On January 31, the State Senate called for a hearing to gather information on the industry, following reports of negligent deaths, sexual assault, drug use, and patient brokering inside an industry that has been only sketchily regulated until now. Some state legislators hope to start making changes. Under current California law, there are no prohibitions on patient brokering. However, in the past two months, several bills were introduced in the state Senate to end the practice of “patient brokering” in the state’s rapidly expanding addiction-recovery industry.

Prior to the January hearing, Senator Pat Bates of Laguna Niguel introduced SB 902, which gives licensing authority to the State Department of Health Care Services and allows the Department to conduct unannounced site visits to facilities. Senator Ricardo Lara’s bill, SB 1228, states that it is the intent of the Legislature to protect people from treatment fraud and patient brokering while in recovery from substance-abuse addiction. Senator Steven Bradford’s bill, SB 1268, would make patient brokering a misdemeanor, punishable by fine.

While this legislative attention is welcome, “patient brokering,” with referral fees of up to $15,000 per patient, is only one of several ways that the addiction-recovery industry preys on consumers and defrauds insurance companies. Some facilities will submit billing to insurance companies for specialized staff and services that the facilities do not, in fact, provide. Others will pay for their patients’ insurance premiums in order to bill those insurance companies for services.

Cotchett, Pitre & McCarthy, LLP is investigating the practices of several addiction rehabilitation facilities. If you have information regarding fraud, please contact CPM attorney Joel Gordon.