AuthorCopeland, Katrice Bridges
PositionResidential drug treatment industries fraudulent practices

"... all you have to do is pee in this cup ..." **

TABLE OF CONTENTS INTRODUCTION I. BACKGROUND A. Substance and Opioid Use Disorders B. The Opioid Crisis II. SUBSTANCE AND OPIOID USE DISORDER TREATMENT A. Treatment Options B. The Role of Public and Private Insurance 1. Private Insurance 2. Public Insurance III. FRAUD IN THE RESIDENTIAL DRUG REHABILITATION MARKET A. Fraudulent Practices at Residential Drug Treatment Facilities. 1. Patient Brokering 2. Overutilization of Drug Tests B. Poor Quality of Care IV. ECONOMICS OF INFORMATION IN THE DRUG REHABILITATION MARKET A. Information and Residential Drug Treatment Centers 1. Asymmetric Information Problems 2. The Unique Position of Drug Rehabilitation in the Medical Industry B. Costs of Failed Rehabilitation Facilities V. ELIMINATING PATIENT BROKERING VI. VALUE-BASED REIMBURSEMENTS A. Substituting Outcome-Based Reimbursement for FFS B. Assessing the Quality of Care 1. Outcomes 2. Process 3. Structure C. Implementation and Effectiveness VII. CORRECTING INFORMATIONAL ASYMMETRIES THROUGH ACCREDITATION AND LICENSING OF DRUG REHABILITATION FACILITIES A. Accreditation B. Licensing CONCLUSION INTRODUCTION

According to federal health and census data, addiction treatment is expected to be a $42 billion industry in 2020. (1) It has doubled in size since 2003 when it was a $21 billion business. (2) The opioid crisis has fueled the growth of the industry by increasing the demand for residential drug treatment programs (3) and sober living homes. (4) The industry has also become less fragmented in recent years with the infusion of capital from investors eager to consolidate web sites, call centers, rehabilitation facilities, drug-testing labs, and sober living homes under one corporate roof. (5) Astronomical growth of an industry, however, often invites bad actors.

Bad actors have swarmed the residential drug treatment industry. One prominent example is Kenny Chatman, who ran several treatment centers and sober living homes in South Florida. (6) His goal was not to help addicts become sober. (7) Instead, his facilities encouraged drug use and prolonged treatment so that he could collect insurance reimbursements. (8) Further, his centers ordered drug-addicted patients to provide urine samples for fictitious patients so that he could continue to collect insurance payments. (9) In total, he collected at least $16 million in reimbursements from insurance companies for treatment that was never aimed at helping his patients overcome their addiction. (10) In 2017, Chatman pled guilty to federal charges of health-care fraud, money laundering, and human trafficking. (11) He was sentenced to twenty-seven years in prison. (12) After the case, two hundred additional sober homes were shut down in Florida. (13) But, that was just the tip of the iceberg. Indeed, the crackdown in Florida simply encouraged fraudulent treatment centers to relocate to other states. (14)

Chatman was able to defraud patients and insurance companies due to insufficient regulation in the residential drug treatment industry. There is a lack of uniformity amongst the states concerning the accreditation and licensing requirements to open and maintain a residential drug rehabilitation facility. Some states have adopted the standards of care put forth by the National Alliance for Recovery Residences (NARR). (15) Others have adopted standards put forth by the American Society of Addiction Medicine (ASAM). (16) Nevertheless, there are still many states that do not have standards of care that govern the operation of residential drug treatment centers. Fraudulent treatment centers, like the ones run by Chatman, thrive in these states. It is very difficult for a consumer to know whether they are going to a legitimate treatment facility or a fraudulent one.

This Article deals with fraudulent practices in the residential drug treatment industry. It will principally focus on the two related issues of quality of care and patient brokering. With respect to quality of care, this Article will address fraud and overutilization as well as poor care. The Mental Health Parity Act and the Affordable Care Act expanded coverage for residential drug treatment. (17) As with other medical expenses, insurance companies cover the costs of drug rehabilitation on a traditional fee-for-service basis. Relapses, (18) which are a normal part of recovery, (19) are also covered. (20) Importantly, health insurance plans cover urinalysis to test for drugs as an essential service, with a very low deductible. (21) Unfortunately, unethical treatment centers, like those run by Chatman, are not incentivized to provide cost efficient and effective care. To the contrary, their incentives are to drag out treatment for as long as possible and rack up insurance claims. Some treatment centers charge insurance companies $ 1,000 or more per drug test and test patients repeatedly to ensure a steady stream of income for the treatment center. (22) This practice constitutes overutilization. Other treatment centers charge insurance companies for drug tests or other services that were never performed, which is fraud. (23)

In addition, unethical treatment centers are involved in patient brokering, a practice whereby they recruit drug addicts with health insurance into their programs by offering everything from low rent to prepaid debit cards as incentives for participating. (23) Patients often search for residential drug treatment centers on the internet. (25) After finding a treatment center, they call the number listed on the internet believing that they are contacting a residential treatment center. (26) In reality, they are often calling patient brokers who misrepresent themselves on the internet as treatment centers. (27) Once the patient brokers convince a patient to receive treatment at a disreputable residential drug treatment center, they often transport patients hundreds of miles to the fraudulent providers. Patient brokers then receive kickbacks from the treatment centers for directing patients to their centers. (28) The problem, however, is that the patients do not receive the care that they need to beat their addiction to drugs. (29) And, once the insurers get wind of the fraud, they cease payments and the addicted patients are left untreated hundreds of miles from home. (30) Further, some addiction treatment centers are associated with sober living homes where they send their patients after addiction treatment. (31) Some treatment centers have gone so far as to offer drugs to residents of sober living houses to make them relapse and start the treatment, or rather billing, cycle all over again. (32) In short, unethical treatment centers are using the opioid epidemic as a means of exploitation for financial gain. Addiction treatment has become a multi-billion-dollar industry chiefly fueled by pee in a cup--Liquid Gold.

The lack of regulation in the residential drug treatment industry is practically an invitation for deceptive business practices such as patient brokering, insurance fraud, and substandard care. While many scholars have written articles addressing the opioid crisis and the best way to address it, this is the first article to address the corruption in the residential drug rehabilitation market. This Article argues that the government must address the crisis in the residential drug treatment industry with national legislation.

Part I addresses the diagnosis of substance and opioid use disorders. It also focuses on the origins of the opioid crisis. Part II addresses the types of treatment available for substance and opioid use disorders with a particular focus on residential drug treatment centers and sober living homes. Part II also examines the impact that expanded insurance coverage for substance use disorder (SUD) treatment has had on the drug rehabilitation market. Specifically, it argues that expanded coverage for SUD has motivated bad actors to enter the residential drug treatment market to exploit vulnerable patients and insurance companies. Part III examines fraud in the residential drug rehabilitation market. It sets forth the schemes that disreputable residential drug treatment centers utilize to defraud patients and insurers. In addition, it critiques the model of treatment at residential rehabilitation facilities that is based on abstinence and support groups. It argues that to ensure quality care, residential rehabilitation facilities must utilize evidence-based treatment and hire professionals with specialized training in addiction medicine.

Part IV employs the economics of information to understand the inability of consumers to choose a reputable treatment center. It argues that the quality of residential drug treatment centers is difficult to assess due to severe informational asymmetries in the residential drug treatment market. Part IV also examines the significant costs associated with fraudulent treatment centers such as decreased productivity, which leads to foregone earnings from employment, and higher costs to the criminal justice system due to an increase in opioid-related crime. (33) And, more importantly, an increase in the mortality rate because patients do not receive effective care at fraudulent treatment centers that places a huge burden on families and the economy in general due to lost potential earnings. (34)

Parts V-VII explore three proposals to address the fraud and lack of quality care in the drug rehabilitation industry. Part V concentrates on the recently passed federal opioid legislation that prohibits patient brokering. It argues that the federal legislation banning patient brokering is an important first step in addressing the fraud in the residential drug treatment market. The federal legislation does not, however, completely solve the problem. The legislation does not ensure quality care by mandating the use of evidence-based treatment. Nor does it correct the information asymmetry in the...

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