Check out The Post’s investigative coverage:
Sky Toxicology is no more: The Texas offices of the once high-flying urine testing business are shuttered. All that’s left of the company is a voice mail message directing callers to a San Antonio post office box.
But that hasn’t stopped UnitedHealthcare from suing Sky and its affiliated companies, making it the second insurance giant to challenge what critics say was a sprawling urine-for-cash scheme stretching from California to South Florida.
Among those named: Delray Beach-based health care attorney Jeffrey Cohen, an indirect investor in Sky who advises addiction treatment business owners on how to stay on the right side of the law.
According to the United lawsuit, owners of Florida addiction treatment businesses were invited to invest in Sky’s booming lab business. In exchange, they could reap tens of thousands of dollars a month.
But the lucrative deals came with a catch: They had to provide Sky with urine drug test referrals — lots of urine drug test referrals — or Sky would sever the deal.
Sky, UnitedHealthcare charged, was actually in the business of kickbacks.
The insurer says it lost at least $50 million in payments to Sky or its affiliates for unnecessary drug tests.
The civil case, which alleges violations of Florida law, comes as a joint federal and state investigation into lab abuses in the local addiction treatment industry drags into its second year with no sign of either civil or criminal charges. Privately, some industry insiders say the delay has emboldened certain operators to continue dubious practices.
Insurers, though, are already in court. Last year, Cigna sued Sky, alleging a $20 million civil fraud.
Sky is a Texas-based company. It did business in multiple states. But the suit was filed in West Palm Beach’s federal courthouse, said Cigna in court papers, because the bulk of the alleged misdeeds took place here.
The case was settled out of court for undisclosed terms.
Unlike Cigna, UnitedHealthcare named specific individuals and Florida businesses in its lawsuit, including the owner of Lantana’s upscale Lucida Treatment Center.
Cohen, who previously has defended criticism of the company’s practices, said in an email that, “While I’d like to speak … a number of the defendants are clients of the firm, and attorney-client privilege prevents me from discussing the case.”
Two companies owned by Nicholas Ferriell, who with his father co-owns a lab, a Lake Worth treatment center and sober homes, are among those sued.
Ferriell said he thought he was investing in a prospering lab company. And he said he had reason to believe his investment in Sky was above board: Two lawyers blessed it.
“I made this investment only after a PowerPoint presentation put together by Sky which included a statement that their Texas law firm approved the program,” said Ferriell. “Their Florida attorney was at the presentation and also said the program was legal.”
Their Florida attorney is Cohen.
Months into the deal, Ferriell said he stopped sending Sky urine test referrals. Sky promptly severed the relationship.
Also named in United’s complaint is Elements Behavioral Health, a multistate, California-based treatment center chain that owns the Lucida center.
Another California company, Costa Mesa-based Solid Landings LLC and its founders, Elizabeth Perry and Stephen Fennelly, were part of the Sky scheme, said United, and have operations in Florida as well.
Elements Behavioral Health did not respond to requests for comment. Through a spokeswoman, Perry and Fennelly declined comment.
Good as gold
Palm Beach County is one of the best-known addiction treatment destinations in the world: International clients arrive at Palm Beach International Airport on private jets. Thousands more travel from the Northeast and Midwest seeking help.
Urine testing has long been a staple of rehab, a fast way to track relapse. It’s also cheap. Corner drug stores sell $25 tests that will immediately indicate the presence of a wide array of drugs.
However, the local addiction industry has in recent years begun extensive, and expensive, urine testing, a money-making practice that has at times exploited patients and gouged insurers, a 2015 Palm Beach Post investigation found.
Some treatment centers, sober homes and their affiliated labs started charging hundreds of dollars for a similar test. 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.
Though addiction medicine experts say such frequent testing is unnecessary, it has become a widely accepted practice.
At two sober homes co-owned by Ferriell, for instance, clients are tested three to four times a week.
Neither of the sober homes are named in the UnitedHealthcare lawsuit. And the testing, said co-owner Dylan Gordon, is needed to protect not only the well-being of people in recovery, but also staff. In any event, he said, the testing is the inexpensive pee-in-a-cup version of testing — not the four-figure tests.
No urine, no cash
In their suits, Cigna and United said Sky found a different way to cash in on urine tests.
The addiction business owners could buy an interest in Sky, or one of Sky’s related companies. One frequently quoted buy-in figure was $10,000.
In return, the businesses would get roughly $10,000 a month, every month, in dividends as Sky’s lab business grew.
The addiction treatment businesses then typically referred their own clients to Sky for urine tests.
The $10,000 a month dividend was just a starting point. It could be $25,000 or $50,000 or even in the case of California’s Elements Behavioral Health a reported $600,000 a month.
In South Florida, United said, Cohen made presentations to potential investors in Sky, reassuring them that such deals were above-board, including PowerPoint presentations and documents provided to addiction treatment facility owners.
There was a catch, though. Sky’s corporate headquarters was tracking the number of urine test referrals it got, said United.
If the treatment businesses weren’t sending along enough referrals, Sky stopped cutting checks, or, in some cases, simply terminated the deal.
That’s what happened with Ferriell. Four months into the investment deal, Ferriell said he started having concerns about the investment. His South Florida Recovery Center stopped sending urine test referrals to Sky.
About one month later, he said, “They kicked me out.”
Sky Chief Operating Officer Bradley West, said United, controlled the monthly distribution payments and would tell company employees not to cut checks when an addiction business failed to send in enough urine test business. When employees would ask why checks were not to be issued, United said West told them “to do what he says to do” and that “they were not paid to ask questions.”
Further, said United, “thousands of (urine) tests submitted to Sky Toxicology Ltd. from Solid Landings … were never ordered by physicians or contained forged physician authorizations.”
And in all cases, the treatment center owners had no intention of billing their clients for any co-pay, said United — a practice that is specifically barred by Florida law — and one which distorts true health care costs.
Said the insurer, Sky’s “calculated fraud and unfair and deceptive practices has resulted in skyrocketing out-of-network costs, injuring United’s plans and members in Florida.”
In fact, by the time Cigna settled its suit against Sky in January, the company had decided to opt out of offering Florida health plans on the federal Health Insurance Marketplace for a year. Cigna cited “an exponential increase in fraudulent and abusive” substance abuse treatment practices — and in particular drug screening.
Cigna, United and others are hitting the brakes industry-wide, holding up millions of dollars in payments to local treatment centers and labs. Some insurance companies are demanding their money back. And there’s talk among insurers of capping payments for addiction treatment, even though it is a brain disease characterized by relapse.
“Blue Cross and Blue Shield is not wanting to pay more than 30 days of treatment and I don’t blame them,” said an Illinois woman whose daughter recently relapsed after being treated for addiction locally. The bill: $180,000, a figure that includes thousands of dollars in drug tests.
UnitedHealthcare, meanwhile, appears to be just getting started with Sky. Its lawsuit names 150 “Does,” people and businesses it believes may have been involved in the cash-for-urine deals, but who have not yet been identified.
“United expects to add many additional defendants as other conspirators are revealed,” the company wrote.
Check out The Post’s investigative coverage: