2027 names Action Behavior Centers (Charlesbank, 449 locations, hold ends 2027) and Centria Healthcare (Thomas H. Lee, 2019), and its review of 2026’s defining deals notes Centene is booking a $513 million loss on the planned sale of Magellan Health to Madison Health Group, which we could not confirm has closed. The read for sellers: hospital-contract psychiatry staffing is still a buyer’s market for scale, and ABA sponsors approaching year five face the Medicaid-integrity backdrop below. Confidence: Medium.

Clinical Policy

The Drug Enforcement Administration (DEA) has had its final telemedicine prescribing rule at the White House for 65 days, and the current flexibilities end in 63. The final rule on special registrations for prescribing controlled substances by telemedicine went to the Office of Information and Regulatory Affairs on August 25, 2026, and review meetings ran through September and October with more scheduled for November, according to Frier Levitt. Its text is not public, the January 2025 proposal drew more than 6,400 comments, and the temporary flexibilities that virtual psychiatry and stimulant prescribing rely on expire December 31, 2026. A fifth extension is possible. Buprenorphine for opioid use disorder is already permanent under a separate January 2025 rule, as we reported in August. For a virtual-first group, plan two scenarios now: a new registration regime with a compliance window, or another short extension. Confidence: Medium. A law firm is the only source on the review status, and we could not reach the review portal.

The Operator Metric

$3.86 billion down to $2.88 billion: Florida’s own projection for annual Medicaid autism therapy spending in fiscal 2026-27. Governor Ron DeSantis’s October 6 Medicaid integrity announcement says the Applied Behavior Analysis (ABA) projection fell about 25 percent after the state moved ABA into managed care and added utilization management. The state also reports more than 220 providers terminated from Medicaid in 2025 and more than 400 provider site visits since January. This is a projection, not realized savings, and the state’s figures are its own. The number for your dashboard is the gap between your billed hours per child and the managed care plan’s authorized hours, because that gap is where a 25 percent cut lands. Confidence: Medium. This continues the oversight thread from the CMS Medicaid ABA toolkit.