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Kirti Vaidya Reddy

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Kirti Reddy is an experienced litigation attorney focused on federal and state investigations involving the False Claims Act, Anti-Kickback Statute, Stark Law and similar fraud statutes.

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Robery Hinyub, III co-authored this article and it was originally published in the American Health Law Association Health Law Connections magazine. Copyright 2025, American Health Law Association, Washington, DC. Reprint permission granted.

As some studies estimate that nearly 23% of the adult population lives with a mental illness, the integration of artificial intelligence (AI) into mental health care has transformative potential in terms of accessibility, cost reduction, personalization and provider efficiency.1 To improve the prediction of risk of mental health disorders and the treatment of mental health, AI is commonly being used for: (1) AI therapy, (2) wearables that interpret bodily signals using sensors and providing assistance when needed, (3) diagnosing and predicting outcomes by analyzing patient data, (4) improving adherence to treatment by using AI to predict when a patient is likely to slip into noncompliance or issue reminders for medication or provider appointments, and (5) personalizing treatments and adjusting individual treatment plans. To support these advancements, the American Medical Association Current Procedural Terminology (CPT) Editorial Board has incorporated billing codes applicable to the use of AI as well as AI taxonomy that provides guidance for classifying various AI-powered medical services applications. While AI has potential to improve behavioral health care, it also presents challenges as technology is advancing at a much faster pace than regulatory controls that ensure safety and efficacy. This article discusses various challenges with the use of AI in the behavioral health setting and regulatory developments that are attempting to provide safeguards in this dynamic space.

While federal funding for addiction treatment programs and research is being cut, more than $50 billion is being distributed to state and local programs from opioid-related lawsuits. There is great debate on the use of these funds as states are implementing structures and plans to distribute the settlement funds.

Without stable housing, recovery for substance use disorder is nearly impossible. “Recovery housing” (or more commonly referred to as a “sober home” or a “sober living residence”) is a broad term that describes a safe, supportive, and substance-free living environment, particularly for individuals transitioning from a formal treatment program to independent living. Recovery homes may have rules, curfews, or encourage therapy, but they also allow residents substantial independence. Studies have confirmed that such communal housing has significant positive effects such as decreased substance use, reduced likelihood of return to use, lower rates of incarceration, increased employment, and improved family relationships.[1] However, insurance payers do not reimburse for a recovering behavioral health patient’s stay in a recovery home because it is not considered medically necessary for treatment, essentially ignoring a vital component in the recovery process. While recovery housing remains a non-reimbursable service, increased attention is being given to the issue following recent legislation—the Consolidated Appropriations Act, 2023[2]—which requires that best practices for recovery housing be made publicly available and published on the Substance Abuse and Mental Health Services Administration’s (SAMHSA’s) website. The Act provides the industry with unified standards for recovery housing, and therefore, it is a significant step towards recovery housing becoming a reimbursable service by health care payers.

Employers must check its employees, contractors and vendors to see if an individual or organization is excluded from participating in federal and/or state programs. While there are a variety of exclusion programs at the federal and state level affecting individuals, entities, contractors and others related and unrelated to healthcare services, this post will address exclusion by the U.S. Department of Health and Human Services, Office of Inspector General (the “OIG”), a well-known entity that excludes individuals or entities from participation in federal healthcare programs. 42 U.S.C. § 1320a-7.

On April 11, 2024, a jury convicted Northern Kentucky Center for Pain Clinic owner Dr. Timothy Ehn (who was not a medical doctor) and medical director, Dr. William Lawrence Seifert, for their roles in a scheme that defrauded Medicare, Medicaid and commercial insurance companies of over $4 million for medically unnecessary urine drug testing.

On April 16, 2024, the U.S. Department of Health and Human Services (HHS) finalized a rule modifying the Confidentiality of Substance Use Disorder (SUD) Patient Records (the Final Rule) codified at 42 C.F.R. Part 2 (Part 2). Part 2 regulations protect the confidentiality of individuals with SUDs and applies to “[r]ecords of identity, diagnosis, prognosis, or treatment of any patient which are maintained in connection with the performance of any program or activity relating to substance use abuse education prevention, training, treatment, rehabilitation, or research” which is conducted, regulated, or directly or indirectly assisted by any department or agency of the United States. The rule increases coordination among providers while strengthening confidentiality and patient protections, and it seeks to become better aligned with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and the Health Information Technology for Economic and Clinical Health Act (HITECH).

In 2023, Arizona uncovered one of the largest behavioral health fraud schemes in the United States. The scheme targeted homeless individuals and/or Native Americans for fraudulent substance use treatment. Organizers of the scheme bribed victims by providing them housing in unlicensed “sober living” homes. They also enrolled victims into Arizona’s American Indian Health Program, even if they were not Native Americans. The victims were then sent to behavioral health treatment centers, not for the purpose of receiving proper treatment, but simply so that the treatment centers could bill for services to the Arizona Health Care Cost Containment System (AHCCCS). The fraud fell into two major categories: (1) fraudulent billings by behavioral health treatment providers and (2) patient brokering (referring patients to addiction treatment providers in exchange for payment).