California Lawmakers Want To Crack Down On Fraud At Drug Rehab Centers. Will It Work?

Some lawmakers are aiming to cut down on corruption at addiction-recovery facilities by changing the way insurance companies reimburse providers.

There are a whole host of problems with the drug rehab industry, according to a major investigation by the Southern California News Group: No degree, medical or otherwise, is required to get a facility license; and some centers are administering subpar, and even unnecessary, care and then billing insurance companies for it in the hopes of earning high reimbursements.

That sort of profit-reaping — often called patient-brokering — usually starts with a facility representative drawing patients into the program, sometimes enticing them with money. Then, the facility enrolls the patient in a health plan in hopes of billing the insurance company for services and getting paid back.

The centers often keep patients addicted so they can keep administering services, said Mick Meagher, an independent California attorney who specializes in consumer protection. When the patient has exhausted the plan’s addiction-treatment benefit, the facility kicks the patient out and stops paying their premium.

“The abuse is so obscene, it’s mind-boggling,” Meagher said.

He noted that commercial insurance reimburses at higher rates than public plans, which is why the centers enroll addicts in private plans. “[Medi-Cal] isn’t gonna pay for a private treatment center. So the motivation is to move them onto a private plan,” he said.

Representatives from the substance-abuse industry did not respond to requests for comment.

The Department of Health Care Services, the licensing body for 24-hour residential centers for people recovering from drug and alcohol addiction, said they’re aware of the problem.

Spokesperson Carol Sloan wrote in an email that they’ve received complaints about allegations of patient-brokering. “Since the majority of licensed Substance Use Disorder programs do not receive payments from Medi-Cal, DHCS’ authority to monitor their billing and payments is limited,” she said.

A new bill from Democratic state Sen. Connie Leyva aims to make this scheme a little harder. Senate Bill 1156, which will be heard by the Assembly Health Committee on Tuesday, would require businesses to continue paying premiums for these patients for a full plan year, regardless of whether they’re still receiving treatment at the facility.

And businesses would need to tell insurance plans and DHCS that they are paying for patients’ premiums. They would also need to disclose whether or not those patients are eligible for Medi-Cal or Medi-Care.

If the patient does qualify for a public plan, the provider would be reimbursed at Medicare rates, rather than commercial ones.

“These providers have a right to make a profit, but not when those financial interests can hurt patients or even keep them from receiving the care they need,” Leyva said.

The lawmaker noted that this has become more common since the Affordable Care Act welcomed patients with pre-existing conditions into the market. It happens most often in substance abuse treatment facilities — which have been in high demand during the opioid crisis — and at dialysis centers.

Some patient advocate groups oppose the bill, citing concerns that kidney disease patients will be bumped off their plans and receive lower quality care. The American Kidney Fund wrote in a letter to Leyva that insurance companies are not acting in the best interest of the patients.

“They have a financial incentive to remove sicker and more costly patients from their plans,” the letter states. “We believe that a patient receiving premium assistance should be able to afford a plan that best fits their medical needs and should not be forcibly steered from that plan by insurers looking to save money.”

Staff from Leyva’s office said the bill would only change the rate at which the provider gets reimbursed, and should not affect the patient’s medical care. They also said the bill doesn’t block organizations from paying patient premiums.

It’s just one of a slew of bills addressing fraud in the substance abuse industry. Another would require more background checks on rehab owners and workers, one would make it harder for new treatment centers to get licensed.

Meagher, the attorney, doubts any of them will make a dent. “They’re well intended, but I think they miss the mark,” he said. “The criminals in this world will have no problems figuring this one out.”

If Leyva’s bill passes the committee on Tuesday, it heads to the Assembly appropriations committee.