California governor proposes drug rehab program changes after CNN investigation

(CNN) -- California Gov. Jerry Brown has proposed millions of dollars in additional funding to crack down on abuses in the state's drug rehab program as a result of an investigation by CNN and The Center for Investigative Reporting.

The governor's budget summary specifies additional government oversight needed to run the Drug Medi-Cal program.

"The budget proposes 21 positions and $2.2 million ... to continue the state's intensive focus on program integrity and expansion of drug treatment services by recertifying all providers in the state," says the budget summary, which was released Thursday.

The yearlong investigation by CNN and The Center for Investigative Reporting -- which culminated in reports in July on CNN.com and onCNN's "AC360º" television program -- revealed widespread fraud in the drug rehab program, which is part of the largest Medicaid system in the United States. The investigation revealed that convicted felons were operating clinics in violation of the law, clinics charged taxpayers for "ghost" patients and teens had been taken from their group homes for drug rehab even though they had no drug problems.

Regulators who could have stopped the fraud allowed it to continue, despite warnings that the system was being abused, the series found.

The investigation prompted a swift and strong reaction from the state. A total of 177 clinic sites have been suspended and 69 referred to the state's Department of Justice for potential criminal prosecution. The head of the program publicly apologized for the fraud before a legislative oversight hearing in September.

"Due to concerns about program integrity in the Drug Medi-Cal program, DHCS (the California Department of Health Care Services) took steps in July 2013 to eliminate fraud and abuse in the program. ... DHCS has conducted a review of internal operations to improve oversight and monitoring of drug treatment programs, and has improved coordination with counties to ensure appropriate monitoring and recertification of all drug treatment providers," according to the budget summary.

State Sen. Ted Lieu, D-Torrance, chairman of the Senate Business, Professions and Professional Development Committee, said, "I am pleased the governor is proposing additional positions and funding to fight fraud in the Drug Medi-Cal program. We will analyze his proposal during the budget process to see if it is sufficient, but it is a good start."

DHCS spokesman Norman Williams said the money will allow the department to add a wide variety of new positions to scrutinize individual clinics and the department's own procedures.

Some staffers will comb through applications from rehab clinics to be recertified by the state -- a new requirement prompted by the series. Others will analyze data to make sure clinic billing matches the services provided, examine the department's policies and make recommendations for improvement.

"These are positions that will make the (Drug Medi-Cal) program stronger," Williams said. 

"This amount gives us the support necessary to continue our efforts ... in a way that we will ultimately be able to improve the integrity of the program."

Of the $2.2 million, half will come from the state's general fund, and the rest will be matched with federal funds.

All of the clinics featured in the CNN/CIR investigation have either closed on their own or have shut down after being suspended by the state. George Ilouno, one of the clinic operators who continued to stay open despite being out on bail on charges of Medi-Cal fraud and grand theft, pleaded guilty to Drug Medi-Cal fraud in September. He received a one-year suspended jail sentence, three years' probation, paid $90,000 in restitution to the state and must perform 60 days of community service.