Preying on the Vulnerable: Sober Home Fraud

By Jean Lyon
Apr. 27, 2017

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One of the hot fraud trends right now involves the increasing number of sober living homes (SLH) around the country.

The typical model for substance addiction treatment and recovery consists of two basic stages:

  • Detoxification and services including in-patient treatment, if necessary; and
  • Out-patient treatment coupled with a therapeutic residential recovery home or “sober home” environment.

A sober living home is generally defined as an alcohol- and drug-free living environment for newly sober individuals who are trying to abstain from those substances. These are simply homes to the residents, not treatment or drug/alcohol rehabilitation facilities. Residents typically attend other programs not associated with the home at rehab clinics or outpatient programs. The intention is to provide a safe place for the residents where they are not constantly faced with easily accessible drugs or alcohol.

Because sober homes can be an important step between inpatient rehabilitation and an independent living environment, many insurers provide coverage for not only the SLH, but also for related services such as outpatient rehab, counseling, and drug testing to monitor the patient’s sobriety.

There have been quite a variety of schemes perpetrated in this area, including:

  • Patient brokering. This happens when patients are “sold” by a recruiter to the sober home. The recruiter gets a fee for every patient they bring that generates revenue for the home.
  • Kickbacks. The sober home receives a payment from other providers who perform lab testing, counseling, or provide other outpatient treatment programs. The payment may be for each service or it may be in the form of a fee for each patient referral. These “providers” may collude to perpetrate other frauds, such as billing for services not needed or not rendered.
  • Not a sober home. Some homes have been accused of allowing drugs in the sober home or even providing drugs directly or through a third party to cause a patient to relapse and to perpetuate the need for services. In one case, investigators alleged some of the defendants permitted the residents to continue using drugs as long as they attended treatment and submitted to drug testing so that those claims could continue to be generated. Addicts spend months, even years, in and out of treatment, and some have even died due to overdose in these disreputable environments.
  • Identity theft. With the new individual coverage available through the ACA exchanges, these criminals may steal the identities of drug- and alcohol-addicted people, and then use those identities to buy health insurance policies without the victims’ knowledge. From there these thieves can submit unlimited numbers of phony bills to payers, netting millions of dollars within a very short time. Sometimes the patient may be complicit in the enrollment process where the “provider” buys the policy and the patient gets a free place to stay or maybe some kickback fee
  • Billing for services not needed/rendered. A sober home patient’s sobriety is often monitored with lab tests. These “qualitative” tests are typically in the form of a type of dipstick urinalysis and intended to provide a simple positive/negative for a multi-substance test. Fraudulent sober home providers benefit in a few different ways from this kind of testing. First, they may have an “affiliated” provider (spouse, relative, friend, etc.) bill for this testing and receive financial benefit from it. Second, these “providers” collude to provide many more tests than necessary for monetary gain. For example, patients may be unnecessarily screened daily or multiple times a day. In one case, investigators alleged that the fraudsters submitted urine and saliva samples from employees instead of urine and saliva from patients in order to be able to submit the insurance claims. Third, the “providers” collude to bill for more expensive testing than what is provided or needed. Saliva or blood tests are billed because their payout is higher. Quantitative tests are billed (to measure “how much” of a drug) when the simple qualitative test results are negative (so how much of zero drugs are there in the system?) Lastly, these “providers” may collude to bill for services not rendered. This may include the falsification of the actual lab results if records are requested.
  • Predatory marketing practices. Abuses in this area have been found to include a misrepresentation of the services offered, a misrepresentation of the service location, and the auctioning of patients through clearing houses. Marketers have been found utilizing internet search terms to route potential patients in search of well-known and well-respected treatment providers to their own referral agencies. They frequently route patients that are looking for local treatment providers to out-of-state treatment providers, who then bill higher fees for out-of-network services.
  • Waiver of co-pay. Treatment centers are offering programs to waive all co-payments and other forms of patient financial responsibility in order to entice them to utilize their services. While patients suffering from addiction often do not have the financial means to pay for treatment on their own, a routine practice of waiving all patient responsibility as a means of enticing patients to enter into treatment may violate the provider’s contract as well as both state and federal laws.

Some states, like in Florida where sober home fraud has been a high profile problem, are taking action against this fraud. Legislation is being introduced to specifically target the problem of fraudulent patient brokering and deceptive marketing practices, and the economic relationship between service providers (like labs and counseling) and the sober homes themselves.

Not all states are actively addressing this issue, so it is important for all plans who provide coverage for these drug rehab related services to monitor their data for indicators of this potential fraud and to actively investigate the potential cases discovered or referred. Some data indicators may include:

  • Increase in urine drug screens, both qualitative and quantitative. Using a link analysis visualization tool, look for patterns in the ordering provider, the lab, and any other provider where the data shows a high incidence of shared members.
  • An increase in utilization of sober home claims (and other substance abuse services) for new plan enrollees, with a focus on individual coverage plans or small groups. This also applies to Medicaid enrollees.
  • Cookie cutter claim patterns for most or all sober home residents. This is where you would find multiple patients with the same sober home, counseling, labs, and other outpatient services.
  • An increasing trend of patients traveling out-of-state to receive treatment can be an indicator that your membership is being targeted by patient brokers and deceptive marketing efforts.

It is unfortunate that these fraudsters prey on the vulnerable people seeking substance abuse treatment and, often, their families who are desperate to help their loved ones. The marketers/recruiters lure these potential residents with the promises of free rent and gifts and then refer them to drug-treatment centers owned by the crooked sober home owners for the sole purpose of lining their own pockets, providing “services” meant solely to maximize insurance reimbursements.

Because crooks are always trying to stay one step ahead, it is imperative that we remain vigilant in our efforts to detect and investigate sober home fraud to not only protect the plan from financial losses, but also to protect our patients from this bogus, and potentially harmful treatment environment.

Jean Lyon is Vice President of Product Sales for HMS.

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