This is the accessible text file for GAO report number GAO-08-713T
entitled 'Residential Programs: Selected Cases of Death, Abuse, and
Deceptive Marketing' which was released on April 24, 2008.
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Background:
Since the early 1990s, state agencies and private companies have set up
hundreds of residential programs and facilities in the United States.
Many of these programs are intended to provide a less restrictive
alternative to incarceration or hospitalization for youth who may
require intervention to address emotional or behavioral challenges. A
wide array of government or private entities, including government
agencies and faith-based organizations, operate these programs. Some
residential programs advertise themselves as focusing on a specific
client type, such as those with substance abuse disorders or suicidal
tendencies.
As we reported in our October 2007 testimony, no federal laws define
what constitutes a residential program, nor are there any standard,
commonly recognized definitions for specific types of programs. For our
purposes, we define programs based on the characteristics we have
identified during our work. For example:
* Wilderness therapy programs place youth in different natural
environments, including forests, mountains, and deserts. According to
wilderness therapy program material, these settings are intended to
remove the "distractions" and "temptations" of modern life from teens,
forcing them to focus on themselves and their relationships. These
programs are typically 28 days in length at a minimum, but parents can
continue to enroll their child for longer at an additional cost.
* Boot camps are residential programs in which strict discipline and
regime are dominant principles. Many boot camps emphasize behavioral
modification elements, and some military-style boot camps also
emphasize uniformity and austere living conditions. Boot camps might be
included as part of a wilderness therapy school or therapeutic
boarding, but many boot camps exist independently. These programs are
offered year-round and some summer programs last up to 3 months.
* Boarding schools (also called academies) are generally advertised as
providing academic education beyond the survival skills a wilderness
therapy program might teach. These programs frequently enroll youth
whose parents force them to attend against their will. The schools can
include fences and other security measures to ensure that youth do not
leave without permission. While these programs advertise year-round
education, the length of stay varies for each student; contracts can
require stays of up to 21 months or more.
* Ranch programs typically emphasize remoteness and large, open spaces
available on program property. Many ranch programs advertise the
therapeutic value of ranch-related work. These programs also generally
provide an opportunity for youth to help care for horses and other
animals. Although we could not determine the length of a typical stay
at ranch programs, they operate year-round and take students for as
long as 18 months.
See appendix I for further information about the location of various
types of residential programs across the United States. In addition to
these programs, the industry includes a variety of ancillary services.
These include referral services and educational consultants to assist
parents in selecting a program, along with transport services to pick
up a youth and bring him or her to the program location. Parents
frequently use a transport service if their child is unwilling to
attend the program.
Private programs generally charge high tuition costs. For example, one
wilderness program stated that their program costs over $13,000 for 28
days. In addition to tuition costs, these programs frequently charge
additional fees for enrollment, uniforms, medical care, supplemental
therapy, and other services--all of which vary by program and can add
up to thousands of extra dollars. Costs for ancillary services vary.
The cost for transport services depends on a number of factors,
including distance traveled and the means of transportation. Referral
services do not charge parents fees, but educational consultants do and
typically charge thousands of dollars. Financial and loan services are
also available to assist parents in covering the expense of residential
programs and are often advertised by programs and referral services.
See appendix II for further information about the cost of residential
programs across the United States.
There are no federal oversight laws--including reporting requirements-
-pertaining specifically to private residential programs, referral
services, educational consultants, or transportation services, with one
limited exception. The U.S. Department of Health and Human Services
oversees psychiatric residential treatment facilities (PRTFs) receiving
Medicaid funds. In order to be eligible to receive funds under
Medicaid, PRTFs must abide by regulations that govern the use of
restraint and seclusion techniques on patients. They are also required
to report serious incidents to both state Medicaid agencies and, unless
prohibited by state law, state Protection and Advocacy agencies. In
addition, the regulations require PRTFs to report patient deaths to the
Centers for Medicare and Medicaid Services Regional Office.[Footnote 2]
Cases of Death and Abuse at Selected Residential Programs:
In the eight closed cases we examined, ineffective management and
operating practices, in addition to untrained staff, contributed to the
death and abuse of youth enrolled in selected programs. Furthermore,
two cases of death were very similar to cases from our October 2007
testimony, in that staff ignored the serious medical complaints of
youth until it was too late. The practice of physical restraint figured
prominently in three of the cases. The restraint used for these cases
primarily involved one or more staff members physically holding down a
youth. Ineffective operating practices led to the most egregious cases
of death and abuse, as the cases exposed problems with the entire
operation of the program. Specifically, the failure of program leaders
to ensure that appropriate policies and procedures were in place to
deal with the serious problems of youth; ineffective management
practices that led to questionable therapeutic or operational
practices; and the failure of the program to share information about
enrolled youth with the staff members who were attending to them
created the environments that resulted in abuse and death. Moreover, in
cases involving abuse, the abuse was systemic in the program and not
limited to the incident discussed in our case studies. In three of the
eight cases we examined, the victim was placed in the program by the
state or in consultation with state authorities.[Footnote 3]
See table 1 for a summary of the cases of death we examined.
Table 1: Summary of Eight Closed Cases (Four Deaths):
Case: 1;
Victim information: Male, 16, California resident;
Program Attended: Arizona boot camp;
Date of death: March 1998;
Cause of death: Empyema (accumulation of infectious pus in the chest);
Case details:
* Victim suffered from asthma and chronic bronchitis;
* For a period of several weeks, victim complained of chest pain and
difficulty breathing, but a program nurse said that his breathing
problems were in his head;
* Staff punished him for refusing an assigned task, and forced him to
do push-ups and carry cinder blocks;
* Victim eventually became unresponsive, at which point staff finally
realized that his condition required medical attention;
* Victim was declared dead at a hospital;
* Autopsy found more than 70 injuries, including some from blunt force,
on his body, indicating that the victim had been physically abused
before his death.
Case: 2;
Victim information: Male, 14, Texas resident;
Program Attended: Texas wilderness therapy program;
Date of death: September 2004;
Cause of death: Cardiopulmonary Arrest;
Case details:
* Victim's hiking group became lost and spent several unforeseen hours
in temperatures that reached 98 degrees (a reported heat index of near
105 degrees);
* During the hike, victim stopped and complained that he was too hot
and tired and refused to go on, but he was encouraged to continue;
* Victim said he didn't feel well and was dizzy, then stumbled and
fell;
* Staff thought he was "faking";
* When victim began to vomit, staff rolled him on his side;
* Victim stopped breathing and was later pronounced dead;
* Died on federal land.
Case: 3;
Victim information: Male, 12, Texas resident;
Program Attended: Texas residential treatment center;
Date of death: December 2005;
Cause of death: Suffocation;
Case details:
* Victim was angry and started banging his head against the ground;
* A 5 feet 10 inch, muscular staff member placed the 87-pound victim
into a facedown restraint;
* Several witnesses claimed they saw the staff member lying across the
back of the victim;
* Victim complained he couldn't breathe and eventually became
unresponsive, at which point the staff member removed the restraint;
* After the victim had lain unresponsive for about a minute, the staff
member rolled him over and found that he was pale;
* Attempts to revive victim failed.
Case: 4;
Victim information: Male, 16, Pennsylvania resident;
Program Attended: Pennsylvania psychiatric residential treatment
center;
Date of death: February 2006;
Cause of death: Abnormal heartbeat;
Case details:
* Victim was placed under "intense observation" for attempting to run
away from the program;
* Victim was ordered to put the hood of his sweatshirt down so that
staff could see his face, but victim refused;
* Three staff members brought the victim to another room and placed him
in restraint face down;
* After 10 minutes of the restraint, victim complained that he couldn't
breathe;
* Despite staff attempts to make the victim more comfortable, victim
became unresponsive;
* Victim died at the hospital 3 hours later from an abnormal heartbeat;
* Program was aware victim suffered from asthma, but staff members who
restrained the victim claimed they were not aware of this.
Source: Records including police reports, legal documents, and state
investigative documents.
[End of table]
See table 2 for a summary of the cases of abuse we examined. For
reporting purposes, we continue the numbering of case studies in this
table, starting with five.
Table 2: Summary of Eight Closed Cases (Four Abuse):
Case: 5;
Victim information: Male, 14-18, New York resident;
Program attended: New Jersey residential behavior modification program;
Date(s) of abuse: 1994 to 1998;
Case details:
* Victim and parents were interviewed separately by staff during his
first visit to the program;
* Victim encountered 6 hours of intense questioning during which he
felt forced to confess to activities he says he did not take part in,
such as illegal drug use and sex;
* Victim was restrained more than 250 times while attending the
program; in at least two cases restraint lasted longer than 12 hours;
* One method of restraint included wrapping the victim in a blanket and
tying him up;
* Victim was required to attend the program for 4 years and was held
against his will after his 18th birthday.
Case: 6;
Victim information: Male, 17, Washington resident;
Program attended: Mississippi faith-based academy and boot camp;
Date(s) of abuse: April 1999;
Case details:
* Victim jumped off a building and broke his left arm; the bone of his
arm was exposed, but he was not given medical attention for 2 weeks;
* Students and staff harassed the victim, with some boys subjecting him
to physical abuse;
* On one occasion, victim was beaten unconscious by staff and other
students;
* On another occasion, a staff member's pit bull bit the victim in the
crotch;
* Victim had previously attended boarding school in case 7.
Case: 7;
Victim information: Male, 15, California resident;
Program attended: Utah boarding school;
Date(s) of abuse: November 2004;
Case details:
* Victim was verbally abused and punched, kicked, and slapped by other
students, under direction of one of the school's owners;
* Victim was hit and pushed down stairs by the same school owner;
* On multiple occasions throughout his stay in the school, victim was
locked in a bathroom and a closet and forced to sleep on a shelf as
punishment.
Case: 8;
Victim information: Male, 14, California resident;
Program attended: Colorado boarding school;
Date(s) of abuse: May 2006;
Case details:
* Staff member assaulted victim by grabbing him by the arm, pushing him
into a stairwell, and slamming his face into a wall;
* Victim's face was visibly bruised, including a black eye;
* Victim was forced to kneel on the floor for hours with his knees at
the point where the floor meets the wall and his nose touching the
wall.
Source: Records including police reports, legal documents, and state
investigative documents.
[End of table]
The following three narratives describe selected cases in further
detail.
Case 3 (Death):
The victim, who died in 2005, was a 12-year-old male. Documents
obtained from the Texas Department of Family and Protective Services
indicate that the victim had a troubled family background. He was taken
into state care along with his siblings at the age of 6. According to
child protective service workers who visited the family's home, the
victim and his siblings were found unsupervised and without
electricity, water, or food. Some of the children were huddled over a
space heater, which was connected to a neighbor's house by extension
cord, in order to keep warm. As a ward of the state, the victim spent
several years in various foster placements and youth programs before
being placed in a private residential treatment center in August 2005.
The program advertised itself as a "unique facility" that specialized
in services for boys with learning disabilities and behavioral or
emotional issues. The victim's caretakers chose to place him in this
program because he was emotionally disturbed. Records indicate that he
was covered by Medicaid.
On the evening of his death, the victim refused to take a shower and
was ordered to sit on an outside porch. According to police reports,
the victim began to bang his head repeatedly against the concrete floor
of the porch, leading a staff member to drag him away from the porch
and place him in a "lying basket restraint" for his own protection.
During this restraint, the 4 feet 9½ inch tall, 87-pound boy was forced
to lie on his stomach with his arms crossed under him as the staff
member, a muscular male 5 feet 10 inches tall, held him still. Some of
the children who witnessed the restraint said they saw the staff member
lying across the victim's back. During the restraint, the victim fought
against the staff member and yelled at him to stop. The staff member
told police that the victim complained that he could not breathe, but
added that children "always say that they cannot breathe during a
restraint." According to police reports, after about 10 minutes of
forced restraint, the staff member observed that the victim had calmed
down and was no longer fighting back. The staff member slowly released
the restraint and asked the victim if he wanted a jacket. The victim
did not respond. The staff member told police he interpreted the
victim's silence as an unwillingness to talk due to anger about the
restraint. He said he waited for a minute while the victim lay silently
on the ground. When the victim did not respond to his question a second
time, he tapped the victim on the shoulder and rolled him over. The
staff member observed that the victim was pale and could not detect a
pulse. All efforts to revive the victim failed, and he was declared
dead at a nearby hospital.
When the staff member demonstrated his restraint technique for the
police, they found that his technique violated the restraint policies
of the program. These policies prohibited staff from placing any
pressure on the back of a person being restrained. The report added
that this staff member was reprimanded for injuring a youth in 2002 as
a result of improper restraint. After this incident, program
administrators banned the staff member from participating in restraints
for 1 month. The reprimand issued by program administrators over this
incident noted that the staff member had actually trained other staff
members in performing restraints, making the matter more serious. The
police reports also cite one of the staff member's performance
evaluations that noted that he had problems with his temper. According
to the reports, one of the youth in the program said the staff member
could become agitated when putting youth in restraint.
Although the Texas Department of Family and Protective Services alleged
that the victim's death was due to physical abuse, the official
certificate of death stated that it was an accident and a grand jury
declined to press charges against the staff member performing the
restraint. However, the victim's siblings obtained a civil settlement
against the program and the staff member for an undisclosed amount. The
program remained open until May 2006, when a 12-year-old boy drowned on
a bike outing with the program. According to records from law
enforcement, child protection workers, and the program, the boy fell
into the water of a rain-swollen creek and was sucked into a culvert.
He died after several weeks on life support. The Texas Department of
Family and Protective Services cited negligent staff supervision in its
review of this second death and revoked the program's license to
operate as a residential treatment center. However, the program's
directors also ran a summer camp for children with learning
disabilities and social disorders licensed by the Texas Department of
State Health Services, until they resigned from their positions in
March 2008.
Case 4 (Death):
The victim was 16 years old when he died, in February 2006, at a
private psychiatric residential treatment facility in Pennsylvania for
boys with behavioral or emotional problems. He was a large boy--6 feet
1 inch in height and weighing about 250 pounds--and suffered from
bipolar disorder and asthma. The cost for placement in this facility
was primarily paid for by Medicaid.
According to state investigative documents we obtained, the victim was
placed in intensive observation after he attempted to run away. As part
of the intensive observation, he was forced to sit in a chair in the
hallway of the facility and was restricted from participating in some
activities with other residents. On the day of his death, staff allowed
the victim to participate in arts, crafts, and games with the other
youth, but would not let him leave the living area to attend other
recreational activities. Instead, staff told the victim that he would
have to return to his chair in the hallway. In addition, staff told him
that he would have to move his chair so that he could not see the
television in another room. The victim complied, moving his chair out
of view of the television, but put up the hood of his sweatshirt and
turned his back toward the staff. The staff ordered him to take down
his hood but he refused. When one of the staff walked up to him and
pulled his hood down, the victim jumped out of his chair and made a
threatening posture with his fists, saying he did not want to be
touched. The staff member and two coworkers then brought the victim to
another room and held him facedown on the floor with his arms pulled up
behind his back. The victim struggled against the restraint, yelling
and trying to kick the three staff members holding him down. After
about 10 minutes, the victim became limp and started breathing heavily.
He complained that he was having difficulties breathing. One staff
member unzipped his sweatshirt and loosened the collar of his shirt,
but rather than improve, the victim became unresponsive. The staff
called emergency services and began CPR. The victim was taken by
ambulance to a hospital, where he died a little more than 3 hours
later. In the victim's autopsy report his death was ruled accidental,
as caused by asphyxia and an abnormal heartbeat (cardiac dysrhythmia).
Following the victim's death, an investigation by the Pennsylvania
Department of Health found that the policies and procedures for youth
under intense observation do not prohibit them from watching
television, nor do they require that youth keep their face visible to
staff at all times. The investigation also found that the facility had
documentation of the victim's history of asthma, and that its training
manual for restraint procedures cautioned against the risk of decreased
oxygen intake during restraints for children with asthma. However, all
three staff members involved in the restraint told investigators that
they were unaware of any medical conditions that needed to be
considered when restraining the victim. In addition, the investigation
found that the facility did not provide timely training on the
appropriate and safe use of restraint. The state's Protection and
Advocacy organization, Pennsylvania Protection & Advocacy, Inc. (PP&A),
conducted its own investigation of the facility and found that staff
members inappropriately restrained children in lieu of appropriate
behavioral interventions, which resulted in neglect and abuse. Of the
45 residents interviewed by PP&A investigators, 29 said that staff at
the facility subjected them to restraints. The residents reported that
the restraints could last as long as 90 minutes and caused breathing
difficulties. They also stated that staff often placed their knees on
residents' backs and necks during restraints. One resident reported
that the blood vessels in his eyes "popped" during a restraint. Another
resident said that his nose hit the ground during the restraint,
causing him to choke on his own blood. Further, some of the residents
reported that staff provoked them and that staff did not make any
effort to de-escalate the provocations before implementing a restraint.
No criminal charges were filed in regard to the victim's death. The
victim's mother filed a civil suit over her son's death against the
facility, which is currently pending. Her son's death was not the only
fatal incident at this facility. Only 2 months before the victim's
death, in December 2005, a 17-year-old boy collapsed at the facility
after a physical education class, and later died at a nearby hospital.
His death was attributed to an enlarged heart. This facility remains
open.
Case 5 (Abuse):
This abuse victim was sent to a private drug and addiction treatment
program in July 1994 at the age of 14. He was attending public school
in the major metropolitan area where his family lived. The abuse victim
told us that he had problems at school, including poor grades, truancy,
a fight with other students, and that he had been suspended. After the
victim was questioned by police about an assault on a girl at his
school, a family friend with ties to the behavior modification program
recommended the program to the victim's parents. According to the
victim, his first visit to the school turned into an intense intake
session where he was interviewed by two program patients. Although the
victim denied using drugs, the interviewers insisted that he was not
being honest. After about 6 hours of questioning, the victim told the
interviewers what he thought they wanted to hear--that he was smoking
pot, did cocaine, and cut school to get high--so that he could end the
interview. The interviewers used these statements to convince the
victim's parents to sign him into the program for immediate
intervention and treatment. He ended up staying in the program for the
next 4 years--even after he turned 18 and was held against his will.
According to program records, the program's part-time psychiatrist did
not examine or diagnose him until he had been in the program for 14
days. This lack of psychological care continued, as program records
indicate he was examined by the psychiatrist only four times during his
entire stay. He was restrained more than 250 times while in the
program, with at least 46 restraints lasting one hour or longer. The
victim said some restraints were applied by a group of four or five
staff members and fellow patients. According to the victim, they held
him on his back, with one person holding his head and one person
holding each limb. These restraints were imposed whenever the victim
showed any reluctance to do what he was told, or, the victim told us,
for doing some things without first obtaining permission from program
staff. On one occasion, while he was staying with a host family and
other patients, he attempted to escape from the program. The victim
claims that they restrained him by wrapping him in a blanket and tying
him up. According to the victim, when he turned 18, he submitted a
request to leave the program but his request was denied because he had
not followed the proper procedure and was a danger to himself. For
expressing his desire to leave the program, he was stripped of all
progress he had made to that point, and was prevented from further
advancing until the program director decided he was be eligible.
Incident reports filed by program staff document that after he had
turned 18, the victim was restrained on 26 separate days, with at least
two restraints lasting more than 12 hours.
According to program rules, failure of the parents to follow program
rules and fully support and participate in the program would jeopardize
their son's treatment and progress and put him at risk of expulsion.
Having been led to believe that the program was the only way to help
him overcome his alleged addictions and problems, his family complied
with the program's demands. Moreover, the program required parents and
siblings over age 8 to attend twice weekly group therapy meetings.
According to the victim, these meetings lasted for many hours,
sometimes stretching into the early morning. He added that when the
victim's father refused to attend the therapy meetings for fear of
losing his job, the program told him to quit. When he would not quit
his job or miss work to attend the meetings, the victim said that the
program convinced his mother to leave her husband. After his parents
separated, the program would not allow the victim to have contact with
his father. The victim said that the program never told the victim's
family that all the drug tests they performed on him returned negative
results, including the initial tests done when he entered the program.
In February 1998, the State of New Jersey terminated the program's
participation in the Medicaid program, holding that the program did not
qualify as a children's partial care mental health program because of
its noncompliance with client rights standards and its failure to meet
various staff requirements, such as staff-to-client ratios and
requisite education and experience levels for staff. The program
subsequently closed in November 1998, citing financial problems. About
a year later, in September 1999, an administrative law judge rejected
an appeal by the program to overrule the state's termination of its
Medicaid participation. The judge noted in his decision that the
program effectively operated as a full-time residential facility.
Moreover, he noted that all group staff at the program were either
current or former patients, and only two members of the program staff
met the educational requirements to qualify as direct-care
professionals.
The victim filed a civil lawsuit against the program, director, and a
psychiatrist, which resulted in a $3.75 million settlement. Other civil
suits filed by former patients included one patient who was committed
to the program at the age of 13 and spent 13 years in the program. This
patient reached a similar settlement against the program, director, and
psychiatrists for the sum of $6.5 million. In addition, a third former
patient secured a $4.5 million settlement against the program,
director, and psychiatrists.
Deceptive Marketing and Questionable Practices in Selected Programs and
Services:
Posing as fictitious parents with fictitious troubled teenagers, we
found examples of deceptive marketing and questionable practices
related to 10 private residential programs and 4 referral services. The
most egregious deceptive marketing practices related to tax incentives
and health insurance reimbursement, and were intended to make the high
price of the programs appear more manageable for our fictitious
parents. We also found examples of false statements and misleading
representations related to a range of issues including education and
admissions, as well as undisclosed conflicts of interest. In addition,
we identified examples of questionable practices related to the health
of youth enrolled in programs and the method of convincing reluctant
parents to enroll their children. Although general consumer protection
laws apply to these programs and services, there are no federal laws or
regulations on marketing content and practices specific to the
residential program industry.
A link to selected audio clips from these calls is available at:
[hyperlink,
http://www.gao.gov/media/video/gao-08-713t/]. See table 3
for a selection of representations made by programs and referral
agents.
Table 3: Cases of Deceptive Marketing and Questionable Practices:
Source: 1. 501(c)(3) charity foundation;
Representation: Foundation representative described a funding mechanism
whereby (1) parents solicit friends, relatives, and others to make
financial donations to the foundation and have them specify on their
donation checks a numbered code representing the child; (2) the
foundation tracks the donation amount on behalf of the child, then
deducts an administrative fee and pays the program the remaining
donation amount on behalf of that child; and (3) friends and family
deduct the charitable donations on their tax return;
Comments: An IRS official told us that the foundation is potentially
committing tax fraud and that individuals who follow the program's
recommendation may be responsible for back taxes, as well as penalties
and interest for taking an improper charitable deduction.
Source: 2. Montana boarding school;
Representation: Program representatives told one fictitious parent that
an application form must be filled out before a child is admitted to
the boarding school;
Comments: After a call to this program by a different fictitious
parent, we received an acceptance letter for our fictitious child even
though we never applied for admission.
Source: 3. Texas wilderness program;
Representation: Program representative stated that earth science
credits earned in the program are "fully transferable" and that other
institutions "can't deny" the credit;
Comments: Education credits can be denied by schools for any reason and
are not intrinsically transferable.
Source: 4. Texas wilderness program (same as case number 3);
Representation: Program representative said that the program will
provide parents with a detailed bill after their child completes the
program and that health insurance companies will reimburse expenses;
Comments: Representatives for both a health care insurer and a
behavioral health company told us that parents who follow this advice
run a real risk of not being reimbursed, especially if the health
insurance company requires pre-approval of counseling or other mental
health services.
Source: 5. Texas wilderness program (same as case numbers 3 and 4);
Representation: Program representative said a trade organization, the
National Association of Therapeutic Schools and Programs (NATSAP),
"absolutely" performs inspections of the program;
Comments: NATSAP does not perform inspections of its member programs.
Source: 6. Referral service "A";
Representation: Referral agent stated that behavioral modification
schools are "specialty schools" and that tuition costs are tax
deductible under Section 213 of the Internal Revenue Tax code;
Comments: The two programs recommended by the referral agent do not
appear to meet the requirements of IRS regulations for special schools;
according to an IRS authority on Section 213 with whom we spoke, this
is questionable tax advice and parents should consult a tax advisor.
Source: 7. Referral service "A";
Representation: The referral agent warned our fictitious parent that
his wife might "freak out" about sending her daughter to a boarding
school, and stated: "I want you to tell her it's a college prep
boarding school...if she thinks that you want to send her daughter to a
place where there are drug addicts and people that are all screwed up,
she will look at you and say 'no way'";
Comments: In order to secure the business of our fictitious parent, the
referral agent gave us questionable ethical advice.
Source: 8. Referral service "B";
Representation: Referral agent stated that the program he recommended
"feed
the child a whole-grain diet" and that along with exercise and
rest, "the bipolar, the depression, those kind of things, they just go
away after awhile";
Comments: Although diet and sleep may be beneficial, there was no
discussion during the call for a health care provider to confirm the
child's diagnosis of bipolar disorder or depression and whether to
continue medication.
Source: 9. Referral service "B";
Representation: Web site for this referral service states: "We will
look at your special situation and help you select the best school for
your teen with individual attention";
Comments: Referral agents recommended the same Missouri boot camp to
three different fictitious parents with three fictitious children
having very different problems; the referral service is owned by the
husband of the woman who owns the Missouri boot camp, but the conflict
of interest was not disclosed.
Source: 10. Referral services "A" and "C";
Representation: When investigators called the phone number of referral
service "A" the receptionist answered the call using the name of
referral service "C";
Comments: Referral services "A" and "C" represent themselves as
separate entities, with separate names, Web sites, phone numbers, and
magazine advertisements, suggesting that they provide objective advice.
Source: GAO.
[End of table]
Case 1: One of our fictitious parents called this foundation pretending
to be a parent who could not afford the cost of a residential program
for his child. A representative of the foundation explained that their
"most popular" method of fund-raising involved the friends and
relatives of the enrolled youth making tax-deductible donations to the
foundation, which in turn credited 90 percent of these "donations"
specifically to pay for tuition in a program the child was attending.
The foundation assigns a code number to each child, which parents
ensure is listed on the donation checks. The representative also
provided a fund-raising packet by mail that instructs the parents of
troubled teens: "You are able to contact family, friends, business
acquaintances, affiliates, churches, and professional/fraternal
organizations that you know. Don't forget corporate matching funds
opportunities from your employer too." The packet also included two
template letters to send in soliciting the funds. According to an IRS
official with the Tax Exempt and Governmental Entities Division, this
practice is inappropriate and represents potential tax fraud on the
part of the foundation. Furthermore, those who claim inappropriate
deductions in this fashion would be responsible for back taxes, as well
as penalties and interest. Based on this information, we referred this
nonprofit foundation to the IRS for criminal investigation.
Case 2: The program representative at a Montana boarding school told
our fictitious parent that they must submit an application form before
their child can be accepted to the school. However, after a separate
undercover call made to this school by one of our fictitious parents,
the program representative e-mailed us stating that our fictitious
daughter had been approved for admission into the program and
subsequently sent an acceptance letter. The acceptance letter stated
that our fictitious child "has been approved for our school here in
Montana." This admission was based entirely on one 30-minute telephone
conversation, in which our fictitious parent described his daughter as
a 13-year-old who takes the psychotropic medication Risperdal, attends
weekly therapy sessions, has bipolar disorder, and been diagnosed with
Reactive Attachment Disorder. We did not fill out an application form
for the school. Moreover, this program had previously recommended that
our fictitious parents seek advice from the 501(c)(3)foundation
discussed in Case 1 to help finance the cost of the program. It appears
that parents do not have assurance about the integrity of the
admissions process at this boarding school.
Case 4: One fictitious parent asked the representative for a Texas
wilderness therapy program whether there was any possibility that a
health insurance company would cover the cost of the program. The
representative replied that, at the completion of the program, the
bookkeeper for the program would generate an itemized statement of
billable charges that could be submitted to an insurance company for
reimbursement. She emphasized that we should not call ahead of time to
seek pre-approval, because then we would be "up the creek." She added
that this was "just the way insurance companies like it" and stated
that health insurance companies reimburse "quite a bit." She gave an
example of one insurance company that reimbursed for over $11,000--
almost the entire cost of the 28-day wilderness program.
Representatives for both a health care insurer and a behavioral health
company told us that parents who follow this advice run a real risk of
not being reimbursed, especially if the health insurance company
requires pre-approval of counseling or other mental health services. In
this case, our fictitious parent was being led into believing that a
large portion of the tuition for the program would be covered by health
insurance even if pre-approval for the charges was not obtained in
writing in advance of the services.
Case 6: One referral agent we called stated that behavioral
modification schools are "specialty schools" and that tuition costs are
tax deductible under Section 213 of the Internal Revenue Tax code. The
referral agent also stated that transportation costs related to
bringing our fictitious child to and from the school were tax
deductible under this section. However, the two programs recommended by
the referral service do not appear to meet the requirements of IRS
regulations for special schools. Our review of Section 213 of the
Internal Revenue Tax code shows that it relates to medical expenses and
specifies that, if medical expenses and transportation for treatment
exceed 7.5 percent of a taxpayer's adjusted gross income, the excess
costs can be deducted on Schedule A of IRS Form 1040. Even if these
expenses were deductible under this section, only expenses above 7.5
percent of the adjusted gross income would be deductible, rather than
the full amount as suggested by the referral agent. An IRS authority on
Section 213 with whom we spoke stated that the referral service
provided us with questionable tax advice and that parents should
consult a tax advisor before attempting to claim a deduction under this
section. Parents improperly taking this deduction could be responsible
for back taxes, as well as penalties and interest.
Case 9: On its Web site, referral service "B" invites parents to call a
toll-free number and states: "We will look at your special situation
and help you select the best school for your teen with individual
attention." Our undercover investigators called this referral service
pretending to be three separate fictitious parents and described three
separate fictitious children to the agents who answered the phone.
Despite these three different scenarios, we found the referral service
recommended the same residential program all three times--a Missouri
boot camp. Our investigation into this referral service revealed that
the owner of the referral service is the husband of the boot camp
owner. This relationship, was not disclosed to our fictitious parents
during our telephone calls, which raises the issue of a potential
conflict of interest. It appears that parents who call this referral
service will not receive the objective advice they expect based on
marketing information on the Web site.
Mr. Chairman and Members of the Committee, this concludes my statement.
We would be pleased to answer any questions that you may have at this
time.
Contacts and Acknowledgments:
[End of section]
For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-6722 or http://www.gao.gov/cgi-bin/getrpt?GAO-08-146T] (Washington, D.C.: Oct.
10, 2007).
[2] 42 C.F.R. §§ 483.350-.376.
[3] For an illustration showing the states where victims resided and
the location of the programs they attended, both for this testimony and
our October 2007 testimony, see app. I.
[End of section]
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