The New Normal? Avoiding Risk and Preparing for Growing Scrutiny of Addiction Treatment

Recent weeks have brought headlines of law enforcement crackdowns on addiction treatment: federal, state, and local raids on sober living and residential rehab operators, arrests, and charges of fraud or other misconduct.  National news also reflects a trend of growing federal and local law enforcement coordinating to prosecute fraud by laboratories, addiction treatment marketers, and others in the industry.  Is this the “new normal”?

With increasing levels of law enforcement scrutiny expected in the near future, addiction treatment center operators and professionals should be conscious of particular pitfalls and risk areas.  We put together this list of ten things every addiction treatment professional should be mindful of to stay out of trouble.

Resident Health and Safety

A disquieting number of patient safety incidents around the country – including patient suicides, mismanaged illness leading to preventable death, and other self-harm – has called attention to the need for greater regulatory oversight.  Addiction treatment professionals need to ensure that all personnel are well-trained on how to handle health and safety issues, and not to wait until a disaster occurs before paying attention to policies and procedures, training, and safeguards to ensure safety.

Shady Marketing

Questionable marketing practices in the recovery industry – including brokers who steer patients for thousands of dollars, procurement of patients by obtaining insurance coverage, kickbacks to recruit patients and their families, unethical call center practices – are too many to name.  Growing media attention has shined a spotlight on abusive marketing, calling the attention of federal and state law enforcement to the issue.  While many have taken these practices as “business as usual” for as long as anyone can remember, law enforcement and health plan fraud investigators are moving aggressively to curb these practices by making an example out of the worst offenders.

Sloppy Billing and Coding

The line between error and fraud is nowhere more ambiguous than when it comes to billing and coding practices.  The health plans are on an aggressive campaign to define poor documentation,  the rendering of levels of care that are inconsistent with the codes being billed, and other billing and coding practices as opportunistic forms of fraud and abuse.  Addiction treatment professionals need to ensure that the billing submitted on behalf of their treatment centers are accurate.  It is critical to exercise careful oversight of billing practices, and to focus on improving documentation and record-keeping to stay ahead of evolving enforcement perspectives on insurance reimbursement.

UDT Overtesting

A review of recent indictments and government interventions in False Claims Act cases highlights an unambiguous crackdown on excessive and inappropriate UDT testing.  With UDT testing as the “front line” of the battlefield from a law enforcement perspective,  addiction treatment professionals need to be mindful of standards of care in utilizing and billing for UDT.


Addiction recovery involves difficult decisions about medication management, including the legitimate need for pain management of people in recovery and the increasing focus on medication assisted treatment.  It is striking – and troubling – how many non-physicians are playing active roles in driving medication assisted treatment, including the use of naltrexone and suboxone.  The overinvolvement of non-physicians should be a red flag for addiction treatment providers.  As crazy as it is to imagine, some industry personalities have become known for their ability to procure medications easily for people in recovery who have relapsed and are “in need” of prescription opioids, benzodiazepines, or even illegal drugs.  DEA and local law enforcement intervention is almost inevitable when non-physicians are actively involved in bypassing physician prescribing and effectively running their own illegal pharmacies to dispense medications in addiction treatment.

Illegal Hiring of Doctors

The recently enacted Stone Act (AB 848) established new legal standards for how physicians are permitted to be involved in the provision and oversight of specific kinds of care in residential treatment centers that apply and receive certification to provide incidental medical services.  The implications of the new law are expected to include less tolerance for noncompliance by law enforcement.  In other words, treatment centers that disregard the new requirements – as well as the physicians who work with them – are at significantly greater risk.  This includes centers that hire physicians to do more than is permitted by the Stone Act or that hire physicians without obtaining the necessary certification.  Hiring of physicians in the outpatient context remains a problem under the new law.

Patient Financial Responsibility

Discounting and waiving copayments is a pervasive issue.  The insurance companies consider the routine practice of discounting and waiving deductibles and coinsurance to be a form of fraud and abuse, and are actively searching for centers that engage in the practice in their marketing as a basis to deny payment or demand a return of funds.  Addiction treatment professionals should be mindful of the minefield that comes along with allowing patients to avoid financial responsibility.

Resident Rights

Several recent cases have called attention to the lack of protection of residents’ rights as a “dark side” of the addiction treatment experience.  In particular, incidents at several centers involving allegations of nonconsensual sexual behavior have triggered law enforcement scrutiny, based on concerns that clients were being preyed upon in a period of vulnerability that is inherent in overcoming addiction.  Other investigations have related to restrictions on residents that are inconsistent with the legal limits on treatment facilities.  Addiction treatment professionals should understand and operate with respect for resident rights.

Sober Living Overcrowding/Misuse

While municipalities and disability rights advocates are doing battle over proposed legislation of sober living homes at the state level, local municipalities are actively looking for ways to use their inherent power to put pressure on existing operators.  Examples include growing levels of scrutiny of noncompliance with zoning requirements in sober living.  While federal and state law protect the rights of six or fewer people to live together,  local authorities in many California cities are engaging in more aggressive policing of the number of beds, provision of services, and, in some cases, even challenging utilization of the so-called “Florida model” of integrating outpatient services with sober living residences.   Addiction treatment professionals should be mindful of the permissible scope of activity in sober living and the need for legal relationships with treatment programs.

 New Regulations

Government regulators and insurance companies have been waking up to the desperate need for greater regulation of recovery in so many areas, and in particular the extent to which California lags other states in regulations to police industry conduct. The most notable change of 2016 at the State level has been the implementation of Stone Act, AB 848, which requires treatment centers to apply for licensure in order to contract with physicians to assess patients and manage medications.  2017 is expected to bring additional laws to limit addiction treatment marketing activity, as well as so-called “Florida model” structures that bypass licensure by combining unlicensed sober living facilities with outpatient programs.  Operators need to make a point of familiarizing themselves with new legal requirements and paying attention to what’s coming soon.  

Harry Nelson is the managing partner of Nelson Hardiman, a firm that works with behavioral care providers and founding board member of the American Addiction Treatment Association (AATA). AATA is a national trade association that provides online resources and training events, for licensing and certification, operations, reimbursement, clinical standards, patient privacy, quality assurance, and risk management.

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