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Inside the Fight for Regulation as Rehab Centers Cash in on Patients

In Variety‘s Recovery Issue, prominent entertainment figures offer insights on navigating a sober life in Hollywood. For more, click here

Navigating the maze of rehabilitation facilities for substance abuse problems is a daunting task for anyone, let alone an addict in desperate straits.

In California, the situation is made even worse due to a lack of regulatory standards for rehab facilities. The addiction-recovery industry has exploded in recent years, as upstart operators capitalize on the availability of insurance amid the deepening opioid crisis. Experts say a major concern is that market forces — rather than medical necessity — often dictate the course of treatment, because drug addicts have become bankable commodities.

“At every single step in this crisis, we have unscrupulous [people] who are profiteering,” says Cottie Petrie-Norris, a Democratic Orange County assemblywoman who is involved in reform measures. “There is a total lack of oversight and regulation in the space.”

Rehab centers will pay good money — thousands of dollars — to recruit patients with dirty urine samples, knowing they can reap tens of thousands of dollars in insurance payouts. This practice, called “body brokering,” is illegal in California. Last year, then-Gov. Jerry Brown signed a bill outlawing the practice, under which vulnerable addicts are effectively sold to the highest bidder, regardless of their treatment needs. But that doesn’t mean the abuse has ended. According to advocates and rehab practitioners, paying for referrals is still a fundamental part of the industry.

“They’re still doing it,” says Evan Amarni, CEO of Multi-Concept Recovery in Burbank, Calif. “If patient brokering was gone, a lot of places wouldn’t be able to survive.”

The opioid crisis has underscored the urgent need for drug rehabilitation, and the Affordable Care Act has made it more accessible than ever. But the industry is rife with abuses, of which body-brokering is but one example. An addict who hits bottom is vulnerable to various forms of exploitation. Likewise, it can be overwhelming for distraught family members and friends to know where to turn in their efforts to help a loved one.

“There’s a lot of money to be made off of rehab because people are very desperate,” says Caleb Banta-Green, principal research scientist at the Alcohol and Drug Abuse Institute of the University of Washington. “Addiction is a treatable medical condition that is not cured but managed through long-term counseling and lifestyle changes. Trying to advertise that is a challenge when you’ve got all the for-profit companies coming in to make money off it.”

In Hollywood, rehab tends to mean a trip to Malibu. The idea conjures an image of an exclusive resort, with horse therapy, yoga and high-thread-count sheets, where celebrities dry out at a cost of $60,000 a month. But recently the “Malibu model” of drug treatment has suffered some setbacks. Last fall, the Woolsey Fire destroyed several rehab facilities, forcing some to close and others to find locations outside Malibu. Promises — the rehab resort that has hosted Robert Downey Jr. and Lindsay Lohan, among others — declared bankruptcy last year, citing lower admissions numbers and declining insurance reimbursements.

“A lot of insurance companies feel taken advantage of, and have tightened their belts as a result,” says Howard Samuels, CEO of The Hills Treatment Center. “Treatment centers aren’t getting the revenues they used to, and that has caused closures.”

Samuels, who was once the program director at Promises, is critical of many of the practices in Malibu. He believes that other centers tend to coddle their celebrity clients, for fear of losing their business. As a result, he says, they aren’t really helping. “They’re therapy resorts,” he says. “It’s a total enabling-for-profit job. They don’t really want to help the client change their lives.”

But he’s also worried about a new generation of competitors that have flooded the business in the wake of Obamacare. The 2010 law requires insurers to offer substance abuse treatment, creating a golden opportunity for new providers in a lightly regulated market. “Everybody has joined the party,” Samuels says. “A lot of good people have gone out of business, while the ones involved in fraud and patient brokering are thriving. The consumer is at risk of being taken advantage of and getting ripped off.”

The new competitors follow the “Florida model” of treatment. Under that system, addicts go to outpatient clinics during the day and reside at sober-living homes. In California, neither outpatient clinics nor sober-living homes have to be licensed. Florida passed legislation to crack down on the sector after a series of exposés about patient abuses and overdoses. California has lagged behind, allowing a heavy concentration of unregulated sober homes to sprout up, many of them in Orange County.

“Florida actually cleaned up its act,” says Ryan Hampton, an activist and author of “American Fix: Inside the Opioid Addiction Crisis — and How to End It.” “All of those bad actors from Florida have moved to California. We have been open for business for bad actors.”

The most notorious case was Christopher Bathum, the founder of Seasons Malibu. After being forced out of Seasons, Bathum founded a network of outpatient clinics and sober homes called Community Recovery. Last year, he was convicted of sexually assaulting seven women in his care. He has also been accused of perpetrating a multimillion-dollar insurance fraud.

The case has spurred a movement for new regulation of sober-living homes in California. In October, Gov. Gavin Newsom vetoed a bill that would have established a statewide licensing system for outpatient providers. In his veto message, he said more work was needed to ensure the Department of Health Care Services would be able to enforce the new rules, and encouraged the Legislature to work with the agency on a “more robust proposal.” Newsom signed two other bills that addressed conflicts of interest in drug testing and insurance coverage, and more legislation is expected on the issue in the next session.

“The legislators are saying, ‘We’ve got to do something,’” says Sherry Daley, government affairs director at the California Consortium of Addiction Programs and Professionals. Daley says that after the Affordable Care Act was passed, “tons of money came into the system with lax regulations. … That was a recipe for disaster,” she adds. “We’re trying to make that shift to account for large amounts of money that have come in, with these low bars for coming into the system.”

The bill to regulate outpatient sober-living homes drew opposition from Disability Rights California, which seeks to defend disabled people from housing discrimination. The group’s concern is that community groups and city governments would use the new regulations to try to drive sober-living facilities out of town. “We come at this from years and years of NIMBYism going on,” says Curtis Child, the group’s legislative director, referring to the “Not in my backyard” sentiment among many homeowners.

In the absence of regulation, however, it’s difficult for parents and patients to distinguish between reputable facilities and shady operators. Marketing plays a tremendous role in the industry. Many clinics have focused on buying up Google search terms, which often lead to the most expensive Malibu facilities. Many clinics also employ high-pressure sales techniques, doing little to assess a patient’s true needs.

“There’s no way really to vet these places unless you’re asking family members,” Hampton says. “There’s no national vetted list. There’s no Yelp. … You need to do your homework.”

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