Clarification: A news article published on The Palm Beach Post’s website July 30 and in the print edition August 2, and emailed to subscribers, reported on the lucrative addiction recovery industry in Palm Beach County, including the fact that the industry has drawn FBI scrutiny. The article accurately disclosed that Frank Cid has sued John Lehman for defamation, alleging that Cid lost the chance to sell his addiction recovery business to Goldman Sachs for $32.5 million after Lehman falsely told Goldman that the FBI was investigating Cid. The article also included a photograph and discussion of raids carried out by the FBI at two sober homes unrelated to Cid. To clarify, The Post did not intend for the article or the email to imply that the raided sober homes are affiliated with Cid or that he is the target of a criminal investigation.
It took Frank Cid just six years to create a lucrative, one-stop addiction recovery empire big enough to bring Wall Street to town.
And Wall Street brought cash. Last September, an affiliate of Goldman Sachs was preparing to shell out $32.5 million for the real estate investor’s portfolio of high-end treatment programs: detox, rehab, outpatient sober living rentals and a lab to test his clients’ urine.
But accusations of an FBI investigation killed his deal, said Cid in a lawsuit alleging defamation.
Under the radar, local fortunes are being made here, and quickly, from getting addicts and alcoholics clean and sober.
With the big money has come big problems now threatening to upend an estimated $1 billion industry, the fourth largest in Palm Beach County.
Reports of kickbacks, patient brokering, inflated medical testing bills and insurance fraud are rampant, The Palm Beach Post has found. At the same time, the number of sober homes, which don’t have to be licensed, are mushrooming. So are labs making millions of dollars from drug testing addicts.
Alarmed, the FBI and the state last year created a task force to investigate.
Even local operators say privately that it may take a very big, very public crackdown to curb abuses.
Former federal prosecutor Jennifer Bolen, who advises treatment businesses, doctors and pharmaceutical companies on drug testing regulation, agrees. “Nothing will stop unless there is a ferocious enforcement effort,” she said.
A Bentley in the driveway
Considered the largest in the U.S. and one of the best-known in the world, the county’s addiction treatment industry isn’t mentioned on the county website. At $1 billion, though, it’s a major economic engine, ranking below only tourism, agriculture and construction.
International clients arrive at PBIA on private jets. For those who can pay — and those with good insurance — beach-side facilities offer spa-like luxury. Amenities can include golf therapy and rap music education. Some promise near-painless detoxification from even the worst opiate addictions.
A single addict can generate hundreds of thousands of dollars for companies, and not just for treatment: Interventions, lab tests and even vitamins are among the array of related businesses.
A $30,000 bill for a 28-day residential stay is not unusual. Although major insurance companies may foot the bill, some desperate men and women, or their families, will ante up cash, or take out loans from specialty lenders. And that’s just the first step in what can be a months-long course of treatment.
Profit-taking isn’t hard to spot: One attorney said that when he can’t find a client’s office he looks for a Bentley in the driveway.
More money to come
Confidence that the county’s industry will continue to grow is so high that investment firms and private investment pools across the country want in.
“There is a wash of money from private equity funds looking to invest,” said Drew Rothermel, CEO of Origins Behavioral Healthcare, which recently purchased West Palm Beach’s Hanley Center, a 30-year fixture of the treatment community. “And there’s more to come.”
Because of Obamacare and mental health parity laws, more addicts have insurance and that insurance must cover substance abuse treatment for as many stints in rehab as it takes to get clean. Since most addicts and alcoholics relapse, several stays in rehabs are not uncommon.
Addicts, especially those with insurance, have become a sought-after commodity. One newly formed company, treatmentcalls.com, operates a call-center and allows treatment centers to bid on callers seeking treatment based on their insurance coverage — HMO, PPO or cash. Some centers bid as much as $1,000 for a call screened by the service.
When inpatient treatment ends after 30 to 60 or 90 days and the client moves out, insurance continues to pay for intensive outpatient treatment and partial-hospitalization programs, including regular drug testing and therapy. But they don’t pay for room and board.
With no job, little money and no place to live, newly clean addicts — especially those with insurance — have become targets of unscrupulous business owners or used as pawns in a variety of local scams.
Among suspect practices:
- Sober home operators offering free rent, cellphones, gym memberships and grocery gift cards, along with waiving insurance co-pays and deductibles to entice recovering addicts to come to their facilities.
- Halfway house owners paying a bounty, often $500, to “junkie hunters” for every new addict they can deliver to the halfway house. Separately, if an addict in the halfway house relapses, detox businesses may pay bonuses to managers of the houses if they refer the addict to the detox facility.
- Treatment businesses offering to pay an addict’s halfway house rent if the halfway house refers the addict to their outpatient program.
- Businesses filing false insurance claims for unnecessary treatment and tests, and physicians certifying that treatments and tests are medically necessary without properly examining recovered addicts.
Some of the practices are being scrutinized by law enforcement for possible violations of Florida’s patient brokering law, which bans paying for patient referrals — even if the payment is in goods, not cash. But it’s unlikely a federal and state task force would be looking at just one law.
Last September, FBI agents raided the 84-unit West Palm Beach Green Terrace condos used by Good Decisions Sober Living as a halfway house and office, seizing boxes of files. Two months later, agents carted off boxes from the offices and halfway house of Real Life Recovery in Delray Beach.
Urine testing uproar
By far the most lucrative and controversial practice in the recovery process is urine testing. Industry experts say the tests are an essential part of getting clean and sober. They not only show whether clients are staying clean, they also measure whether legitimately prescribed medications are taken in the proper dosage.
But in the past few years, what kind of test should be done, how often and by whom has caused an uproar. Insurance companies claim addicts are being tested too often and the types of tests aren’t necessary.
A simple test that confirms whether or not an illegal drug is present is the cheapest.
However, some samples are sent to labs for additional tests, ones that reveal which drug, and how much of the drug, is in the addict’s system. A full battery of tests on one sample of urine can cost several thousand dollars — and that’s just one test, on just one client. Some sober homes test three times a week; some test daily.
Attorney David Hirshfeld, another specialist in substance abuse treatment law, said many of his clients have received letters from insurers demanding they return money the companies paid for unnecessary tests.
Some of the wrongdoing is inadvertent, Hirshfeld said, committed by mom-and-pop halfway house owners who did not know the law. Even so, he said, ignorance is not a defense.
Locals appear to be spooked: Hirshfeld said he has seen an uptick in business from business owners since the FBI raided the two halfway houses.
A new hustle
Otherwise bullish investors are factoring in the risk — or even the appearance of risk. “The lab abuses and the insurance abuses that are perceived to be happening in parts of the country makes some of these funds cautious,” said Rothermel.
Frank Cid’s deal with Goldman Sachs fell apart the day it was supposed to close. According to a defamation suit filed by Cid, John Lehman, head of the Florida Association of Recovery Residences, told the investors Cid was engaging in insurance fraud and patient brokering — and that Cid is one target of the FBI investigation.
No one, including Cid, has been indicted. The suit is pending.
In a small step toward addressing unethical practices in one aspect of the industry, lawmakers this year created a voluntary certification process for Florida’s sober homes. Standards cover accounting practices in addition to living conditions.
No one, though, will be required to become certified.
For now, legitimate treatment facilities resent the bad players for drawing the attention of the FBI and giving the already maligned industry another black eye. Just as important, they say, is the message that people exploiting addicts and alcoholics are sending to those seeking sobriety.
“We’re all natural hustlers,” said one halfway house manager, a recovered alcoholic. But in mining addicts and alcoholics for cash, he said, “They are taking away the drug and teaching them a new hustle.”