Addiction treatment bonanza: How urine tests rake in millions

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Like thousands of other families, when an out-of-state couple last year sent their 23-year-old son to Palm Beach County for addiction treatment, they understood his recovery could be lengthy and pricey.

What they didn’t anticipate was the bill that arrived weeks after he finished treatment: a six-figure tab, not for counseling or medical care, but for the humblest of drug screens — peeing into a cup.

The total charge for nine months of tests: $304,318.

Behind the glitzy ads for pain-free drug detox and luxury beachfront rehabs, urine drug screens are generating millions for Palm Beach County’s addiction treatment industry.

In the process, the sky-high charges have exploited addicts and alcoholics seeking help, gouged insurers and spurred law enforcement interest in the area’s billion-dollar addiction treatment industry.

Not every sober house, lab or treatment center is cashing in. Many are fed up. Some are providing the FBI and state investigators with information about suspect practices.

“It all seemed to be working well until pee came along and ignited these bad instincts in a bunch of people,” said David Hirshfeld, an attorney specializing in health care law. “Pee comes along and everybody wants in.”

Cash machine

For the longest time, running a sober home was a dicey financial proposition. People didn’t do it for the money because there was no money to be made from providing supportive housing to newly sober addicts and alcoholics.

Owners scraped by. It was, said one person close to the industry, “God’s work.”

That began changing when some realized insurance companies would pay big bucks for urine testing. At first, money from urine testing was just a means to make ends meet. But as time went on, and the cash started rolling in, it became a financial linchpin — and now, a gold mine.

Urine testing is a staple of rehab, a fast way to both track relapse and gauge use of prescribed drugs. It’s also cheap. Corner drug stores sell $25 tests that will immediately indicate the presence of a wide array of drugs.

Over the past few years, though, some treatment centers, sober homes and their affiliated labs have charged hundreds of dollars for a similar test. One routinely charged a reported $1,500.

Then, the same urine sample could be shipped off to another lab for more sophisticated, and far more expensive, testing.

Just one test, for one person, at one facility could yield up to $5,000.

And some sober homes test every resident, seven days a week.

“There’s never a reason to test every day,” said Dr. Stuart Gitlow, past president of the American Society of Addiction Medicine and an internationally recognized expert on addiction.

For one thing, many drugs, including opiates and marijuana, remain in a person’s system for days, or even weeks. Back-to-back tests simply repeat what is already known.

In fact, said Gitlow, some addiction specialists never test at all.

Further, he said, some testing practices are “just a stupid use” of screening. He offers the example of someone who goes into rehab because he wants to stop smoking pot. The rehab facility might test him for marijuana, but then also tests for drugs the client has never used, or even expressed interest in using.

“Now they are testing him every other day for 20 other drugs, just to do the billing and get the profits.”

Mushrooming labs

Palm Beach County treatment centers and sober homes have rushed to open their own drug testing labs. Today, 31 local labs are either indirectly or directly tied to the owner of a sober house or treatment center. All opened since 2011 and almost half opened in the last year alone.

This dual business ownership of both a sober home with clients who need to be tested and a lab providing tests can guarantee revenue; an arrangement leading some sober homes to charge minimal rent — or no rent at all.

As long as residents keep urinating into a paper cup, owners don’t need a rent check. An addict tested three times a week with the more sophisticated urinalysis is a veritable cash machine: $36,000 every month, $432,000 a year.

A sober home with six residents on the same testing regimen could bring in $2.5 million.

Despite the jaw-dropping bills, when doctors sign off on such tests as medically necessary, insurance companies pay up. So does Medicare. So does Medicaid.

There’s evidence major insurers are hitting the brakes. In New Jersey, for instance, Blue Cross Blue Shield made industry headlines in 2013, when it sued a Florida lab over what it alleged were unnecessary drug tests. San Diego-based Millennium Health, which up until recently ran tests for an area methadone clinic, is now facing multimillion-dollar penalties from the federal government’s Center for Medicare and Medicaid Services related to testing.

Locally, Hirshfeld said some of his clients have received letters from insurers looking for their money back.

This month, Cigna sued Sky Toxicology and two affiliated lab firms in federal court here, alleging a $20 million civil fraud revolving around urine testing.

According to the suit, Sky, a consortium of labs, offered doctors and drug treatment centers ownership interests in the companies. For their investment, said Cigna, providers were paid “kickbacks in the form of dividends” linked to how many urine tests they sent to Sky.

The suit does not specify how much money Sky paid to the doctors and centers. However, two sources close to the industry told The Post that $12,500 was one investment amount, and that for the $12,500, providers sending urine to Sky could get anywhere from $24,000 quarterly to $50,000 monthly.

Sky is a Texas-based company. It does business in multiple states. But the suit was filed in West Palm Beach, said Cigna in court papers, because the bulk of the alleged misdeeds took place in South Florida — and the doctors and treatment centers who participated are here, too.

Despite the shakeups, Florida remains a sought-after source of potential lab test revenue. Although a financial penalty has yet to be determined, Millennium reports it has settled “all federal and state issues” with Medicare and Medicaid. The Florida lab sued by Blue Cross Blue Shield in New Jersey was purchased by a Massachusetts firm, and the case has since settled.

In Georgia, Khalid Satary, a felon turned Palestinian philanthropist whom the United States has for years tried to deport, also saw promise in Florida markets.

Satary opened Nue Medical Consulting in 2013, swiftly growing the drug test lab equipment leasing and consulting firm from four to 70 employees. Among its first customers: a West Palm Beach sober home raided last year by the FBI.

Green Terrace

Good Decisions Sober Living owner Ken Bailynson had no shortage of prospective clients in late 2013, when Nue leased the former New Jersey CPA an array of lab equipment to run urine tests.

Two years earlier, Bailynson had begun buying up units at Green Terrace condos in West Palm Beach, a long-neglected complex off of Belvedere Road east of Interstate 95, where condos sold for bargain basement prices. The properties were then rented, primarily to newly sober addicts.

Bailynson bought just eight properties in 2011 and 2012, the year he incorporated his lab. But by last fall, Bailynson owned 34 units, was the condo association president and had set up his business office in the condo clubhouse.

It’s not known how many of Bailynson’s Good Decisions Sober Living clients were steered to urine testing at his lab, or how much Bailynson charged for those tests. Bailynson, though, pulled in enough cash from his various operations to pay Nue’s hefty equipment lease: an $85,000 bill due roughly every four weeks.

On Sept. 11, FBI agents descended on Green Terrace. Armed with a search warrant, agents left with boxes of papers from Bailynson’s office.

Then, in December, the FBI, U.S. Postal Service and state fraud investigators raided the Delray Beach headquarters of businessman Eric Snyder’s two treatment companies: Real Life Recovery of Delray Beach and Halfway There.

Halfway There is a sober house. Real Life Recovery of Delray Beach is a drug testing lab, according to state licensing records.

Neither Bailynson nor Snyder have been charged with wrongdoing.

“We are fully cooperating with the government in terms of providing whatever they asked for,” said Bruce Reinhart, Bailynson’s attorney and a former federal prosecutor. “Ultimately, I believe they are going to conclude nothing my client did was illegal.”

Bailynson’s lab closed in September. When it did, a state Agency for Health Care Administration investigation into complaints that the lab was mismanaged by supervisors closed, too. With the lab shuttered, substantiating the allegations wasn’t possible, said the investigator.

Problems were also reported at Snyder’s Real Life Recovery. AHCA investigators were told urine wasn’t being stored or tested correctly.

But by the time the state inspection began, the FBI already had been at the lab, confiscating records, paperwork and manuals. Without records, the state also closed that inquiry, too.

Although many in the industry believe the state and federal scrutiny is long overdue, there’s also fear of fallout as the joint task force considers charges: Even if drug-testing profits don’t dry up and leave sober home owners without revenue, a crackdown could leave hundreds on the street.

It’s happened before.

A little less than three weeks after the FBI raid on Good Decisions, Bailynson’s lab was closed and between 50-80 Sober Home tenants were given their walking papers: four days to pack up and leave.

Staff writer Rex Bone contributed to this story.

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