Not long ago, testing the urine of newly clean and sober addicts and alcoholics was so cheap that it was absorbed as the cost of running a halfway house. So how and why did something that was once flushed down the toilet become worth hundreds of millions of dollars?
It’s a question an FBI task force has been trying to answer as it investigates claims of insurance fraud, patient brokering and kickbacks in Palm Beach County’s billion-dollar addiction treatment industry.
Part of the blame goes to the Centers for Medicare and Medicaid, which, in 2010, cracked down on reimbursements for cheaper tests but continued to pay for more complex, costly drug tests performed in labs. As goes CMS, so goes the insurance industry.
The addiction treatment industry responded by submitting more claims for more complex tests and pushing the envelope to see how often insurance companies would reimburse them for the tests. It turned out, five times a week.
“It’s been allowed to pervade because no one was watching the hen house,” said Jeffrey Lynne, a Delray Beach attorney in addiction treatment legal issues. “Overall, I think it’s not different than any other scam that’s been created.”
Insurance companies and addiction treatment providers agree the tests are necessary to show if a recovering addict is clean and taking legitimately prescribed medications — such as antidepressants — in the appropriate doses.
The process is simple. They pee into collection cups with detection panels, which reveal positive or negative results.
“Nobody ever dreamed of trying to bill an insurance company for urine,” said John Lehman, executive director of the Florida Association of Recovery Residences. “That had been the status quo for many decades.”
Sober house operators learned they could cash in by obtaining a license from the state to collect urine from their residents. Agreements between sober houses and labs emerged: Labs gave sober houses complimentary collection cups to collect urine and would pick up the specimens, take them to a lab equipped with analyzers and perform more complex tests.
Sober house operators could bill insurance companies for collecting urine, about $150 for each specimen. Labs could bill for complex tests.
Reimbursement rules create new layer in care
Some sober house operators realized they could capture all the profits by opening their own labs. Large labs agreed to sell or lease them equipment and provide staff who knew how to use the machines. Insurance companies caught on and stopped reimbursing sober houses for collecting urine.
Only tests ordered by a physician at a licensed behavioral health provider would be reimbursed. Because sober homes do not have physicians on staff or provide medical treatment, they could not cash in on the more costly tests.
In response, the industry created a new layer of medical treatment called intensive outpatient or IOP. Because IOPs offer treatment overseen by a medical staff of therapists, nurse-practitioners and physicians, insurance covered the cost of tests ordered by a physician and collected at the IOP.
“Everyone went running to become an IOP,” Lehman said.
More than 100 popped up in Palm Beach County. Although sober homes could not cash in on lucrative drug tests, they did have a lock on the commodity that IOPs and labs needed to generate huge profits: Addicts.
Some sober house owners got into the IOP business themselves. Others formed agreements with IOPs and got referral fees for sending their tenants to an affiliated IOP. Unmarked, white vans began picking up recovering addicts and alcoholics at sober houses in the morning and shuttling them to IOPs. The vans delivered the addicts and alcoholics back to sober houses in the afternoon.
To keep a full house and a constant supply of urine, some sober houses began offering free rent, cellphones and gift cards to entice recovering addicts. Some pay “junkie hunters” finders’ fees of as much as $500 for every addict or alcoholic brought in to the house.
Everyone seemed to profit. Sober houses collected referral fees from IOPs. The IOPs collected urine from the sober house residents and sent it to labs, which performed costly, complex tests. Addicts and alcoholics got treatment from licensed medical professionals, therapy and lessons in life skills, such as building a resume and therapeutic activities such as golf, sculpting, yoga, Spinning and writing song lyrics.
“I think what happened is over time it became lucrative and like human nature, they pushed it to the limit,” said Michael Walsh, an industry activist and the chief operating officer and executive director of HARP, a treatment center on Singer Island. “If I can get paid for testing once a week, then why not everyday?”
‘From patient care to patient profit’
Besides urine, the business model relied on insured addicts and alcoholics and doctors willing to order tests. Some IOPs helped uninsured addicts and alcoholics find insurance and paid their premiums, Lehman said. As for doctors, industry insiders say “rent-a-docs” rubber-stamped orders for drug tests on patients they rarely saw.
Dr. Michael Ligotti, a family practitioner in Delray Beach, wrote a letter to the Department of Children and Families in September 2013 saying he was “astonished and outraged to learn that my name and license may be currently used in an unauthorized fashion” by addiction treatment programs. Ligotti did not return calls for comment.
“It went from patient care to patient profit,” said Brian Crowley, a local lab industry expert. Crowley said he could be making millions of dollars if he was willing to pay kickbacks. “Payers got caught napping.”
Insurance companies have trouble proving complex drug tests are not medically necessary because there are no industry-approved treatment guidelines about how often recovering drug addicts and alcoholics should be tested.
That may soon change. A consortium of addiction specialists throughout the country has spent two years devising guidelines, similar to those used to treat other illnesses. The guidelines will include treatment recommendations based upon the best available research and practice experience.
The group is finalizing its white paper and hopes it will be approved as the industry treatment guidelines.
“What is the problem here is no national organization has developed guidelines that anyone can use,” said Dr. Andrea Barthwell, former president of the American Society of Addiction Medicine and owner of several treatment facilities. Barthwell and Walsh are both members of the consortium. “I say we need to educate people about how to use this tool and create guidelines.”
Why is the industry booming?
- The Mental Health Parity and Addiction Act of 2008 and the Affordable Care Act in 2010 prohibit insurers from denying coverage because of pre-existing conditions or imposing limits on treating mental disorders.
- The Afforable Care Act enables parents to keep their children on their insurance plans until age 26.
- The nationwide crackdown on pill mills pushed more people toward heroin, guaranteeing a constant supply of addicts.
- Labs must create new tests for synthetic drugs created to avoid detection, such as flakka. The more drugs tested, the more expensive the test.
- Because relapse is so common, the entire process of detox, rehab, halfway houses and intensive outpatient centers (IOPs) begins again with every relapse. Than means insurance companies reimburse for the same services, again.
- Insurance companies took action slowly.
How much money?
A client at one local recovery residence, which owns its own intensive outpatient center (IOP) and has ties to a lab, attended IOP three times a week and gave a urine specimen each session. His insurance company was billed $1,075 for every IOP session, $5,594 for every drug test and $600 for weekly individual psychotherapy.
The bill submitted to insurance for one week: $20,608. The insurance company paid $9,980. A recovering addict with similar insurance and treatment would bring in $119,767 in three months — the minimum length of time most addicts attend IOP.