INDIANAPOLIS | Kathleen McCoy, a South Bend child therapist, says she saw the Madison Center of South Bend put children with mental and behavioral health problems in treatment they didn't need and falsified records to get the government to pay for it.

But instead of keeping quiet -- and keeping her job -- McCoy became a whistle-blower and filed suit to stop the alleged Medicaid fraud. She says she was then forced to resign.

"As a mental health professional, I intimately knew the victims and was closely connected to them and their families," McCoy said. "I had to choose to be either part of the problem or part of the solution."

The state of Indiana joined McCoy's lawsuit in June, asking the court to order the mental health facility to repay Indiana's portion of fraudulent claims Madison Center made to Medicaid, the joint federal-state health insurance program for the poor. The case is pending in federal court.

Attorney General Greg Zoeller said Thursday he hopes McCoy's actions will inspire other Indiana health professionals who witness Medicaid fraud to report it or sue to stop it.

"This is an area where if you don't have someone from the inside bring it to your attention, they are very difficult cases to make on your own," Zoeller said.

The Republican attorney general urged Hoosiers who witness or know of Medicaid fraud to report it to his office or contact an attorney to file a "qui tam" (pronounced "key tam") lawsuit.

In a qui tam case, a whistle-blower's allegations are kept confidential while the government investigates the claim. If the government joins the case, as Indiana did with McCoy, and the government prevails, the whistle-blower is entitled to between 15 percent and 30 percent of the damages awarded by the court.

Allen K. Pope, director of the Medicaid Fraud Control Unit, said the most common frauds are kickbacks, billing simple procedures as more costly procedures and theft of Medicaid patient names and identification numbers.