Dear Gov. Newsom: Thanks for the new laws. Thanks for the new inspectors. Thanks, I guess, for trying, even a little.
But — and isn’t there always a but? — it’s not working. And it’s maddening that the fraud and abuse still plaguing California’s addiction treatment industry aren’t being exposed by California’s regulators, or California’s attorney general, or its district attorneys or insurance commissioner, but by the federal Department of Justice and the insurance companies footing the bills. To wit:
Last month, Aetna filed a lawsuit against a slew of rehabs and their operators in Orange, Los Angeles and Riverside counties, claiming fraud, negligent misrepresentation, economic interference, conspiracy under the Racketeer Influenced and Corrupt Organizations Act and unjust enrichment.
“The various schemes perpetrated by Defendants here are particularly disturbing,” the Aetna suit says. “Since at least 2021, Defendants have targeted vulnerable Aetna members who suffer from alcohol and/or substance dependency issues as part of a concerted effort to profit at their expense. Defendants used the patients for health benefit payments under the lie of helping them, while doing the exact opposite.
“Defendants lured patients into their programs by offering them kickbacks in the form of … free or low-cost living arrangements in ‘sober living homes’ located in highly desirable locations throughout California. In reality, the sober living homes were little more than drug dens, used to ensure patients remained in Defendants’ treatment ‘programs’ for as long as possible…. ensuring reliance on treatment rather than recovery from treatment.”
In the rare instance where a patient progressed while still retaining benefits, Aetna said the operators encouraged drug use so the treatment cycle (and billings) could start anew.
“Defendants weaponized addiction and pushed relapse to prevent recovery,” the suit says. “Far from performing services for their patients, Defendants actively worked to harm their patients.”
Named in the suit are:
- Nathan Samuel Young, aka Pablo Lopez, of Rodeo Recovery (Rodeo Drive, Beverly Hills), Get Real Recovery (Rancho Viejo Road, San Juan Capistrano), Healing Path Recovery, Healing Path Detox (Amberleaf Circle, Huntington Beach), Sunset Rehab (Santa Monica Boulevard, West Hollywood), Natural Rest House (Ocotillo Drive, La Quinta) and Ocean Valley Behavioral Health (Mauve Drive, Santa Ana);
- David Young, aka Sancho Lopez, a family member of Nathan Young who “actively participates in the operations of the various entities, including Rodeo Recovery”;
- Marc Adler of Helping Hands Rehabilitation Clinic (North Highland Avenue, Los Angeles);
- Jose Ricardo Toscano Maldonado of Joser Forever (South La Cienega Boulevard, Los Angeles);
- Ani Mirzayan of Revive Premier Treatment Center (Ventura Boulevard, Studio City);
- Ali Beheshti, who operates the Zealie medical billing company in Laguna Beach, which submitted a majority of the bills to Aetna that resulted in what it calls wrongful payments.
Aetna paid nearly $40 million in fraudulent health care claims to these entities, most of it to Helping Hands ($20.8 million) and Joser Forever ($15.1 million), it said.
We reached out by phone and email to the treatment centers and those who’ve served as their lawyers. Most did not respond.
“We want to underscore at the start that the allegations against Zealie in the Aetna lawsuit are without merit, and we are actively pursuing the dismissal of all claims,” said attorney Aaron Goodman by email. “Zealie’s association with this client is solely limited to handling their billing, so the accusations do not pertain to Zealie. Zealie’s unwavering focus remains on their mission to administratively support behavioral health treatment centers in delivering optimal care to their patients.”
Several defendants requested more time from the federal court to file the required “answers” to Aetna’s suit, which typically deny wrongdoing.
Give ’em a license!
Now, Gov. Newsom, state regulators might have gotten in front of this alleged skullduggery back in 2020, when the city of Beverly Hills sued Nathan Young and Rodeo Recovery for violation of the Controlled Substances Act, being a public nuisance and engaging in unfair business practices.
“The Illegal Drug Rehab Facility Operated At The Subject Property Is A Haven For Drug Abuse And Other Criminal Conduct,” the suit said of the “flop house” on Rodeo Drive run by Young and Rodeo Recovery.
One resident described it as “a place to crash and smoke fentanyl,” where Young provided drugs such as black tar heroin and methamphetamines to residents at “significantly reduced prices.” Beverly Hills police responded to multiple reports of overdoses, illegal narcotics, armed robbery, vandalism, loud verbal altercations and marijuana use, according to the suit.
“Police also learned that 10-15 people live in the Subject Property. At any given time, there are multiple people sleeping in each room and the garage and living rooms are both used as sleeping quarters with mattresses on the floor,” the suit said. “….(E)ach ‘client’ … provides insurance to secure a ‘bed’ and submits to urine drug tests about three times a week.”
Expenses were completely covered by the insurance company, a resident told the city.
“State regulators have attempted to stem the proliferation of these illicit businesses but simply do not have the resources to adequately police them,” Beverly Hills said. “And, due to the ease of establishing a business, even if a program shutters it can spring up almost anywhere doing the same things in the same manner and in the same networks.
“The clients, whether they legitimately want to be sober or those just going through the appearance of doing so to satisfy legal or third-party requirements, are vulnerable to manipulation and abuse.”
Attorneys for Young and Rodeo Recovery denied wrongdoing. Their actions were at all times reasonable and taken in good faith, their response said.
The parties made their peace. The state granted Rodeo Recovery a license to operate an addiction treatment facility at the location. It is part of the web where Aetna alleges fraud.
The recipe
How did this alleged fraud work? You’ve read the recipe a billion times, Gov. Newsom. We’ve been harping on it since 2017, when our Rehab Riviera series began. Crusading lawmakers have channeled outrage over it as they embraced new laws to crack down on the fraud-plagued industry.
Suffice to say that laws without enforcement are worth diddly squat.
First, they find patients with good private insurance. “To continue growing, Defendants hired some patients as ‘body brokers,’ sending them out to find other addicts to cycle through their facilities,” the suit says.
No insurance? No problem. “If a patient lacked coverage, Defendants schemed to sign them up, such as by adding them as ‘dependents’ to the health plans of other patients with whom they had no familial relationship,” the suit says.
These private rehabs are technically “out of network,” meaning the insurer won’t cover the whole bill, putting patients on the hook for the extra. This cost-sharing is important because it sensitizes folks to the costs of care and leads them to seek out providers with lower fees, making medical insurance less expensive for everyone, Aetna argues. “When providers waive or forgive the out-of-network co-insurance, they undermine this important mechanism to limit healthcare costs and ensure quality. They are also committing fraud,” the suit says.
To avoid detection, the rehabs created multiple entities so they could spread charges across multiple providers and bill under various Tax Identification Numbers (TINs), which makes things significantly harder to track, Aetna says.
“They often shuffled patients throughout programs for seemingly no reason other than to prolong benefits payments. When Aetna flagged certain providers and sought more information to prove the medical necessity of each claim, Defendants moved the patients to other providers they controlled and continued to collect payments. Remarkably, nearly half of the Aetna members enrolled in Defendants’ treatment programs were treated through multiple organizations during their time in treatment,” the suit says.
Even worse, at least some patients were offered drugs, the suit asserts. “When benefits would run out, some members were forced to do a ‘pop’ test, which entailed the submission of a failed drug test and stay in detox, with the hope that the member could then restart their outpatient benefits over again…. Defendants placed them in situations to encourage relapse so they could milk more money out of them.”
This not only poses grave danger to patients and harms the insurer, but drives up costs for everyone, the suit says. Aetna asks for punitive and exemplary damages “in an amount sufficient to punish Defendants and deter other persons similarly situated from engaging in similar conduct in the future.”
Ground zero
This alleged conduct violates state and federal laws, Aetna says. The feds are trying to do something. Is the state?
The Department of Justice declared Orange County as America’s Ground Zero center for addiction fraud, and has pursued operators as part of a sting. California has held myriad hearings and passed myriad laws since our Rehab Riviera series published in 2017 — forbidding patient brokering, requiring rehabs to reveal financial ties to related businesses (like urine labs and sober homes), forbidding false advertising — but who has been sued or arrested or prosecuted under these laws? What has the state attorney general, its insurance commissioner, its district attorneys, done to help enforce them?
That provider database that’s supposed to be live right about now — allowing people to see inspection reports and complaints and licensing files without waiting the four to six months we now have to wait for public records — where is that?
“The story is that nobody in the state is doing anything,” said Laurie Girand of Advocates for Responsible Treatment in San Juan Capistrano, who has been following all this way longer than I have.
Action, she said, would require an investigator willing to take a tip and follow up on it — and a district attorney willing to bring charges. “There’s nobody, as far as I can tell,” she said. “The Legislature passed a bill with a $20,000 per brokered person civil fine. You’d think a D.A.’s office might be able to do something with that.”
Addiction treatment programs “often exist in environments with few barriers of entry into the marketplace,” Aetna notes in its suit. “Unfortunately, many unscrupulous actors have flooded into the … market, capitalizing on the most vulnerable of populations for their own gain.”
That’s been true since the Affordable Care Act passed and mandated mental health coverage. That’s where you lawmakers can, should and must do more. Acknowledge that addiction is a medical condition that poses grave risk of death. Put treatment in the hands of people who know something about medical conditions rather than people who once had one. I say this a lot, but I could open a rehab here in California, and that should scare the hell out of us all.
While many of the lawmakers who demanded a fundamental rebuild of the system have left office or gone eerily quiet, others are trying. In July, Assemblymember Diane Dixon, R-Newport Beach, asked for an audit of the Department of Health Care Services to determine if it’s properly licensing, regulating and enforcing state laws in this sphere. That audit is due out this spring, and folks with experience to share can share their stories directly with auditors, Dixon’s district director, Kristin Vellandi, said.
Assemblymembers Laurie Davies, R-Laguna Niguel, and Kate Sanchez, R-Trabuco Canyon, are active in the Mission Viejo-led California Sober Living and Recovery Task Force, which is trying to push forward on these issues. This used to be a bipartisan thing; we hope the “Rs” after their names don’t doom their efforts.
In a landscape where vulnerable people are losing their lives to substandard care — and without attention and strong leadership from the top — it’s hard to be optimistic for change.
“Wash, rinse, repeat,” Melissa Delise Ruby, who runs the 6,600-plus member “It’s Time for Ethics in Addiction Treatment” group on Facebook, said of the scandals.
“Why aren’t things changing? If you peel all the layers away and you look at the root of the problem, it’s stigma,” she said. “The overall consensus is, ‘These people don’t matter anyway. Let them die. It’s easier that way.’ It’s investigated on the health care white collar crime level, not for the human trafficking, the deaths, the drugging, the horrific things that are happening to these people.”
The entire structure of how addiction treatment is licensed, credentialed and regulated needs to change, she said.
“Getting information out there on a massive level that can’t be ignored will push the hands of the powers that be to do something,” she said. “The way we fix it is step by step. Do we not have enough dead bodies?”
