Still sitting on Gov. Jerry Brown’s desk: a bill that would enshrine “patient-brokering” – when licensed drug rehabilitation centers and/or addiction professionals pay to enroll patients – as a no-no.

And one that would put new rehabs on a year-long probation before they get licensed and forbid operators who flunk out from applying again for five years.

There’s another that would require sober living homes and licensed treatment centers to publicly disclose their financial relationships, and others that could impact California’s notorious – and sometimes deadly – addiction treatment industry.

“The science is clear. We know how to address this epidemic – by including medical treatment of a medical illness in the treatment plan,” said David Kan, a psychiatrist and president of the California Society of Addiction Medicine, which is championing bills that would do just that.

“It will save lives, it will save money and potentially reverse the course of this epidemic.”

Many rehab-related bills were watered down or condemned to death in committee during this session, igniting outrage in some reformers. But backers – and opponents – of bills that made it through the legislative grinder are eagerly, and anxiously, awaiting action.

Brown has just more than a week – until Sept. 30 – to deliver his thumbs-up or thumbs-down.

What do dialysis and addiction have in common?

Senate Bill 1156, by Sen. Connie Leyva, D-Chino, takes aim at alleged scams in the dialysis industry – but would impact addiction treatment as well.

It would make it harder for financially interested third parties – such as dialysis centers and rehabs – from paying for a patient’s insurance policy. That allows them to collect far more in fees for service than they spend on premiums.

The Centers for Medicare and Medicaid Services recently examined the practice at dialysis clinics and found that it could hurt a patient’s readiness for kidney transplants, expose them to greater out-of-pocket costs and disrupt coverage if the dialysis center stopped paying premiums.

That’s also a prevalent practice in California’s addiction treatment industry, an investigation by the Southern California News Group found.

Levya’s bill would require financially interested third-parties to tell the patients – and the health plans – that they’ll be paying premiums. It would also limit what financially interested third parties could collect from insurers – either the Medicare rate, or the rate set by the patient’s health insurance policy, whichever is lower.

The bill is championed by insurers and labor unions, and decried by dialysis centers and some of their patients. While acknowledging that some restrictions might be warranted, the California Hospital Association fears this bill would undermine programs that pay for health insurance for patients who can’t afford it but don’t qualify for Medicare, Medi-Cal or Covered California.

Doctors enter fray

When it comes to addiction and mental health, California has a history of good intentions – with decidedly mixed results, says the California Society for Addiction Medicine.

“The problem is a lack of forethought and clear standards – and a lack of accountability for the spending carried out on the public’s behalf,” CSAM said in a statement. “As a result, an entire industry of treatment has been shadowed by fraud and abuse, and we must now try to clean it up.”

The answer lies in recognizing addiction as a medical, and not solely behavioral, problem – and introducing medical standards for treatment.

“This means that providers must choose approaches that have been proven effective,” CSAM said. “To compare, the success rate for those involved in medically managed opioid treatment is 60-90 percent, versus less than 10 percent for non-evidence-approaches, such as psycho-social-only treatment.”

SB 823, by Sen. Jerry Hill, D-San Mateo, would require the state to adopt the American Society of Addiction Medicine’s treatment criteria as the minimum standard of care. That means medical management with drugs that block opioid cravings, like buprenorphine, methadone or naltrexone.

The overwhelming majority of California treatment centers are non-medical, based instead on the 12-step model of Alcoholics Anonymous. Some treatment centers and sober living homes refuse to accept clients who take medication, adhering to a completely drug-free philosophy that works less than 10 percent of the time.

Another CSAM-favorite bill, SB 275, would require the state to develop standards for treating minors, “taking into account the unique needs of young people with developing brains.”

The state Department of Finance is opposed to the CSAM approach, arguing that it would increase costs and limit flexibility for counties.

Kan heartily disagrees. “The state saves a tremendous amount by not having ER visits, hospitalizations, overdoses, HIV and hepatitis C infections, and deaths – not to mention involvement with the criminal justice system,” Kan said.

Survivors

Several other bills on the governor’s desk seek to refine physician training for prescribing opioids, and to specify how data kept in CURES – the Controlled Substance Utilization Review and Evaluation System, which monitors prescription and dispensing of controlled substances – can be accessed and used.

Also waiting is AB 3162, by Assemblymembers Laura Friedman, D-Glendale, Melissa Melendez, R-Lake Elsinore, Quirk-Silva, D-Fullerton, and Sen. Pat Bates, R-Laguna Niguel, which would make rehab licenses provisional for one year and revocable for good cause.

And SB 992, by Sen. Ed Hernandez, D-West Covina, which would require centers to draft plans for what to do when residents relapse, as well as require that financial relationships between sober living homes and licensed treatment centers are publicly disclosed.

And SB 1228 by Sen. Ricardo Lara, D-Bell Gardens, which would forbid patient-brokering.

“No action yet,” said the governor’s spokesperson, Ali Bay.

The U.S. House committee investigating the ugly underbelly of addiction rehab in America told eight call centers to cough up details about their business practices – including whether they get paid for routing patients to specific treatment facilities, and if so, exactly how much.

The letters – sent on Tuesday, May 29, to big and small companies in the treatment industry – probe allegations of “patient brokering,” where addicts are essentially sold to the treatment centers willing to pay the most for them, rather than sent to the treatment centers that might do them the most good. It also targets referral call centers and websites that are affiliated with treatment centers – but don’t necessarily disclose that relationship.

“The exploitative tactics employed by patient brokers and some call aggregators have been deployed amid a perfect storm,” said the letters signed by six Congressmen. They noted that 115 people die from overdoses every day – which is one every 13 minutes.

The eight companies must by June 12 provide documents and details – copies of contracts with treatment providers, how many patients have been referred, to where, whether it helps sign addicts up for health insurance, if it owns websites and paid internet search engines for ad optimization, among other things.

Those companies are American Addiction Centers, one of the nation’s largest treatment chains; Addiction No More in Texas; Addiction Recovery Now in Florida; Elite Rehab Placement in Michigan; Redwood Recovery Solutions in Florida; Solutions Recovery Center in Florida; Treatment Management Company in Georgia; and Intervention Allies in North Hollywood.

The companies contacted by the Southern California News Group said they do not engage in the unsavory practices outlined in the letters.

“I’m excited about this letter. It’s about time,” said Michael Cartwright, CEO of American Addiction Centers. “Anything that looks into bad practices around the treatment industry is something we’re supportive of.”

Cartwright continued: “I view this as a great opportunity to start a conversation with legislators. How about the feds getting in on the action in this area? We’ve worked to get laws passed in Florida, in Tennessee, and now in California – it would be a lot easier if the federal government passed some meaningful regulations, rather than doing it state by state by state.”

American Addiction Centers owns several websites that handle inquiries for its centers – much as the revered Betty Ford Center has its own hotline, he said – and Cartwright suspects AAC got the letter because of its national size and scope.

The Hazelden Betty Ford Foundation balked at Cartwright’s comparison of AAC websites to the Hazelden Betty Ford website.

“Our one branded website, which directs all calls to our single call center, is nothing like owning several websites that aggregate calls under different brands,” said Jeremiah Gardner, spokesman for Hazelden Betty Ford. “AAC owns websites like Rehabs.com and Recovery.org that are not branded as AAC and purport to connect people to all sorts of treatment centers. The Congressional committee wants to know more about those sorts of practices, which we do not engage in. Mr. Cartwright’s comparison does not even make sense.”

Others on the receiving end of the letters were less clear on why they’re on the list.

“It doesn’t apply to me,” said Carmine Thompson, founder of Intervention Allies. “As I’ve tried to explain to the committee, I’m a private interventionist. I don’t accept insurance. I have never received a referral fee from a treatment program, and I will not give a referral fee to a treatment program.”

Daniel Callahan of Solutions Recovery Center in Florida said his company doesn’t use phone rooms and doesn’t pay brokers to round up clients from the streets.

“The old method of having people pounding the pavement, that method doesn’t work anymore,” Callahan said. “What I see Congress attempting with their inquiry is an attempt to patch a system that needs overhaul.  The questionnaire is asking the wrong questions.  The focus on patient brokering is flawed, there must be some guidelines for advertising and marketing a facility.”

Callahan says a good reputation and good online presence helps to keep the business going.

Critics of the industry welcomed news of the ongoing probe.

“Looks like a great first step and it’s significant to note that action is being taken,” said Warren Hanselman of Advocates for Responsible Treatment in San Juan Capistrano. “Hopefully this is just the beginning of what could lead to legislation that cleans up the unethical operators of these organizations. People with addiction have enough problems to overcome on the road to recovery without being subjected to ‘referral services’ that have no moral values and sell them to the highest bidder.”

In its probe, the congressional committee cites the Southern California News Group’s ongoing investigation into abuses rampant on the “Rehab Riviera,” among other probes.

“One of the ways that patient brokers can generate leads on potential clients is through phone hotlines that connect to call centers or call aggregators,” the committee wrote to the eight companies. “Patient brokers are predominantly paid in one of two ways – a per-head fee that can range from $500 to $5,000 for each patient who successfully enters a treatment center, or monthly treatment facility fees that are based on the broker meeting a quota of patients and can result in earnings in the tens of thousands of dollars.”

Clients are sometimes offered perks such as “scholarships,” free housing and medical treatment.

“It is unclear if these patient brokers or call aggregators have any medical background necessary training to assist or make medical decisions for potential patients,”  said the congressional letter. “Perhaps most disturbing is the allegation that some patient brokers follow these individuals with substance use disorder after their release and provide them with drugs to induce relapse so that the entire process can be repeated.”

Note: This story has been updated to include a comment from the Hazelden Betty Ford Center.

WASHINGTON D.C. – As he and other lawmakers grilled representatives from the addiction recovery industry Tuesday, the Congressman from Georgia seemed to grow incredulous.

“So you have a list of companies that you refer people to?”  Rep. Buddy Carter, R-Georgia, asked Jason Brian, founder and owner of TreatmentCalls.com and Redwood Recovery Solutions, two Florida-based companies that market treatment centers to people addicted to drugs or alcohol.

“What are the qualifications for a company to be on that list?”

Brian sat stiffly in his chair and began to answer, “Licensed by the state…”

Carter cut him off: “Do you take into consideration outcomes?” Do you ask those companies (what percentage of patients achieve sobriety) before you put them on your list?”

“No,” Brian said.

“So the outcomes have nothing to do with it,” Carter noted. “You’re just on the list.”

And so it went Tuesday as members of the U.S. House subcommittee investigating addiction treatment in America grilled providers and marketers about advertising practices. It was the latest hearing in a bi-partisan probe of an industry that many lawmakers believe should be subject to tougher federal oversight in order to curtail widespread consumer and insurance fraud.

Some executives pointed out that their industry — which includes a beachhead in Southern California known as the Rehab Riviera, with more than 1,100 centers in Los Angeles, Riverside, San Bernardino and Orange counties — is particularly needed during the national opioid crisis. They also noted that regulation varies widely from state to state.

“We have people dying in the streets,” said Michael T. Cartwright, chairman and CEO of American Addiction Centers. “We really need to do something about this. We want to see consistency regarding the quality of care and licensure standards. It’s completely different from state to state. In California, you can detox in six-bed houses. In other (states), it has to be done in hospitals. We should have standardization.”

And because there is no agreed upon standard definition of what quality care is, and isn’t, there’s no ability to rank facilities on quality, and no easy way for consumers to get information, noted Rep. Gus Bilirakis, R-Florida.

Most information about addiction treatment is provided via Internet advertising, where overstatement, misstatement and outright fraud abound, lawmakers said. Several witnesses implored the federal government to raise the bar.

“To ensure ethical, quality care for all who seek help for addiction, we believe it is time to establish quality standards,” said Mark Mishek, president and CEO of the Hazelden Betty Ford Foundation.

“Congress needs to assist… Reforms ought to bolster state licensure requirements; accreditation standards; clinician education qualifications; and access to comprehensive, evidence-based care and support that is coordinated and integrated with the rest of the healthcare system.

Kenneth Stoller, director of the Johns Hopkins Hospital Broadway Center for Addiction, said there are five elements to high quality treatment. Effective centers use clinically appropriate medications (methadone, buprenorphine and naltrexone for opiate disorder; naltrexone, disulfiram and acamprosate for alcohol disorder). They combine medications with counseling or psychotherapy that is delivered by skilled, experienced staff. And they use behavioral therapies that motivate positive change and incorporate objective measures of treatment response as well as so-called wrap-around services (including supportive housing and vocational rehabilitation, among others) to help patients achieve long-term sobriety.

“A big concern that this committee has is in ensuring that, when an individual is looking for treatment, they know what to look for, and what things to avoid,” said Rep. Bilirakis of Florida. “I want to make it clear and less complicated for the consumer.”

On average, 115 Americans die every day from opioid-involved overdoses, said Rep. Gregg Harper, R-Mississippi. The demand for treatment has increased greatly in recent years, with admissions for opiate use growing 58 percent between 2005 and 2015.

That growing demand has spawned a large and complex treatment industry that Harper and others said is largely unregulated at the federal level.

The Congressional probe comes in the wake of a Southern California News Group investigation of the “Rehab Riviera.”  The SCNG probe found that unscrupulous operators can turn a single drug addict or alcoholic into huge profit, often without providing much in the way of recovery. Offers of free travel and treatment “scholarships” lure addicts from other states to Southern California, where those addicts then are signed up for health insurance, often under false pretenses. Treatment centers pay the premiums and then bill insurance companies for services — a slight-of-hand that can put hundreds of thousands of dollars into the operator’s pocket.

Often, when the insurance runs dry, those addicts wind up on Southern California streets, destitute and still addicted. Sometimes addicts die in the care of non-medical centers that would not be allowed to open in other states.

“Without more accountability, our field will continue evolving into a sector where success is predicated not on whether patients get well and families heal, but on the size of your advertising budget, website analytics, search engine optimization and call center tactics,” said Mishek.

“The lack of transparency, on top of minimal quality standards in the industry, puts patients at risk. These kinds of practices certainly would not be tolerated in any other area of healthcare,” he said. “In too many cases, people who need help are instead being harmed.”Updated 7/25 with comment from Mishek

The rules at Joseph Scolari’s sober living home were clear: No drugs or alcohol, of course. Random searches. Drug tests. No sex.

Scolari had known little about the sober living home industry just a few years before, but it looked like a lucrative solution to his financial woes. And his business – Sober Network Properties, launched in 2014 – would come to manage more than a dozen sober houses in residential neighborhoods, some with up to 14 beds each.

It was the first of those houses – the five-bedroom, 4,200-square-foot Mediterranean on Via Lampara in San Clemente’s luxurious Talega development, where he had once lived with his wife, Rebecca, and their two children – that got Scolari sued.

Last year, in a deposition related to that lawsuit, attorney Richard McNeil showed Scolari an image of a man and a woman in the backyard of that house, entwined in an amorous embrace, in flagrant violation of one of the house rules.

“In the first photo,” McNeil said, “can you tell what they’re doing?”

“They’re showing affection to each other,” Scolari said.

“OK. And are part of their genitals exposed in that photograph?” McNeil asked.

“Well, they’re in their own backyard,” Scolari said….

“Well, look at the female,” McNeil said.

“I see her leg.”

“And above that?”

“I see her stomach. Oh, her – yeah, I can see that.”

“Yeah,” McNeil said.

And so it had come to this: Scolari and his erstwhile neighbor, David Hurwitz – who once amicably discussed barking dogs – were locked in a legal battle so bitter that Hurwitz stationed a video camera in an upstairs window to track events in Scolari’s backyard.

But the list of complaints that neighbors lodged about Scolari’s 14 tenants ran far beyond one couple violating the “no sex” rule. Neighbors complained about noise and loutish behavior. They complained about litter and cigarette smoke.

And the lawsuit didn’t touch on the one emotion voiced in other neighborhoods dealing with other sober homes throughout Southern California — fear. Neighbors fear that recovering addicts might cause them harm, and that their existence in the neighborhood might drag down property values.

These days, in Southern California, such fears are rampant.

In the world of addiction recovery, the Los Angeles, Orange, Riverside and San Bernardino county area is known in the Rehab Riviera, a dense cluster of more than 1,100 licensed drug and alcohol treatment centers from Malibu and Lake Arrowhead to San Clemente. Regulation is lax and operator fraud – against patients and against insurance providers – is so rampant that the Orange County District Attorney formed a special task force to fight back.

What’s less well-understood is that licensed treatment centers often own or work with a broader network of unlicensed ancillary businesses – sober living homes – which are largely beyond government’s reach.

People who have completed addiction treatment, or who go to licensed centers during the day, live in these homes without medical supervision as they transition into their new, theoretically sober lives. Clients provide income for sober living homeowners in the form of rent, and for treatment providers in the form of insurance reimbursements for urine or blood tests meant to check their sobriety.

The proliferation of sober living homes in recent years – often in upscale residential neighborhoods – has led to bitter conflict, lawsuits and charges of persecution.

The camera pointed at Scolari’s yard was meant to capture what Hurwitz considered life-disrupting chaos that came to his Talega neighborhood when Scolari turned it into a business that charged monthly rent to as many as 14 people in the early stages of recovery.

Scolari, in the deposition, suggested Hurwitz’s camera was evidence of something more sinister.

“Well, the way I look at this is that the neighbor is videotaping people’s private parts. It sounds pretty obscene to me. I mean, it’s in the privacy of their own backyard. … You know what I mean? Why would somebody videotape somebody’s private parts, one of their neighbors?”

Voices grew shrill. Scolari said it was weird, called Hurwitz irrational, and later said his wife feared that Hurwitz was some sort of predator.

“Mr. Hurwitz is a part of that whole organized group to discriminate against addicts,” Scolari said.

The lawsuit filed by Hurwitz and several other Talega neighbors may be exceptional for the precision employed in documenting neighborhood disruption, and for the window it provides on an industry largely shielded from outside eyes, but it’s not unusual in the fierceness and vitriol aroused on all sides.

Discrimination?

Scolari was hardly the first sober living operator to accuse neighbors of discrimination.

The Fair Housing Act and the Americans with Disabilities Act wrap recovering addicts – and the people who rent homes to them – in a protective legal cloak. Sober living home residents are families in the eyes of the law, and cannot be subject to any more requirements than a traditional family would face.

Thus, sober homes are not tracked or regulated by government, so it’s unclear exactly how many of them there are. But experts say there are several for each licensed treatment center – putting the total in the thousands in Southern California.

Attempts to register or regulate sober living homes have been met with outrage – and legal action – from operators who argue that such rules represent persecution of a vulnerable class. The ADA, while well-intentioned, protects the bad as well as the good, critics say.

“The federal government forces us to fight this battle with one hand tied behind our back,” said Dave Aronberg, state attorney for Florida’s Palm Beach County, which is in the one region of the country to rival Southern California when it comes to the numbers of sober living homes and drug rehab centers.

Experts have been trying to warn policymakers for years that sober living homes are an impending train wreck.

Richard Rawson, retired co-director of UCLA’s Integrated Substance Abuse Programs and longtime consultant for California regulators, said there’s a difference between “the theory of sober living and the reality of sober living.”

“In theory, having a place to live in early recovery – first several months for many people – is useful, particularly for stimulant and alcohol users who do not have effective medication support,” Rawson said.

“When stimulant users begin recovery, their brain is very reactive to cues and triggers in the environment, and the very powerful Pavlovian conditioning makes it very difficult for them to maintain abstinence … A place to live, where there is no drug use, can be very helpful.”

But that’s the theory. The reality offered in many sober living homes, in Rawson’s view, is different: “(It’s) a scam of taking people’s money and jamming them into overcrowded, unsupervised flophouses, where drug use (is) the rule, not the exception.

“This group now is an embarrassment to the substance use disorder field, and further stigmatizes SUD treatment and recovery services.”

Rawson said there are exceptions, and some sober living operators are sincerely interested in helping patients, but he noted that there is no formal vetting process to distinguish good from bad. The state has no authority to set standards or regulate sober living homes, and good ones can become bad ones overnight.

“Well-managed, smaller sober living places can play a useful role in helping people in recovery,” Rawson said. “But in the current unregulated environment, lots of bad stuff is happening.”

The Scolaris would agree. Joseph Scolari argues that his company was among the good guys, interested only in their guests’ healing.

But proposed legislation would not automatically give him the benefit of the doubt.

In May, Rep. Dana Rohrabacher, R-Huntington Beach, introduced a bill to change the Fair Housing Act and Americans with Disabilities Act to allow local governments to regulate – and potentially ban – sober living homes.

“This infusion of drug addicts and alcoholics into residential communities has had a deleterious impact on the quality of life of local families who now suffer increases in police activity, transient residences next door and a decline of property values,” said Rohrabacher, upon introducing House Resolution 5724.

Federal law has shielded unscrupulous sober living homes from meaningful oversight, he said, adding,”This is a travesty. My bill will empower the communities and the states to prohibit such facilities in residential areas if that is the will of the local people.”

But many say that goes too far.

“To the recovery community, this is no different than saying ‘group homes for people with Down’s syndrome are bringing property value down’ ” wrote Joe Schrank, editor of TheFix.com – a website that chronicles addiction recovery issues – blasting Rohrabacher’s bill.

“The implication is, drug addicts aren’t fit to live among decent people. It’s as arcane as Jim Crow … treating addiction as crime,” Schrank wrote.

Several other bills pending in Congress and in Sacramento also would bring more oversight to sober living, though in less dramatic fashion.

Beneath the rage, the fundamental question may boil down to this: Are sober living homes 21st-century families? Or are they commercial businesses twisting a well-intentioned law to their advantage?

And, is there a better way?

The Hurwitz-Scolari conflict offers some insight into those questions.

Next: Sober living, a big business opportunity

DAY 1: In So Cal’s Rehab Riviera, sober living homes are common. So is outrage.

DAY 2: From neighbors to litigants; the gloves come off quickly.

TODAY: Sober living was a $150,000-a-month business – before legal bills brought it down.

DAY 4: To fix sober living, California might do well to look at Florida.

SAN CLEMENTE — After Joseph and Rebecca Scolari turned their former home on Via Lampara into a sober living house, complaints piled up at their Talega homeowners’ association.

Dead plants in the pots by the front door. Green-water Jacuzzi. Unmowed lawn. Faded garage door paint.

“Please clarify what exactly is wrong with my garage door,” Rebecca Scolari wrote to Talega’s property management company in May 2015.

“It appears to be in fine condition. Is everyone else on Via Lampara painting their garage doors? They are all the same age and have all been exposed to the same environmental conditions.….

“I have mentioned before that we have felt discriminated against and harassed by the neighbors and inherently the Association,” she wrote. “Receiving five complaints in one day is blatant harassment ….we are not going anywhere. It might be beneficial for the Board to consider all of the time and money wasted by all parties in continuously addressing these ridiculous allegations.”

Such tension is typical of the legal back-and-forth that can arise when sober living home operators, and their neighbors, wind up in court.

Behind the scenes, though, court documents show that the Scolaris also were not impressed with how their corporate business partner, Sobertec, handled the properties. The house managers supplied by Sobertec – one at each sober living home to make sure chores got done, manage medications and generally keep an eye on things — weren’t doing a professional-enough job, Rebecca Scolari said at her deposition. The Scolaris didn’t like the constant complaints.

The neighbors weren’t impressed either.

At one point, according to the lawsuit, neighbors were offended when the sober living residents on Via Lampara broke into a boisterous version of Lil Wayne’s “Execution Style,” singing: “Crack em like a lobster … (gunshot noise) … kill em execution style.”

So, in 2015, as the relationship between treatment provider Sobertec and the Scolaris’ real estate company, Sober Network Properties, approached its six-month anniversary, the Scolaris insisted on some changes.

The Scolaris, not Sobertec, would provide the house managers. There would be two managers at each house, not one. Each of those managers would make $2,000 per month. And the number of beds at Via Lampara would drop from 14 to 12. Also, the price Sobertec would pay to the Scolaris’ company would rise to some $30,000 per month, rather than $15,050.

Sobertec said it performed professionally in court documents, and refused the Scolaris’ terms. The Scolaris gave Sobertec 30 days to vacate.

The Scolaris then courted what was, at the time, one of the larger addiction and mental health providers in Orange County — Sovereign Health — to fill their houses with sober living clients.

“Hi Ben,” Rebecca Scolari wrote to Ben Kaneaiakala, who worked for Sovereign, in the spring of 2015.

“We are a very reputable sober living housing company that specializes in placing mid-high income clientele into high quality sober living properties, in order to facilitate recovery in a quiet, considerate, and respectful manner….. We pride ourselves on creating a conducive atmosphere for individuals to receive the treatment they need, while feeling almost as comfortable as if they were living in their own home. We also place very high standards on behavior….

“As a family, we care about the recovery community and we truly believe that the clients are the most important part of this industry. We are motivated by changing lives and helping people in need. We would love to grow with different facilities and different resources in order to increase the success rate all around.”

Soon, the Scolaris’ company, Sober Network Properties, and Sovereign, struck an alliance. During the day, Sovereign would treat people with substance use disorders at its facilities. Sober Network Properties would provide housing for those clients — along with house managers, food, and transportation to and from treatment. As part of the deal, Sovereign would pay $30,740 a month for the Via Lampara house — about $18,000 for rent and $12,000 for food, transportation and management services. Several more properties would eventually be added to the portfolio as well.

At its height, Sober Network Properties employed about 30 people, including house managers, drivers and operations workers, Rebecca Scolari said at deposition. It conducted business from an office in San Juan Capistrano. Hurwitz’s attorneys estimated Sober Network Properties grossed some $150,000 a month.

The profit margin, though, was just 15 percent, Joseph Scolari later said. And when dealing with complaints, Rebecca Scolari insisted the sober living homes themselves were not businesses.

“There is ABSOLUTELY NO business or commercial activity occurring in any of our homes,” Rebecca Scolari wrote to the Talega homeowners’ association, refusing to attend an enforcement hearing for fear of a “lynch mob.” “There is absolutely no exchange of monetary value for business purposes occurring in any of our homes.”

All three of their sober living homes in Talega were “used SOLEY (sic) for the purpose of single family residences,” she wrote. “While our families may not be a traditional ‘family’ in some eyes, they are still considered a single housekeeping unit. Our tenants/guests clean the home together, cook meals and eat together, and socialize in the same manner as any other family would.”

Attorneys for the neighbors pounced on that assertion.

“And that was true, despite the fact that you were making $20,000 or so every month on your business operations with… with Sobertec and later Sovereign?” attorney Gerald Klein asked Joseph Scolari during his deposition.

The debate — is a sober living house a business or not? — was part of a legal conflict that dragged on for years.

The fight came to include different parties. Code enforcement officers from the city of San Clemente “raided” Sober Network Properties’ homes and joined the fray. The city of Aliso Viejo sued Sober Network Properties. And there were other suits, and counter suits, involving the Scolaris’ and former business associates.

Not impressed with the quality of the treatment providers out there, the Scolaris joined forces with a former Sovereign employee to launch their own licensed addiction treatment business. It was called Altus Treatment.

But even as that business started, the legal battles were proving too costly.

“The cost of litigation became unbearable to us and wound up putting us out of business,” Scolari said recently.

“That (was) the intention of the whole process.”

In the end, the judge placed restrictions on noise and smoking at the house, and the Scolaris closed it soon after. The parties agreed to walk away with no money exchanged; the Scolaris had no money to pursue, even if the neighbors won a judgment, the neighbors reasoned.

The Scolaris briefly moved back into the house, but that didn’t last. Last year, they sold the house for $1.07 million, a bit more than they paid for it in 2014, according to property records.

Few neighbors, however, have the means to wage this kind of fight. Klein, Hurwitz’s lawyer, said Hurwitz is a modern-day hero.

“This guy stood up when no one else would,” Klein said. “He had to borrow money against his house. He spent hundreds of thousands of his own money to fight this battle, and it was disappointing that the homeowners’ association didn’t step up, and that the city didn’t do more. This fight was being carried on one man’s shoulders.”

The Scolaris said the battle cost them dearly, too.

“I’ve lost a ton of money in this business,” Joseph Scolari said in a deposition.

“I’ve lost about $2 million from the start….Financial stress has caused my wife and I to sometimes argue and (ask) ‘Why did we do this?’…

“Initially, we thought we were doing a good thing… ” Scolari added, “to help people in recovery.”

TOMORROW: Lots of people want to fix the sober living home industry.

This is the last in a four-part series. Read Part 1: Outrage | Part 2: Litigation | Part 3: Legal bills

The legal feud that pit sober living operators Joseph and Rebecca Scolari against their former neighbors in the Talega neighborhood of San Clemente ended not with a bang — or a huge payout — but with a whimper.

Each side spent hundreds of thousands of dollars on legal fees. Each side said the conflict made them physically ill.

And, unlikely as it seems, each side agrees on at least one key point — there’s got to be a better way to regulate sober living homes.

Today, the five-bedroom house at the center of the fight, on Via Lampara, is much as it was before the whole draining episode: Sunny. Tidy. Quiet.

The Scolaris, who owned the home for more than three years and ran it as a sober living home for a good part of that, have sold the house and moved on. The neighbors who sued them can sit in their beautifully-landscaped (if cheek-to-jowl) backyards, and once again enjoy the scenery without blinking back cigarette fog routinely exhaled by the dozen or so recovering addicts who congregated outside in its sober living heyday.

But residents say that in many Southern California neighborhoods — in Costa Mesa, Long Beach, Los Angeles, Pasadena, Murrieta — chaos still reigns. The system that lets sober living homes proliferate with no minimum standards, no regulation, and no oversight remains stubbornly in place.

“There is no question these people need help,” said David Hurwitz, the San Clemente neighbor who led the battle against the Scolaris, referring to recovering addicts. “But (unregulated sober living) isn’t helping them, it’s hurting them.”

State and federal governments need to create laws to better protect recovering users and neighbors alike, both sides agree.

“I support, 100 percent, some sort of regulation that doesn’t jeopardize the rights of addicts,” said Joseph Scolari, who ran Sober Network Properties until litigation prompted him to close up shop.

“There are a lot of good operators,” he added. “But, unfortunately, there are also a lot of bad operators.”

And right now, it’s hard to tell one from another, or to get official, unbiased information about how sober living providers perform.

A 12-bed house in a place like Talega can bring in $30,000 a month – about $18,000 for rent, plus $12,000 for food, rent and transportation services, as the Scolari-Hurwitz suit revealed. By comparison, the same house rented as a residence would run about $5,000 a month.

“Nobody can tell me that having an ‘Animal House’ next door is a way to take care of people who have alcohol and drug problems,” said Gerald Klein, one of Hurwitz’s attorneys. “Three, four people in a house, and you might not have a problem. But 10 to 20 people in a house?

“When it’s all about money, it’s not about treatment.”

U.S. Rep. Dana Rohrabacher, R-Huntington Beach, wants to give local governments the power to say no.

“These so-called homes are really businesses in all but name,” said Rohrabacher. “Putting drug addicts and alcoholics next door to ordinary families in residential neighborhoods is wrong, absolutely wrong… It’s the fault of bad federal policy that has tied the hands of our local city governments.”

Seeking change

Rohrabacher’s attempt to change that – coming, as it is, in the middle of a heated re-election battle – is House Resolution 5724. The law would give city and county governments the power to decide where sober living homes can operate, or if they’re allowed at all. The mayors of Huntington Beach and Laguna Niguel are firmly on board.

But critics say the bill is discriminatory, and that it deems addicts — a description that applies to more than 20 million Americans — as unfit to live among decent people.

Other federal lawmakers are taking a different approach.

The “Ensuring Access to Quality Sober Living Act” – House Resolution 4684, by Rep. Judy Chu, D-Monterey Park, and Rep. Mimi Walters, R-Irvine, and Senate Bill 2678, by Sen. Tim Kaine, D-VA – would require the federal Substance Abuse and Mental Health Services Administration to develop “best practices” for sober living facilities, and provide technical assistance on how to oversee sober living homes, to states. The idea, Chu said in a statement about the proposal, is to give families of addicts “confidence in the facilities that are looking after their loved ones.”

The House bill has been approved, sent to the Senate and referred to the Senate Committee on Health, Education, Labor, and Pensions. Kaine’s version would require that states receiving federal money to fight drug abuse must follow those best practices .

As federal lawmakers debate those proposals, there’s also action on the state front. In Sacramento, a cluster of recently-introduced bills aim to strengthen California’s feeble regulation of the addiction treatment industry. These include:

–SB 1228, by Sen. Ricardo Lara, D-Bell Gardens, which would forbid state-licensed treatment facilities from referring patients to sober living homes that aren’t also licensed or certified – thus ushering in some standards for an industry that now has none.

–SB 1317, by Sen. Anthony Portantino, D–La Cañada Flintridge, and Sen. Pat Bates, R-Laguna Niguel, which would require the California Department of Health Care Services to figure out how to report about suspected unlicensed treatment facilities, and how to determine if complaints are substantiated or unsubstantiated.

–SB 992 , by Sen. Ed Hernandez, D-West Covina, which would require sober living homes that are financially connected to treatment centers to publicly disclose those relationships. It would also require many to be licensed and regulated the the state; protect those on medication-assisted treatment from being barred from sober living homes; and deny for five years a new license to operators who’ve had a license suspended or revoked.

–AB 2214, by Reps. Freddie Rodriguez, D-Pomona, and Melissa Melendez, R-Lake Elsinore, which would set up a voluntary certification process for sober living homes; give the California Department of Health Care Services the authority to respond to complaints about them; and require government agencies to refer patients only to certified recovery residences when possible.

–SB 1290, by Sen. Pat Bates, R-Laguna Niguel, which would forbid licensed centers from paying for patients, and create a “Commission on Substance Abuse and Recovery” to help the Legislature do a complete overhaul of treatment industry regulations, much as was done in Florida.

Sunshine State rules

Once, the seaside city of Delray Beach was ground zero for addiction treatment in Florida, much as Costa Mesa and Malibu currently are the dual ground zeroes in Southern California.

Just a few years ago, addicts from other states routinely were lured to rehab centers in Delray Beach, often by promises of free treatment, a pattern common today on Southern California’s Rehab Riviera.

So-called “body brokers” — people who troll the streets and courthouses looking for addicts — delivered those addicts, and their insurance plans, to the Delray Beach rehabs that paid them the most, not the centers that provided the best chance of success; again, mirroring a practice now common in Southern California.

And when the Delray Beach operators could extract no more money from their clients, they kicked them out. Many went right back to using drugs and overdosed. The same scene is common in Southern California.

But while the fraud and abuse that once plagued Delray Beach echo what’s happening today in Southern California’s rehab industry, Florida’s response was more muscular than anything seen to date here.

In 2016, after alarming spikes in opioid overdose deaths that came with the rise of sober living homes in the area, Palm Beach County State Attorney Dave Aronberg appointed a task force to probe industry abuses and recommend solutions.

That task force came back with an interesting idea — the state should look harder at the rehab operators than it looked at the addicts.

“The Legislature needs to recognize that the substance abuse treatment industry is a part of the healthcare system,” that task force wrote. “Currently, there is little oversight of the industry… Recovery residences connected to treatment providers… are not regulated at all.”

A 21-member grand jury also was impaneled to analyze Florida’s reaction – or failure to react – to those abuses.

“Over the past decade, bad actors have been using (the Americans with Disabilities Act and the Fair Housing Act) to hide their exploitation of the very people that these laws were meant to protect,” the grand jury said in its report. “Many unregulated (recovery) homes have become unsafe and overcrowded ‘flophouses’ where crimes like rape, theft, human trafficking, prostitution and illegal drug use are commonplace. The Grand Jury finds that the problem is the unregulated businesses that house these residents, not the residents themselves.”

The task force and grand jury urged major changes, which became law last July.

Today, sober living marketers in Florida must be licensed by the state’s Division of Consumer Services. False and misleading marketing statements are illegal.

Buying or selling patients is now a felony that can be punished by fines up to $500,000 and prison time.

License fees are higher; more training is required for workers; sober homes must be voluntarily certified by an independent nonprofit; and the state can make unannounced inspections and immediately suspend licenses.

Results have come quickly.

The number of opioid deaths in Palm Beach County in the first four months of 2018 plunged 62 percent over the same period in 2017 – from 283 to 88 — reflecting a sharp decline in the number of sober living homes, Aronberg said.

A criminal task force focused on the rehab industry has made 47 arrests, with 16 convictions to date.

California has been slower to act.

“Your local leaders are facing what Palm Beach County faced at the beginning,” Aronberg said. “It sounds like there’s still not total buy-in on the need to reform these laws.”

Earlier this year, Aronberg came to Orange County at the invitation of the Association of California Cities to swap war stories and strategies.

“The first step California needs to take is to enact tough anti-brokering laws at the state level,” Aronberg said during the meeting. “Your laws are weak.”

Aronberg likes Bates’ SB 1290, which would lead to a complete overhaul of regulation of the rehab industry and was modeled after the Florida law he championed.

“There’s a misconception that this discriminates against individuals in recovery when the exact opposite is true – it’s designed to protect them from exploitation and death,” he said.

Another positive, in Aronberg’s view, is Orange County District Attorney Tony Rackauckas’ new “Sober Living Home Accountability Task Force,” which is looking at insurance fraud and human trafficking.

Proceed with caution

Larissa Mooney is a board-certified psychiatrist and director of the UCLA Addiction Medicine Clinic. She is deeply skeptical of any effort to allow cities to categorically ban sober living homes, as Rohrabacher’s bill would.

“If it feels like a frat party in your neighbor’s yard, that is a problem,” Mooney said. “It shouldn’t be a free-for-all. But I know a lot of people who have been very much helped by having a few months in sober living to facilitate their recovery, in an environment with people who are trying to reach the same goal.

“There are homes out there that are very quiet and you wouldn’t even know are there.”

Organizations such as the Sober Living Network are trying to bring homes to a higher standard with some sort of accreditation process, she said, and an increasing number of facilities want accreditation that will set them apart from less scrupulous operators.

A sensible public policy approach, she said, could involve smart regulation; some limit on the number of beds; clear rules; and comprehensive oversight. “To the extent we work toward standardizing and regulating sober living homes, that will end up hopefully in improving the quality of care,” she said.

From where former operator Scolari now sits – on the sidelines of the sober living industry – a good place to start would be limiting the number of residents in a home. Two of the treatment providers he worked with – Sobertec and Sovereign – had up to 12 and 14 beds in a single house.

Capping sober living residences at seven, Scolari said, would help clients as well as neighborhoods. A certification process for owners-operators – to probe their backgrounds and business ethics – would be useful, too.

One of Mooney’s colleagues at UCLA – Walter Ling, psychiatry professor and Founding Director of UCLA’s Integrated Substance Abuse Programs – said that the line between a sober living home and a flop house can be very thin, “so there is wisdom in following the money.”

“My own experience with sober living facilities went back to the 1970s, when there were people like Jack Sanow, who worked day and night, gave everything and did everything, except make money,” Ling said. “It is a mixed bag these days; it is always good to have some ‘adult’ overseeing the operations at some level.

“People in the recovery business are not, by and large, the self-governing type.”

The key to sobriety remains “getting a life,” Ling argued – steady work, real relationships, personal responsibility, community involvement. A period of stable living can be a good start, he said, but it’s only a first step toward those bigger goals.

It’s that challenge that attracts Scolari, who said he might return to the industry someday.

“Seeing first-hand an addict coming into recovery, and seeing them graduate and get excited about the next chapter of life – there’s nothing like it,” Scolari said. “It takes a lot of capital, a lot of hard work.

“I’m not certain it’s for my family right now,” he said. “But I still have a lot of passion for the industry.”

Most legislation aimed at cleaning up California’s dysfunctional addiction treatment industry slammed into brick walls, withered in suspense files or was watered down so much as to be unrecognizable – again.

“These legislators have blood on their hands,” said Ryan Hampton, who pushed a bill to require basic standards for sober living homes after a friend died of an overdose in one – and was outraged when language referencing sober living homes was deleted at the last minute. “I have to go back and tell his mother that business will remain as usual, and people will continue to die?”

A bill by Sen. Pat Bates, inspired by successful reforms in scandal-plagued Florida, would have kick-started a wholesale revamp of California’s notoriously lax regulation of addiction treatment. Instead, her bill languishes in suspended animation in a committee file. It essentially is dead. Another bill, by Assemblymember Sharon Quirk-Silva, tried to place a state inspector in Orange County, ground zero of the Rehab Riviera. It was gutted and now addresses police training and racial profiling. California’s Legislative session ended Friday, Aug. 31, with just a few surviving rehab reform bills making it through both chambers and advancing to the governor’s desk.

“More people will die,” said Dave Aronberg, a Florida state attorney who spearheaded Florida’s crackdown and helped Bates craft her bill. “The ignorance and apathy of some lawmakers is going to continue to cost lives.

“We didn’t have this much trouble in Florida,” he said.

Many who hoped for bolder action to protect vulnerable users and their often-desperate families are disappointed – but the stakes are too high to quit now, Bates said.

“You get frustrated,” said Bates. “But we don’t give up. We have to keep going. You start down the path again.”

Survivors

A trio of rehab-related bills has advanced to Gov. Jerry Brown’s desk, awaiting the signature that will make them law.

That, in and of itself, is a minor miracle: Of the dozens of bills on the issue introduced since 1999, only three have reached the governor’s desk – and they were vetoed by Govs. Pete Wilson, Gray Davis and Arnold Schwarzenegger, according to the California Research Bureau.

Brown’s office declined to say whether he’ll sign these bills or not.

One of the survivors is Assembly Bill 3162. It would require new rehab licenses to be provisional for one year; allow the state Department of Health Care Services to revoke licenses for “good cause”; increase penalties for non-compliance; require all treatment to happen at the licensed facility, as opposed to off-site; and prohibit operators who’ve had a provisional license revoked from applying for a new one for five years.

What was lost? Originally, AB 3162 sought to enshrine 300 feet as a minimum distance between rehabs, but that’s gone. Maximum fines for violations also shrank exponentially (from $15,000 per day to $1,000). But Assemblywoman Laura Friedman, D-Glendale, with co-authors Melissa Melendez, R-Lake Elsinore; Quirk-Silva, D-Fullerton; Sen. Bates, R-Laguna Niguel; and others, say it’s a step forward.

Also landing on the governor’s desk will be SB 992, by Sen. Ed Hernandez, D-West Covina. It would require that financial relationships between sober living homes and licensed treatment centers are publicly disclosed, and require centers to draft plans for what to do when residents relapse, including how they’d be supervised while under the influence of drugs or alcohol, among other reforms.

Another bill – SB 1228 by Sen. Ricardo Lara, D-Bell Gardens, the one originally championed by activist Hampton – heads to the governor’s desk as well, minus the bits trying to set minimum standards for sober living homes. The bill would now forbid licensed rehabs and addiction professionals from patient-brokering – that is, paying for patients – and let the state yank licenses and assess fines.

It does not, however, make patient-brokering a crime, and it doesn’t specify dollar fines. That’s a stark contrast to Florida, where patient-brokering is now a felony punishable by jail time and fines up to $500,000.

“If there’s no real penalty, the law is useless,” Aronberg said. “The fraudulent players in the industry know that. They’ll continue to be attracted to states like California that have weak oversight. It’s a race to the bottom.”

Lara has said that we shouldn’t criminalize something that people may not know is problematic, while still sending a message that the practice is wrong.

“Patient brokering is a crisis we have to confront in substance use treatment,” Lara said in a statement. “SB 1228 gives the state a powerful new tool to protect Californians from fraud and unethical providers who put profits over what is best for patients. SB 1228 will help level the playing field for ethical providers who are struggling to compete for patients.”

Aronberg thinks stronger action is needed.

“It’s imperative that California bring its anti-patient-brokering laws up to a higher standard. It’s also imperative that California provide some sort of guidance for oversight of sober homes,” Aronberg said. “California needs these new laws because we’ve seen evidence of rogue sober homes and corrupted drug treatment centers leaving our community for California.

“Remember, the key part of all this is that it’s for the health, safety and welfare of the residents. That’s often lost on legislators. They think it’s NIMBY or discriminatory – but it’s just the opposite. It’s about protecting the people who are seeking help and who are being exploited.”

‘Bizarre’

The Southern California News Group’s ongoing probe of the addiction treatment industry has found that:

• Addicts trying to get clean — and their families — often mistake California’s 12-step-based, non-medical rehabs for facilities that provide medical treatment, thanks in part to slick advertising. Dozens have died for want of proper medical care in facilities that would not be allowed to open in other states.
• Inexperienced and unscrupulous operators have rushed in to take advantage of mandatory mental health treatment coverage required by the Affordable Care Act.
• It’s easy for almost anyone to open a treatment center – regardless of criminal past – and bill insurance companies hundreds of thousands of dollars per client.
• Addicts with good insurance continue to be lured here with free airline tickets, “scholarships” that cover deductibles and get paid to stay in treatment or agree to a particular kind of treatment. In August, patients willing to get opioid-blocking implants were offered thousands of dollars via Craigslist and Facebook.

In the wake of these revelations, the FBI has raided treatment providers, the Orange County District Attorney has formed a task force to fight rehab fraud, the U.S. Congress has held a series of hearings, and the California Senate did the same. Myriad bills were introduced to crack down on the industry – but few have gotten far or gone far enough, critics say.

“It’s, frankly, bizarre,” said Mark Mishek, president and CEO at the Hazelden Betty Ford Foundation, one of the oldest, most established – and nonprofit – treatment chains in the nation.

“I don’t get it. Given California’s aggressive enforcement of hospital regulations and long-term nursing care homes, it does seem really odd. But in this particular area, it’s like they just don’t really care.”

Weary of waiting for stronger official action, Hazelden Betty Ford has started suing in federal court businesses that hijack its name and reputation to lure patients to their own facilities.

“We hope that if we can document enough of these, we can get a state attorney general or a local U.S. Attorney or the appropriate federal agency to start clamping down,” Mishek said.

Sunshine State fixes

With the support of Florida’s governor and attorney general, stiff new laws for addiction treatment and sober living sailed through Florida’s legislature in a single session last year with unanimous support.

Now, sober living marketers in Florida must be licensed by the state’s Division of Consumer Services. False and misleading marketing statements are illegal. Patient-brokering is a felony. License fees are higher; more training is required for workers; bars licensed facilities from referring patients to sober homes that aren’t voluntarily certified; and the state can make unannounced inspections and immediately suspend licenses.

Results have come quickly. The number of opioid deaths in Palm Beach County in the first four months of 2018 plunged 62 percent over the same period in 2017 – from 283 to 88 – reflecting a sharp decline in the number of sober living homes, Aronberg said.

California’s inaction means more people will die – and these are deaths that could have been avoided, he said.

“It’s really a tragedy. These are people who would be alive but for the fact that they had insurance and sought treatment,” Aronberg said.

Reform advocate and author Hampton agrees.

“It’s easier to open an outpatient treatment facility in our state than it is to open a barbershop,” Hampton said. “You need more licensing qualifications to cut hair and paint nails than to deal with the care of people with addiction. It’s insane.”

Sen. Hernandez, whose successful bill waits on the governor’s desk, says lawmakers understand the problems. He urges patience.

“I’m an optometrist, licensed by the state Board of Optometry, whose No. 1 goal is consumer protection,” Hernandez said. “It’s illegal for me to pay someone to go to a street corner and round up patients. But that’s what’s been happening in this field. …

“All these bills are designed to address these kinds of problems – but it’s not at lightning speed,” he said. “I’ve learned this in my 12 years as a legislator: The wheels of government work very slowly. But they work.”

Gov. Jerry Brown signed a raft of bills into law Wednesday that will begin imposing order on the Wild Wild West of California’s addiction treatment system.

Most take small steps in what reformers say is the right direction – toward stronger regulation. But one of the new laws could be a game-changer, forcing fundamental revisions in the kind of care offered to substance users.

That bill is SB 823, by Sen. Jerry Hill, D-San Mateo, which requires licensed rehabs in California to adopt the American Society of Addiction Medicine’s treatment criteria as the minimum standard of care.

“It’s an unbelievably unregulated field, and we’re going to try to put our arms around that by requiring some standards and the best scientific evidence before these facilities are licensed,” said Hill. “We may be able to solve a small part of the problem, and save some lives.”

The overwhelming majority of California’s nearly 2,000 licensed treatment centers are non-medical – meaning they’re based on the 12-step model of Alcoholics Anonymous rather than on medical science, which recommends drugs like buprenorphine to curb opioid cravings and other medical treatments to battle other types of addiction.

Some treatment centers and sober living homes reject the medical approach entirely, refusing to accept clients who take medication to manage addiction, and never present medication as a treatment option. Instead, they adhere to a philosophy of total abstinence. Studies have shown that non-medical treatments are successful less than 10 percent of the time.

In contrast, the success rate for people in medically-managed opioid treatment is 60 to 90 percent, according to the California Society of Addiction Medicine.

“I think this is going to have far-reaching implications – specifically, greater use of medication to treat addiction, a greater presence of addiction medicine professionals in the equation, and certainly, more appropriate placement of patients,” said David Kan, a psychiatrist and president of the California Society of Addiction Medicine, which championed the bill.

“This holds promise. Standards are critical. Without standards, people can do what they want,” Kan added. “I see this as an advance for the health of Californians, and it was a great call by the governor to sign it.”

The state has five years to figure out how to implement the new law.

Imposing order

Many rehab-related bills were watered down or condemned to death in committee during this session, frustrating some reformers. But other people interested in changing the industry — which is widely seen as under-regulated — are encouraged that Brown signed as many bills into law as he did.

One of the laws Brown signed is SB 1228 by Sen. Ricardo Lara, D-Bell Gardens. It forbids licensed rehabs and addiction professionals from patient-brokering, a practice in which a rehab pays patients to come to a particular facility and stay there for the purpose of billing their insurer. Centers that do pay for patients — or those that pay independent agents to bring them patients — can be fined or lose their license.

“Governor Brown’s signing of SB 1228 puts substance use patients’ medical need over provider profits,” said a statement by Lara. “By taking money out of patient referrals, SB 1228 will protect vulnerable Californians from patient brokering that drives fraud and abuse.”

Originally, the bill also aimed to raise standards for sober living homes. It stops short of imposing criminal charges on patient-brokering, and the fines aren’t as hefty as those imposed in Florida, where patient brokering can cost a rehab operator as much as $500,000. But it’s a firm step in the right direction, according to activist Ryan Hampton.

“Now we have legislative intent and precedent to address this issue in a larger context,” Hampton said. “We’re going to continue to build on this success in the next session and in the future. We will get the the point where we have full protections in place. At least we’re not going backwards.”

A new law that aims to train a more watchful eye on new rehabs is AB 3162, by Assembly members Laura Friedman, D-Glendale, Melissa Melendez, R-Lake Elsinore, Sharon Quirk-Silva, D-Fullerton, and Sen. Pat Bates, R-Laguna Niguel. It makes rehab licenses provisional for one year and revocable for good cause.

SB 992, by Sen. Ed Hernandez, D-West Covina, aims for transparency and a safety net for patients who relapse while in treatment.

It requires that financial relationships between sober living homes and licensed treatment centers are publicly disclosed, and requires centers to draft plans for what to do when residents relapse, including how they’d be supervised while under the influence of drugs or alcohol. Currently, those who use while in treatment are often kicked out while still high, sometimes collapsing on neighbors’ lawns.

SB 1109, by Bates, tries to tackle addiction from both the prescriber and consumer angles.

Doctors will have to take continuing medical education on the risks of opioids; prescription bottles will have to carry a warning about addiction and overdose risks; and youth sports organizations will have to highlight the risks of opioid use to each student-athlete and their parent/guardian annually.

Ongoing probe

The new laws come in the wake of the Southern California News Group’s ongoing probe of the the rehab industry in Southern California, which includes more than 1,000 centers in the region.

The investigation found that dozens of patients have died for want of proper medical care in non-medical facilities that would not be allowed to open in many other states. It also found that inexperienced and unscrupulous operators have taken advantage of mandatory mental health treatment coverage required by the Affordable Care Act, and that almost anyone, regardless of education level or criminal history, can open a licensed treatment center.

The Southern California News Group investigation also found that many rehab operators bill insurance companies hundreds of thousands of dollars per client, and that addicts with good insurance continue to be lured to the region by rehab operators who promise free airline tickets, “scholarships” that cover insurance deductibles, and cash payments to stay in treatment or agree to a particular kind of treatment.

In the wake of these revelations, the FBI has raided some treatment providers. Also, the Orange County District Attorney has formed a task force to fight rehab fraud, leading to arrests of two groups of rehab operators, physicians and drug testing centers. Hearings have been held in congress and the California Senate and, as of this week, the investigation into what is known as “Rehab Riviera” has sparked changes in California law.

“Thanks to you and the paper and John Oliver for opening my eyes to the issue and the abuses,” said Hill, whose bill will require science-based treatment at rehab centers. “Southern California has such a prevalence of these facilities. It’s not benefiting anyone, and harming so many people.”

Mark Mishek, president and CEO of the Hazelden Betty Ford Foundation, was stunned by California’s lax standards after the merger of the Minnesota and California treatment giants. He’s encouraged by the laws signed by Brown this week, saying they’re a sign that the state is starting to take addiction treatment seriously, and that there will be more enforcement.

“All welcome news,” Mishek said.

But he and others noted that implementation of Hill’s bill – 2023 – feels distant.

“The assumption is that, in the interim, the reputable centers will do an even better job and the bad places will continue to…  see how long they can get away with it,” he said. “You still have unlicensed facilities out there – sober homes morph themselves into treatment centers.”

Bates, who is also running for re-election, said she plans to resurrect and refine her proposal for criminal background checks on people owning rehabs and working in the industry, with the understanding that many who have valuable first-hand experience fighting addiction will not have perfect records.

She also wants to continue to push Washington D.C. to give local governments tools so they can at least know where sober living homes are, to help ensure they’re being good neighbors.

Bates has been working on this issue for years – but this is the first year bills have made it through the Legislature, landed on the governor’s desk, and been signed into law. She credited SCNG’s Rehab Riviera coverage for raising awareness

“We wouldn’t have gotten this far without your deep dive,” Bates said. “It has been the key that unlocked the door.”

Staff writers Tony Saavedra and Scott Schwebke contributed to this report.

WASHINGTON, D.C. – A day after California took its first firm legislative steps to reign in an out-of-control addiction treatment industry – and three days after prosecutors in Orange County charged 11 people in a $6 million rehab-related scam – Congress took on the next piece of the puzzle:

How to reconcile laws that protect the disabled with the need to ensure that sober living homes aren’t dangerous flophouses?

“In the worst cases, bad actors don’t encourage recovery at all, but exploit vulnerable individuals in order to collect insurance payments,” U.S. Rep. Judy Chu, D-Monterey Park, told the House of Representatives’ Judiciary Committee at a hearing on sober living homes on Friday. “This can mean life or death.”

Chu pointed to reports of sober living home operators who force recovering addicts to undergo unnecessary tests and even to use drugs again, so those addicts can re-enter treatment and operators can collect even more insurance money.

“In our city, we have houses with multiple overdoses and deaths, and all we can do is send our firefighters in to pick up the pieces,” Huntington Beach Mayor Pro Tem Erik Peterson told the committee. “In an attempt to help or be compassionate, we have further placed the burden on our communities, and left thousands of people who need help at risk.”

The problem

Sober homes – also called “recovery residences” – offer a place to stay for those who have finished formal addiction treatment and are trying to rebuild their lives.

Unlike rehabs, they’re not licensed, inspected, or systematically tracked by any government agency. And because recovering addicts are considered disabled under federal law, sober homes can’t be subject to any more requirements than you’d put on a family living in the same dwelling.

Attempts to regulate sober houses – and ensure quality – have been decried by the rehab industry as discrimination against the disabled. Operators take cities to federal court, and often win.

As a result, sober homes have proliferated throughout Southern California – often cramming as many as 14 people in the fragile stages of early recovery into one single-family home. New residents can cycle through every few days or few weeks – and neighbors  say that living next to one can be a living hell.

“They’re not actually homes, but businesses that operate out of single-family homes in residential neighborhoods,” said Rep. Dana Rohrabacher, R-Huntington Beach. “There are no standards nor criminal background checks on those who can operate such a business, and a significant number are run by unscrupulous owners and operators who willfully disregard the well-being of the addicts they are supposedly saving, while simultaneously reducing the quality of life in the community.

“Under normal circumstances, this problem would be addressed by local governments. But in this case, federal law shields the bad actors with the protections meant for their clients,” Rohrabacher said. “Crooked owners and operators laugh all the way to the bank.”

Lawmakers propose…

Both Chu and Rohrabacher have introduced bills to address the problems.

Chu’s bi-partisan bill, the Ensuring Access to Quality Sober Living Act, was favored by those testifying at the hearing. It would have the feds draw up standards for sober living homes, and then help the states implement those standards.

She’d like to see a system developed so the public can evaluate the quality of sober living homes. She’d like written contracts for residents with all fees and charges explained up front, trained staff on site, guarantees that people couldn’t be turned away because they take medication to manage addiction, and naloxone – a drug that can reverse opioid overdoses – on hand for emergencies.

Rohrabacher’s bill, the Restoring Community Oversight of Sober Living Homes Act, would clarify that city and county governments have the power to decide where sober living homes can operate, and if they’re allowed at all. It also would remove substance abuse treatment from the list of essential health benefits that must be covered by insurance.

This, Rohrabacher said, would remove the unintended incentive to encourage patients to relapse in order to cash in on insurance coverage.

‘Turn my stomach’

Todd Leishman, an attorney with Best Best & Krieger in Irvine who advises cities battling on the sober living home front, has seen too much.

“The examples turn my stomach,” he said. “Operators selling drugs to residents. Trading drugs for sex. Rapes. Resident and house manager overdoses. And that doesn’t get into the human trafficking and and fraud that are so common.

“Local governments are in the best position to address these abuses,” Leishman said. “Congress needs to confirm that local government may reasonably regulate recovery businesses to protect the people they serve. Please make it plain that permissible regulation includes maximum occupancy limits, minimum separation requirements, and minimal operational standards.”

Palm Beach County State Attorney Dave Aronberg has led a crackdown in Florida that has had the unintended effect of pushing many unscrupulous rehab operators into states with weaker laws – especially California, he said.

“We can’t fix this alone at state the and local levels,” Aronberg said. “We need the federal government to act.”

If Congress doesn’t act, the witnesses said, the price is high.

“More people will relapse in the facilities that are supposed to help them,” said Leishman. “More residents will be trafficked, abused and raped. More will overdose and more will die. I wish this were hyperbole but it’s not.

“It’s all happening, in large part because federal law leaves open a radical, and I think perverse, interpretation that insists that local governments may not regulate recovery operators at all – even when it’s to protect people in recovery.”

First of two parts. See Part 2 here.

Brandon Nelson loved to fix things. When his mother’s computer froze up with a weird error message, he scoured the Internet until he found a solution: Put the motherboard in the oven for 20 minutes.

“I said, ‘That’s crazy. It’ll never work,’ ” said Nelson’s father, Allen Nelson. “But he did it — and when he put that motherboard back in the computer, the error message was gone. It worked.”

Nelson had a gift for that kind of thing, his parents said: He taught himself computer programming, was an outstanding student at Santa Monica High, was enchanted with flight, and earned a degree in aerospace engineering from UCLA. He loved basketball and soccer and played on the varsity football team in high school, where a coach predicted that his smarts would ensure that no dream was beyond his reach.

“Brandon could have changed the world,” said family friend Allison Basile.

After college, the kid who once transformed black plastic bags into solar hot-air balloons started working for a company that made aircraft components. Things didn’t really begin to veer off course until last fall, when Nelson, 26, became convinced that one of those aircraft components was fatally flawed. He was consumed with the idea that, if struck by lightning, aircraft with those parts would explode.

What followed was a disastrous foray into California’s fractured mental health system, which has been plagued with dysfunction since psychiatric hospitals were shuttered in favor of more friendly — and less expensive — community-based treatment centers decades ago, experts say.

Today, nine months after Brandon Nelson committed suicide, his parents agonize over the sloppiness of health-care and regulatory systems that they say failed him, and fail mental health patients throughout California.

They are tormented by one question: “Did our son really have to die?”

“The system is dysfunctional and dangerous,” Allen Nelson said. “It’s wrong. It’s just wrong.”

Nelson’s breakdown

In the fall of 2017, Nelson — who lived in Santa Monica with his parents — began obsessively scouring the Internet for news of plane crashes.

He went so far as to file a whistleblower complaint with the Federal Aviation Administration, warning of impending tragedy. The FAA investigated, spokesman Ian Gregor said, but “determined there was no evidence to substantiate a violation of an FAA regulation, order or standard.”

The FAA sent Nelson what’s called “a letter of no findings” on Dec. 6 of that year, Gregor said. Nelson grew agitated, depressed, angry, according to his parents — until, in January, he suffered a full psychotic break, beseeching a policeman friend to bring a gun so he could die.

The friend called him in as a 5150, the state code section for those who present a danger to themselves or others due to signs of mental illness. Nelson wound up spending 28 days at Las Encinas Behavioral Hospital in Pasadena, where he was stabilized, given prescriptions for anti-psychotic medication and received recommendations for follow-up care.

His family was hopeful he was on the mend.

The first recommendation — an outpatient program in Pasadena — didn’t work out. Nelson was still acutely paranoid and too fragile for outpatient treatment, the company said after an intake interview. He needed more intensive, residential mental health care, his parents were told.

The Nelsons were steered toward Sovereign Health, a behavioral and mental health company with residential programs based in San Clemente. Sovereign operated addiction treatment centers but also ran residential programs specifically for mental illness. Nelson would be closely monitored by a licensed therapist and a psychiatrist, he would get group therapy, and — good news — Sovereign accepted their insurance, Blue Shield.

Allen and Rose Nelson took this to mean Sovereign’s programs were vetted and approved by both the insurance company and the state.

They weren’t told that more than 100 FBI agents had raided Sovereign’s offices in June 2017, hunting for evidence of health-care fraud, wire fraud, conspiracy, “laundering of monetary instruments” and illegal payments for patient referrals, according to paperwork filed in federal court by attorneys for the company.

They weren’t told Sovereign was struggling financially, closing and consolidating treatment centers as it battled with insurer Health Net over reimbursements.

They weren’t told the California Department of Social Services had denied licenses to Sovereign CEO Tonmoy Sharma and his companies for facilities in Los Angeles, Orange and Riverside counties. Or that the state was trying to revoke Sharma’s remaining licenses to operate adult-care facilities.

And so, Brandon Nelson arrived at Sovereign on Feb. 23 to forge a new path forward.

Two weeks later, he was dead.

Tense environment at Sovereign

Newly stabilized, Nelson arrived at Sovereign in San Clemente on a Friday. He was supposed to see a psychiatrist within 24 hours, but it’s not clear that ever happened, his parents said.

Former workers at Sovereign said the situation there was getting tense. The company was having money troubles, some workers got hit with enormous bills because employee health insurance wasn’t being paid, and others were quitting, leaving programs short-staffed and making life more difficult for those who remained on duty.

Many doctor visits that clients such as Nelson were promised happened over Skype, if they happened at all, ex-workers and former clients said.

Nelson told his parents he didn’t get his medications — another detail they remain unclear about. But one thing was clear: On Monday, Feb. 26, their son slid back into psychosis, saying he wanted to end his life. Sovereign sent him to Mission Hospital Laguna Beach on another 5150 hold, according to a hospital report.

“The patient was irritable, explosive, unpredictable, could not moderate his impulsivity, and was aggressive, attempting at one point to jump over the nursing station into the nurse who was sitting at the front,” says a March 5 report from Nelson’s mental health certification review hearing, which is required by the state.

“Brandon continues to meet criteria as gravely disabled … is confused … is unable to care for himself at this time.”

Probable cause existed to detain Nelson for 14 days of intensive treatment, the hearing report concluded. The next day, a “psychiatric progress note” described him as depressed, irritable and anxious. It said his thoughts were disorganized, delusional and phobic, but that he was eager to get out of the hospital and was not suicidal.

Nelson was released from Mission Hospital Laguna Beach the following day, March 7, with a diagnosis of bipolar affective disorder and obsessive-compulsive disorder.

“He was not able to get into the Air Force and he denies suicidal thoughts, but currently does admit to feeling desperate,” the hospital discharge report says. “He showed some coping skills and some insight into his illness at the time of discharge and was medication compliant. He was eating all meals, sleeping through the night and directable.”

The hospital said Nelson would be discharged to the care of his family — with twice-a-day medications vital to his psychic stability. Doctors and nurses stressed the importance of medication compliance, and he promised to follow up for medication management.

But after some 10 days at the hospital, Nelson did not discharge back to his family, which was eager to care for him. He returned, instead, to Sovereign’s five-bedroom tract house perched above a golf course on Calle Vallarta in San Clemente.

The house was not licensed as a mental health facility or as an addiction-treatment facility, according to state records. It was about 7 p.m. on March 7 when Nelson walked through the door, alive, for the last time.

‘What is wrong with me?’

It was a bit after 4 p.m. the following day when Michael Ramirez heard the screaming.

“What is happening to me? … What is wrong with me? … I don’t like this,” wailed Nelson.

Ramirez was a fellow client at what sheriff’s reports refer to as a “sober living home mental health facility” — something Nelson’s parents say is, or should be, an impossibility.

The vital prescriptions that Nelson was supposed to take that morning hadn’t been filled, even as evening approached.

The prescriptions went to MedsRX — a pharmacy in Sovereign’s headquarters also belonging to Sharma, Sovereign’s CEO. They were processed and reviewed at about 11 a.m. that morning — hours after they should have been taken — and weren’t delivered until 4:03 p.m., nearly 24 hours after Nelson left the hospital, according to case notes from the Orange County Coroner’s Office.

In the interim, Nelson’s psychosis again took terrifying hold of him. “F— you! Go away!” he screamed, according to handwritten notes that housemate Ramirez made the next day.

Social worker Diana Miltenburg was summoned to the house to conduct a “biopsychosocial evaluation,” according to the coroner’s notes. Nelson — who earlier had seemed paranoid and oversensitive to noises and sounds, according to the house staffer — was now pacing the room, yelling, “Make it stop!”

He was “very concerned about taking his new medications,” according to the Sheriff’s Department casualty report, which included an interview with Miltenburg, who declined comment for this article.

Miltenburg asked Nelson if he wanted to hurt or kill himself, and he was adamant that he did not, the Sheriff’s Department report said. “She said as far as she knew, Brandon had never had any suicidal thoughts or attempts in the past and he declined her offer to return to the hospital for further evaluation.”

Nelson actually had expressed a desire to die several times. And his parents are aghast that someone in his condition would be given the power to decide whether a return trip to the hospital was necessary.

Nelson took his medication in front of Miltenburg, the sheriff’s report said, and she waited with him for about 20 minutes to make sure he was OK. She said she left his bedroom about 6:45 p.m. “and he seemed somewhat relaxed and calmer than he had been when she first arrived,” according to the report.

Nelson was fine now, the other clients were told. He had taken his medication, was tired, and wanted to be left alone.

“That’s the worst thing you could do for someone in that much pain,” said Hunter Taylor, a former Army recruit treated for PTSD at Sovereign. Taylor also was Nelson’s roommate.

Shattered silence

Other residents of the house were watching a basketball game in the common room at around 7 p.m., when screams again erupted from Nelson’s room. Someone suffering as much as he was needs to go to the hospital, several said aloud as Nelson continued screaming, according to Taylor and Ramirez.

After a bit, it quieted down. About 8 p.m., Taylor ran up to the room he shared with Nelson to get a blanket, according to the sheriff’s report.

This time, it was Taylor who screamed. There, dangling by a pair of sweatpants from the fire sprinkler on the ceiling, was Brandon Nelson.

“Brandon just hung himself!” Taylor yelled down to the others.

Everyone rushed up the stairs. Taylor, Ramirez and other clients grabbed Nelson and lifted him up, screaming at the Sovereign staffer to cut him down. Another client removed the noose from Nelson’s neck. Nelson’s face, Ramirez said, was already blue.

The staffer, apparently hysterical, called 911, but was unable to provide the house’s address to the dispatcher for about a minute-and-a-half, according to the emergency call reviewed by the Southern California News Group.

The staffer apparently also did not immediately perform life-saving measures. Instead, Taylor, who learned CPR in the Army, did chest compressions. Ramirez said he heard gurgling in Nelson’s airway and checked for a pulse at the wrist and at the neck. He felt none.

Soon, paramedics and sheriff’s deputies arrived. They took over CPR, started an IV and tried to shock Nelson’s heart back to beating with a defibrillator.

Nothing worked. Nelson was pronounced dead at the Sovereign house at 8.29 p.m.

His fellow clients at the house were traumatized — and enraged.

“Brandon’s behavior blatantly warranted an action of 51-50 (go to the hospital) … but that action was never taken,” housemate Ramirez wrote. At the very least, the Sovereign staffer should have checked on Nelson every 15 minutes, “but the neglect of poor management and poor decision-making led to none of that being done.”

Taylor, who was already struggling with PTSD, went into profound shock. “I sort of blamed myself,” he said. “I felt responsible for it. He was my roommate.”

For weeks, Taylor had nightmares. “I was seeing his face everywhere I went. I’d wake up and see him standing there, and all he was saying was, ‘It’s your fault. It’s your fault.’ “

Sovereign moved the men to a different house and told them, “We did everything we could.”

“No you didn’t,” Taylor said. “They should have called an ambulance. He should have been taken right back to the hospital. If you did everything you could, you would have made sure that boy didn’t kill himself.”

Next: Turmoil at Sovereign House 

Brandon Nelson’s descent into California’s fractured mental health treatment system illustrates the dysfunction that has put thousands of mentally ill people on the streets, experts say.

It began decades ago, after California closed psychiatric hospitals to usher in more informal — and less expensive — community-based care, according to reports by the California Hospital Association.

The result was “a devastating drop in psychiatric inpatient services.”

Since 1995, as California’s population increased by more than 20 percent, the number of facilities with inpatient psychiatric beds available to the general public has fallen more than 20 percent. And the number of beds available in the remaining facilities has declined more than 30 percent.

Together, the drop in beds and jump in population mean psychiatric beds per capita has plummeted more than 42 percent since 1995.

“California’s system for serving the mental health population is in crisis,” the CHA said.

This contributes to a host of ills, from homelessness to the profusion of more diffuse, and often less well-staffed, community-based centers that are more difficult for the state to regulate and for consumers to navigate.

Nelson, 26, of Santa Monica was diagnosed with bipolar affective disorder earlier this year. He was discharged from Mission Hospital Laguna Beach’s psychiatric unit on March 7 and went to an unlicensed Sovereign Health “sober living home mental health facility,” which its owners said was a “step-down” facility appropriate for Nelson’s needs.

There, Nelson failed to get his medications on time, had another breakdown and was left unattended, according to police and coroner’s reports. He hanged himself on March 8.

Nelson’s death was a failure of a system lacking sufficient standards, oversight and regulation — and one that desperately needs to change, his parents said.

Statewide system broken up

“We have a very fragmented and disjointed delivery system,” said Sheree Lowe, the California Hospital Association’s vice president of behavioral health.

It’s a system that was decades in the making.

“In 1991, the state decided that behavioral health would better be delivered at the local level,” Lowe said. “They broke up the statewide system and gave pieces to counties to operate. Commercial health plans followed suit.”

Physical health care, and mental health care, cleaved into separate systems, she said.

Records are not kept electronically, so doctors and caseworkers can’t easily share patient information. Federal privacy protections make communication even more difficult. Well-qualified workers are in short supply, partly due to the stigma attached to mental illness.

“I often say to folks, ‘You can’t ever point your finger at one reason why this isn’t working,’ ” Lowe said. “It’s decades in the making, and will take a lot of time to fix.”

To that end, the CHA and the National Alliance on Mental Illness have joined forces to push policymakers to do just that. Their new Behavioral Health Action coalition aims to fundamentally change the status quo, and make behavioral health a top priority at the federal, state and local levels.

“We need to revisit the construction of the delivery system,” Lowe said. “That’s really what it’s all about. Do we have the right resources in the right locations so patients can get the right care at the right time with the right provider?”

Second of two parts. Read Part 1 here.

Left unattended, Rose and Allen Nelson’s son committed suicide at the very mental health home where he was supposed to get help.

As they struggled to understand what happened, their agony only grew heavier. They tracked down the people who tried to revive their son, Brandon Nelson, on that terrible day. They spoke to clients who sought help at Sovereign Health. They found former employees who had left the company.

What they learned stunned them: Even as Sovereign accepted their mentally ill son, the company faced growing difficulties on several different fronts — financial, regulatory, legal and operational. They had been apprised of none of it.

“I was told, ‘Rose, this is a great facility. He’ll have a psychiatrist, psychologist, therapy sessions, a case manager, a house manager — an entire team that works with him throughout his 30 days,’ ” Rose Nelson said. “It sounded like heaven to me. A team of people who really care. That was my vision.

“That’s where it all went to hell.”

It turns out that the Sovereign “step-down” house Nelson went to after release from a hospital was not licensed by the state as either a mental health facility or an addiction treatment facility. Nelson didn’t have a team of professionals overseeing his transition — he apparently didn’t even get his medications on time, according to his parents and police reports.

What they got were sales pitches, not health-care advice, the Nelsons concluded.

“We’re now dealing with the maze of state bureaucracy,” Allen Nelson said. “I keep getting told, ‘If that was a licensed facility, I could help you. But because it’s not licensed, we can’t do anything.’

“But what’s the penalty for running a place that should be licensed, but isn’t? No one seems to be able to answer that,” he said.

Sick people can be used as human ATM machines by behavioral health businesses, and the state of California does little to nothing to stop it, the Nelsons have concluded.

“The investigation into Brandon Nelson’s tragic death raises a number of troubling issues,” said a statement from Assemblyman Richard Bloom, D-Santa Monica. “We are continuing to review this case file to see what legislative or administrative action might best help reform California’s mental health and addiction treatment systems.”

Deadly lack of transparency?

Brandon Nelson, 26, of Santa Monica was diagnosed with bipolar affective disorder and obsessive-compulsive disorder at Mission Hospital Laguna Beach in March. Medications were vital to managing his psychosis, his discharge papers said — but Brandon failed to get them on time at Sovereign, according to police and coroner’s reports and his parents.

Brandon suffered another psychic break less than 24 hours after arriving at Sovereign, was left alone in his room, and hanged himself.

Unbeknownst to the Nelsons, Sovereign CEO Tonmoy Sharma and his companies were defending themselves before an administrative court in Sacramento seeking to, among other things, bar Sharma for life from facilities it licenses.

In November 2017, about the time Nelson’s psychosis was starting to take hold, the California Department of Social Services filed an accusation against Sharma and his companies that handle treatment for adolescents, alleging that genetic and HIV testing was done on children without parental consent. Children also provided urine samples nearly every other day “to the financial benefit of (the company) and Sharma,” the state said.

Officials also invoked Sharma’s professional problems in the United Kingdom — also unknown to the Nelsons — to justify barring him for life. In 2008, Sharma’s license to practice psychiatry was “erased” for conduct deemed dishonest, unprofessional and misleading, according to documents from the General Medical Council of the UK. He began businesses in California soon after, and his past did not prevent him from getting a license to run an adolescent facility from the Department of Social Services at the time.

Now, the state seeks to deny Sharma and his companies new licenses, revoke the licenses currently held, and bar him for life from “employment in, presence in, and from contact with clients of, any facility licensed by the Department or certified by a licensed foster family agency.”

The case is before an administrative law judge, awaiting a decision.

Sharma said the action is retribution for a suit he filed against the state protesting the license denials. It dredged up the UK matter in an attempt to discredit him with a decade-old administrative issue that involved no criminal allegations — and those accusations were misplaced and unfair, he said.

It’s also wrong to blame Sovereign for any genetic or HIV testing at the adolescent facility, Sharma said. Tests were ordered by physicians who were independent contractors, not Sovereign employees. Sovereign wasn’t aware of that activity, and, as a nonmedical facility, Sovereign employees weren’t allowed to access patient medical files.

“It was improper for the state to try to hold us accountable for medical decisions by medical doctors who are not affiliated with our company,” Sharma said.

Brandon Nelson’s death deeply saddened Sharma and all of Sovereign’s staff, and he said his thoughts are with Nelson’s family and loved ones. Federal privacy laws preclude him from discussing the death in detail, but he said the Sovereign house in San Clemente was “a transitional living step-down facility for mental health patients,” and, based on all available information, Nelson was suitable for that type of housing.

“Transitional living mental health facilities play a vital role in preventing homelessness for people with mental health issues who have been discharged from a hospital,” he said. “Our employees at these facilities were trained to recognize warning signs about potential self-harm and other issues. The safety of our clients was always our highest priority.”

Cash-flow problems

When Nelson arrived, Sovereign was suffering cash-flow problems as well. Health Net had refused to pay $55 million for services Sovereign and related companies provided. Sovereign sued Health Net in 2016; Health Net responded with a countersuit alleging Sharma and his companies engaged in massive fraud.

The FBI raided Sovereign’s offices in 2017. Legal bills mounted. Credit became difficult to come by.

In April, less than a month after Nelson’s death, workers began filing wage claims against Sovereign Health with the California Labor Commissioner, seeking money they said they had earned but weren’t paid. Nearly 200 claims have been filed to date, said Jeanne-Mairie Duval, a spokeswoman for the California Department of Industrial Relations.

In June, former workers filed a federal lawsuit against Sharma, Sovereign and related companies for breach of fiduciary duty. They said the company had ceased paying for covered claims in its self-funded health insurance plan, but nonetheless continued making regular payroll deductions from employee paychecks. Ex-workers accused Sharma and others of misappropriating and misusing the money, the suit says.

Sharma and others denied misusing plan assets, engaging in self-dealing transactions, commingling funds or failing to properly administer the plan, court filings say.

“This was a result of our cash-flow problems,” Sharma said by email. “We are working with lawyers on the other side to resolve this and believe that once we collect our accounts receivable, all of our employees will be compensated.”

Sovereign closed its doors and released remaining workers in July, but it has not filed for bankruptcy. Sharma said he expects to recover all, or a major portion, of the past-due claims from Health Net in court, and intends to pay his workers the money they are owed.

“Rather than declare bankruptcy, I mortgaged my personal residence and dipped into personal savings to fund the business with $5 million of my own money, which allowed us to continue business for several months while we sought a solution,” he said by email. “I have not taken salary since October 2017.

“Despite these efforts, we were unable to avoid cash-flow problems. Once our legal matters are resolved, I am hopeful that we will be able to repay all of our employees, reopen facilities and resume treatment services.”

Sovereign and its related businesses have successfully run Joint Commission-accredited, award-winning mental health facilities since 2009 for adults, and since 2013 for adolescents, he said.

“I started Sovereign Health and Dual Diagnosis because I believed we could fill a significant need in the community. There is a significant shortage of facilities — and beds — available to treat people suffering from mental illness and addiction in our country.”

Post-mortem bills

After Nelson’s death, Allen and Rose Nelson got “explanation of benefits” letters in the mail from insurer Blue Shield. They listed tens of thousands of dollars billed for Nelson’s care from companies linked to Sharma — bills that Blue Shield did not pay. “Patient’s responsibility,” many of the letters said.

In a statement to the Southern California News Group, Blue Shield expressed sorrow for the Nelson family’s loss and explained: “The provider in this situation was not part of our network, and we did not pay the claims.”

An investigation by the state Community Care Licensing Division concluded that the house where Nelson died was providing unlicensed care to nine clients who needed mental health services, not addiction treatment.

“Witnesses corroborated that care was being provided in the form of medication management, mental health services as well as monitoring of vital signs,” said the report, dated Nov. 9. “A Notice of Operation in Violation of Law was faxed to the corporate number.”

By then, Sovereign’s offices had been closed for months.

Family friend Allison Basile can’t make sense of it all. “Rose and Allen trusted our system,” she said. “Our system failed them.”

Nelson’s parents are now certain their son did not have to die. They are on a crusade to reform what they see as a deadly, dysfunctional system — they’re meeting with legislators, hospital administrators, state regulators and others, all in an effort to spare other parents the pain they’ll carry for the rest of their lives.

“The state of California has a moral obligation to get these ‘rehab’ centers strictly regulated and, just as importantly, inspected regularly,” the Nelsons said in a plea for action to legislators. “The state needs to stop more deaths like Brandon’s from occurring.”

It’s a well-known and lethal problem: About 90 percent of recovering addicts relapse and use drugs such as heroin again.

The overwhelming majority of these falls from grace occur within one month of successfully completing treatment, and the results can be deadly, according to several studies.

BioCorRX, a small Anaheim company, believes it can help break this vicious cycle, and the National Institute on Drug Abuse is inclined to agree. The institute — part of the National Institutes of Health — has awarded BioCorRX a grant to help develop a naltrexone implant to treat what is officially called “opioid use disorder.”

But the implant also is effective in battling alcoholism, a more widespread problem that could use more successful treatment, officials said.

BioCorRX will get $2.84 million for the first year of the grant, which runs through January 2020, and can get $2.83 million for the second year “based on satisfactory progress of the project and availability of funds,” according to a company statement.

The drug naltrexone is an opioid antagonist that blunts highs even if patients use drugs again. It’s already available as a daily oral medication and as an injection lasting about a month — but “poor compliance” plagues those methods, which means it’s easy for people to simply decide to stop taking them.

BioCorRx’s naltrexone implant — with the futuristic name BICX102 — makes impulsively quitting much more difficult. It’s inserted under the skin and releases medication steadily, providing a “continual blockade” of the brain’s opioid receptors for up to three months, the company said in its grant application.

“This can prevent patients from being affected adversely by almost any opioid relapse event, while improving efficacy and adherence to behavioral programs that support long term management and recovery,” it said.

The NIH is funding more than 100 research projects throughout the nation aimed at developing medications to battle opioid addiction, according to NIH data. Current grants total more than $64 million and include two projects at UCLA, one of which specifically targets heavy-drinking smokers with a combination of varenicline and naltrexone.

BICX102 has been safely used in Russia as Prodetoxone for more than a dozen years, and studies from Russia and Australia found that naltrexone implants improved outcomes for opioid-addicted individuals beyond what’s seen with orals and injectables.

“The implant has been used around the world for 20 years successfully with few problems,” said Brady Granier, CEO of BioCorRX. “But in the United States, it hasn’t been approved yet by the FDA. So that’s the ultimate finish line. A lot of people are waiting for FDA approval before they’ll feel comfortable using it on patients — and before health insurers and government payers will cover for the treatment.”

NIDA reviewers said BioCorRx has a “strong rationale for the technology based on previous basic research and clinical experience,” and that “extensive experience with the parent drug and delivery technology (clinical) suggest that the development plan has a high likelihood of progressing to an approved treatment in the U.S.,” according to a company statement.

BioCorRX hopes to win that approval in about four years. It has been pouring money into the effort for years, and the grant is a big step toward that approval — and perhaps toward wider use of medication to battle addiction.

“This grant is a really big deal for us,” Granier said.

It comes as California and the nation pivot toward a more medical approach to the problem, which has traditionally been treated primarily as a behavioral issue. In the big picture, BioCorRx combines both approaches to attack addiction.

“We offer a unique treatment philosophy that combines medical intervention and a proprietary cognitive behavioral therapy program, plus peer support program, specifically tailored for the treatment of alcoholism and other substance abuse addictions for those receiving long-term naltrexone treatment,” the company says in Security and Exchange Commission filings.

“We are also engaged in the research and development of sustained release naltrexone products for the treatment of addiction and other possible disorders.”

Its alcoholism and opioid addiction treatment program is called the BioCorRx Recovery Program. Before this grant, the company’s primary source of operating funds has been “from proceeds from private placements of convertible and other debt and the sale of common stock,” according to its SEC filings.

Federal officials have pegged the cost of the opioid epidemic at more than a half-trillion dollars a year.

“Getting BICX102 to the market quickly is a national priority,” BioCorRX said in its grant application. “We know from extensive non-clinical and clinical studies that BICX102 will be effective.”

Sober-living-home operators have been accused of exploiting recovering addicts for sex, and even of giving drugs to drug addicts.

Operators and their customers have generated neighborhood complaints, lawsuits and allegations of behavior so rowdy it borders on the criminal.

But houses filled with people struggling with addiction can also be lifelines — and big business, hauling in tens of thousands of dollars each month for their owners. And because sober living residents are protected by the Americans With Disabilities Act — meaning police and zoning officials have to treat them as they would any other family residence — no one knows exactly how many of these houses exist in California. No one inspects sober homes; no one regulates them to ensure quality and safety.

A proposal being debated in Sacramento, from Assemblymember Tom Daly, D-Anaheim, would change some of that.

Assembly Bill 1779 calls for establishing the first ever minimum operating standards for sober homes that get public money to accept patients from the courts or public health systems. It also would deny certification to would-be operators who have previously lost licenses to run addiction treatment centers.

The California Department of Health Care Services would have to create “best practices” and quality control standards for sober homes, including a requirement that these homes keep the anti-overdose drug Narcan on site.

Daly hopes to prevail where myriad other bills seeking to impose order on the industry have failed.

“Despite the growing death toll from opioid and alcohol abuse and addiction, California lacks a uniformset of standards to guide individuals and their loved ones in identifying safe, reliable housingaccommodations that will be conducive to recovery,” Daly said in a statement.

“AB 1779 will enable California to provide accurate and up-to-date information …. And by adopting best practices, including minimum standards for recovery residences, California will take a significant step towards increasing the number of residences that are safe for people in recovery and for the communities where they are located.”

Skeptics

While some applaud AB 1779 as another baby step toward much-needed reform in an industry rife with corruption — “A first step towards beginning to get the sober living industry in line in the state of California,” said activist Ryan Hampton — others don’t.

Critics say setting bare-bones standards on the few homes that get public funding fails to address the much larger problem — thousands of private sober homes in California, financed with private money, that answer to no one.

“This is just another ridiculous bill that the makes the Legislators feel good about themselves, adds layers of bureaucracy and rules that will never be enforced, and ultimately just wastes all of our time and tax money,” said David Hurwitz of San Clemente, who was once the next-door-neighbor to a 12-bed sober living home with a revolving door of recovering addicts.

“Addiction is certainly an issue that needs major attention,” Hurwitz added. “But the entire concept of housing these ‘patients’ in regular neighborhoods during the time they need carefully supervised medical treatment is simply crazy and must be ended.

“I am very skeptical that anything meaningful is ever going to happen.”

As sober living homes have proliferated throughout Southern California, residents from Malibu to San Clemente and Murrieta to Lake Arrowhead — the area known within the industry as the Rehab Riviera — decry how their once-quiet neighborhoods have morphed into virtual recovery campuses, sometimes with many sober living homes clustered within spitting distance of one another.

“Voluntary certification standards…. Same old song,” said Laurie Girand of Advocates for Responsible Treatment in San Juan Capistrano, a nonprofit group advocating for regulation of the recovery industry.

“This is health care, not vitamin supplements,” Girand said. “When are we going to start treating it like health care?”

More than a dozen bills have been introduced this session to try to address California’s scandal-plagued addiction treatment and recovery industry. Many see one as essential: AB 704.  It would require criminal background checks for employees of licensed addiction treatment centers. It was introduced in the Assembly by Jim Patterson, R-Fresno, and is co-sponsored by Sen. Pat Bates, R-Laguna Niguel.

Last year, the Orange County District Attorney’s office launched a Sober Living-Home Investigation and Prosecution task force to take aim at scammers in the field. To date, it has received 158 tips and has multiple open investigations, officials said. It has filed charges against five doctors, two administrators and four alleged “body brokers” (people who get paid to bring patients to addiction centers and sober homes) in what prosecutors call a multi-million-dollar insurance-fraud scheme. Complaints can be made to the task force online or at 714-647-3228.

Todd Spitzer, Orange County’s new district attorney, isn’t sure that Daly’s bill will help with problems reported in the private sector, either.

“He really needs to take a strong look at the area where there’s significant abuse, the residential treatment facilities that are being run by private operators and funded through private insurance,” Spitzer said. “One of biggest complaints we get are about private facilities targeting people across country, bringing them here, then tossing them out when the insurance benefits run out. That’s not happening when government funding is involved. They’re very distinct and different entities, which is why my office is pursuing the private side.

“We have people who are ripping off the system.”

In Huntington Beach, city attorney Michael Gates has teamed up with the D.A.’s office to sue sober homes using a novel legal strategy — charging the homes with operating a medical facility without a licence.

What would AB 1779 do?

Daly’s bill would require sober homes to meet the most recent standards approved by the National Alliance for Recovery Residences before receiving state funding for recovery residence housing. After the U.S. Department of Health and Human Services publishes a “Best Practices for Operating Recovery Housing,” homes getting public money would be encouraged to match those standards.

It also would require that courts and county hospitals refer patients to certified sober homes if spaces are available.

And the element of the law that would deny certification to sober home operators who have lost their addiction treatment licenses, or had those licenses suspended, is an effort to recognize the whack-a-mole nature of the industry. Often, sober home operators driven out of business by neighborhood pressure or legal actions in one location simply resurface in a nearby community.

If AB 1779 is passed, it would mean more work for the Department of Health Care Services, which would have to create an Internet listing with the address of each sober home that’s lost its certification, or whose application for certification was denied, as well as the names of operators whose certification was revoked or denied.

The department also would have to provide lawmakers with data about the frequency and types of complaints received — and the status of those complaints — about specific sober homes.

A spokesman for Daly believes the bill would, indeed, raise the bar for all sober homes. The adoption of best practices — and a certification process with evidence-based standards — would help identify responsible recovery residences. If sober home residents are found to be using drugs or alcohol, owners/operators wouldn’t be able to claim zoning privileges under the Americans with Disabilities Act.

“If a home is in reality a ‘flop house’ for drug activity, it should be shut down,” said David Miller, spokesman for Daly.

Why needed?

State data paints a grim picture of drug use in California. There are about 3.5 million state residents with diagnosable substance use disorders, and two years ago 4,868 California residents died from drug overdoses. If California has followed national trends, both figures have gone up.

Also, it can take years for addicts to reach a full, sustained recovery, with the first 30 to 90 days after treatment viewed as the most critical for preventing relapse. The bill, AB 1779, acknowledges that, saying it is “imperative that recovery residences be expanded as a means of reducing costs associated with multiple treatment episodes.”

Substance use disorder is ranked in the top five clinically-preventable burdens on health care spending, and addicts, prior to entering treatment, tap into health care services at twice the rate of the general population.

“AB 1779 is not an end-all,” Daly’s spokesman, Miller, said. But the goal, he added, is to “establish a framework for changing things for the better, for consumers and communities alike.”

Sovereign Health is cast as villain in many personal dramas — by hundreds of workers who lost jobs when it shut down, by former clients who complain they didn’t get the care they were promised, by parents whose children died on the company’s watch.

But in its long, drawn-out fight with insurance giant Health Net, Sovereign casts itself as David battling Goliath. And despite FBI raids of Sovereign facilities, hundreds of pending unpaid wage claims and dozens of lawsuits in myriad courts, the now-defunct Sovereign could get its hands on millions of Health Net dollars with an outside assist from the California Department of Insurance.

Sovereign, once a prominent addiction treatment and behavioral health provider in Southern California and several other states, sued Health Net in 2016 because the insurer refused to pay for treatment already provided to Health Net customers.

Health Net owed Sovereign $55 million back then — and, with statutory interest, that has ballooned to $80 million, according to Sovereign’s court filings.

This fight rages in suits and counter-suits, in state and federal courts, each side accusing the other of craven and contemptible behavior that endangers vulnerable people at the height of the opioid crisis.

But even as Sovereign accuses Health Net of purposefully dragging out the litigation for years — in a further attempt to cripple it — Sovereign points to the under-the-radar proceedings at the California Department of Insurance, and harbors hope for victory.

‘Unfair settlement’

The state Department of Insurance received hundreds of complaints from out-of-network residential treatment centers — like Sovereign — about how Health Net handled claims in 2015 and 2016, the agency said in an “order to show cause” and notice of noncompliance issued to Health Net last year.

Faced with suddenly ballooning bills for addiction treatment after mandatory coverage requirements kicked in under the Affordable Care Act, Health Net sent letters to providers in January 2016 demanding “extensive documentation” of fees before any payments would be made, resulting in “illegitimate denials and delayed payment of claims,” the Department of Insurance said.

Health Net’s obligation was to pay 75% of charges billed by the providers, CDI said, but “Health Net did not pay their claims pursuant to the terms of the policy, instead using an improper methodology not supported by the terms of the policy.”

This, the agency said, “resulted in the underpayment and unfair settlement of claims.”

It hit people getting addiction and behavioral health treatment under individual-market PPO policies. The insurer violated the California Insurance Code, the Department of Insurance said, engaging in acts “constituting unfair competition and/or unfair or deceptive practices.”

Sovereign first to sue

Sovereign, led by Tonmoy Sharma, was the first to sue Health Net over all this in July 2016.

In its suit, Sovereign alleged the insurer “engaged in a disgraceful scheme to enrich themselves by backtracking on their insurance promises to recovering addicts and the mentally ill,” adding that its “misconduct is part of a sad pattern of prioritizing dollars over decency.”

Health Net has told its shareholders it put aside $300 million to pay claims like Sovereign’s as it faces lawsuits “from waves of cheated providers,” Sovereign said in court filings.

“The opioid epidemic is real; its victims need help from trained providers; and insurers that cover such treatment cannot walk away from their promises,” Sovereign argued.

Sharma believes Health Net orchestrated the FBI raids on its facilities nearly two years ago, playing law enforcement like a fiddle. The ensuing trauma to patients and staff — and extreme negative publicity — led to the collapse of Sovereign’s business, the company claims. Last July, Sovereign closed its doors and laid off hundreds of employees who still haven’t been paid.

Sovereign has not, however, filed for bankruptcy. Sharma intends to collect what Health Net owes and use it to pay his workers, he said.

“We have been fighting now for more than three years,” said Lisa Kantor, one of Sovereign’s attorneys. “There are people who are owed money and wages, and they shouldn’t have lost their jobs. They shouldn’t have lost money. All this stress — from what we believe to be a fraudulent approach to the payment of claims.”

‘Massive fraud’

Health Net has a vastly different perspective. In a counter-suit, it argued that Sharma and his companies engaged in massive fraud that harmed all consumers.

In 2013 — before coverage for addiction treatment was mandated under Obamacare — Health Net paid $251,000 to out-of-network treatment providers like Sovereign. In 2015, it paid them more than $190 million, “an almost 1,000-fold increase in just two years,” it said.

Within the span of a single year, monthly billings from Sovereign’s companies to Health Net climbed from less than $50,000 to more than $13 million, Health Net said.

Treatment providers “abused the Affordable Care Act in a manner that threatens the ongoing viability of health insurers,” Health Net said. “This scheme, which involves fraudulently obtaining insurance policies and the submission of thousands of false and fraudulent claims, also raises the costs of healthcare coverage to consumers, who ultimately will have to pay higher insurance premiums.”

Sovereign and other clinics “engaged in a sophisticated fraud involving paying kickbacks to ‘buy’ hundreds of patients from teams of brokers, or ‘cappers,’ who find the patients in 12-step programs, AA meetings, homeless shelters and jails, often from outside California, and then ‘sell’ them for cash to the highest-bidding clinic,” its suit said.

“Because the prospective patients typically would not be able to afford private health insurance or the cost-sharing obligations associated with receiving services from an out-of-network provider — and who should therefore be enrolled in state-funded or subsidized health care programs such as Medicaid — the providers, including (Sovereign), offer the patients financial kickbacks and inducements.”

The primary inducement is the offer of free care, Health Net charged. Sovereign, and providers like it, get preferred provider insurance policies for clients. The providers — not the clients — paid the premiums. Then the providers either waived — or paid — the patients’ out-of-pocket deductibles and co-pays, which Health Net said violated the policy terms.

Sovereign and the others recouped their cash outlays by billing massive amounts — often for services that were never rendered, were not medically necessary or were not covered, the counter-suit said.

Settlement with state

Health Net entered into a settlement agreement with the Department of Insurance in January, fully resolving the order to show cause with no adverse findings against Health Net. As part of the resolution, Health Net agreed to pay $1 million to the agency, plus $25,000 to cover its costs related to the inquiry.

Health Net has resolved all but seven of existing complaints made to the department, the settlement agreement said. Six of those were in settlement negotiations; the seventh, apparently, is Sovereign.

“Health Net continues to cooperate with the department to address provider fraud, waste and abuse as appropriate,” spokesman Ken Muché said by email.

What’s next?

Health Net wrongly equates the rise in coverage claims with misconduct, Sovereign’s lawyers argue.

What it really shows “is that providers like Sovereign have stepped forward to provide desperately needed care to patients finally able to access health insurance and treatment. In its effort to paint Sovereign and other clinics as sinister, Health Net ignores the overwhelming demand for substance-abuse treatment.”

The law does not prevent third parties from paying health insurance premiums for people, Sovereign argues. The PPO policies involved didn’t have deductibles or co-pays to waive. And, while denying that “body brokering” took place, they argue it wasn’t illegal in the addiction treatment realm until a new law kicked in on Jan. 1 anyway.

More legal skirmishing is slated for this month, with a hearing set for June 14.

“We will not only be defending ourselves against the allegations in the complaint, but also prosecuting our cross-complaint against these same parties for fraud, interference with contractual relations and violation of California’s unfair and illegal business practices act,” Muché said.

“Health Net believes fraud and abuse threaten our state’s healthcare system and the many consumers who rely on it. Those engaging in fraudulent practices should never have automatic access to healthcare dollars. Our commitment to root out this behavior remains as strong as ever.”

After disturbing reports of death, sexual assault, drug abuse and paying for patients inside California’s loosely regulated addiction treatment industry, an across-the-aisle team of lawmakers has banded together to fundamentally change the rules of the game.

The new Bi-Partisan Legislative Substance Abuse Treatment Working Group seeks to significantly expand state oversight, improve patient protections and ensure taxpayer dollars are spent on programs that work.

“The scope and scale of the opioid crisis really is staggering,” said the group’s organizer, Assemblywoman Cottie Petrie-Norris, D-Laguna Beach, at a Sacramento news conference Tuesday June 4. “In California alone in 2017, there were over 2,000 deaths because of opioid abuse. It’s heartbreaking.

“And what’s particularly heartbreaking is that, at every step, we’ve seen unscrupulous actors profiteering from this crisis. Pharmaceutical companies that have engaged in deceptive marketing practices. Doctors who have knowingly overprescribed these medicines. And rogue rehab and sober living home operators who are exploiting patients for profit.”

The new group was formed in the wake of the Southern California News Group’s probe of the treatment industry. It found that dozens of people have died for want of proper medical care in California’s non-medical treatment centers — facilities that would not be allowed to open in many other states.

Young drug users continue to be lured here with free plane tickets, rehab “scholarships” and cash payments. They are signed up for PPO health insurance on the Covered California exchange, with rehabs paying premiums until benefits max out. And then some addicts are given drugs — often heroin — so they test “dirty” and the whole insurance billing cycle can begin anew.

“It’s a cycle that far too often ends in patient death,” Petrie-Norris said. “And it’s a cycle that’s only possible because of the virtual lack of any regulation or oversight here in California. For years — for years — attempts to address this atrocity have failed. And, in the meantime, far too many people are dying.”

The new team tasked with trying to repair the system includes lawmakers who have been working on the issue for years: state Sens. Pat Bates, R-Laguna Niguel, Jerry Hill, D-San Mateo, and Henry Stern, D-Calabasas; as well as Assembly members Petrie-Norris, Richard Bloom, D-Santa Monica, Tasha Boerner Horvath, D-Encinitas, Bill Brough, R-Dana Point, Tom Daly, D-Anaheim, Kevin McCarty, D-Sacramento, and Marie Waldron, R-Escondido.

Some progress so far

There has been some progress. Last year, Hill’s Senate Bill 823 was signed into law, and will require state-licensed residential rehabs to adopt the American Society of Addiction Medicine’s treatment criteria as the minimum standard of care. But outpatient centers — where the vast majority of treatment occurs in California — don’t have to meet that standard, or any standard at all, Hill said with incredulity.

“Anyone can hang that shingle and open an outpatient treatment center today. No license, no training or prior experience necessary at all. Nothing,” he said. “We don’t know how many outpatient facilities are operating in the state, or how many people are returning to outpatient treatment after they relapse. If you wanted to know how many people died at outpatient facilities, we couldn’t tell you today.”

Bills target rehab industry

Hill’s new bill, SB 325, would require outpatient centers to be licensed and meet evidence-based treatment standards, as well as prohibit providers from engaging in patient-selling and recruiting.

Other bills moving forward this year include Bates’ SB 589, which would end deceptive marketing in the rehab industry; Petrie-Norris’ AB 919, which would require the state to establish an enforcement program to tackle body-brokering fraud; and Petrie-Norris’ AB 920, which would clarify that sober homes and treatment facilities serving six or fewer people aren’t “families” under the law if they have economic relationships with treatment providers.

“The tragedy is when we reach out for help, and for hope, to be met with exploitation, to be met with a profit motive,” Stern said. “To reach out that hand and have someone grab it who has ill-intent is something that government really should come in and rectify.”

Mom ‘horrified’

Among those appearing with lawmakers at the news conference was Wendy McEntyre of Sky Forest, who lost her son, Jarrod, to an overdose in a sober living home in the San Fernando Valley in 2004. Twenty-four men were living in the three-bedroom, two-bath house at the time, and one brought in speedballs to share.

McEntyre founded the nonprofit Jarrod’s Law in memory of her 23-year-old son and began fighting to change California’s laws, hoping to spare other parents the same agony. AB 920 is named in his honor.

“I’m horrified at what I’ve discovered,” said McEntyre, reading a long list of names of those who died trying to recover. “A week doesn’t go by where I don’t get a phone call from a broken mom or dad. I can’t keep coming to the state with this list of dead boys.”

Nearly 2,200 opioid deaths in 2017

Opioid-related overdoses claimed 2,196 lives in California in 2017, according to the California Department of Public Health. Doctors wrote 21.8 million opioid prescriptions that year; the state’s population was 39.4 million.

But opioids are just part of the problem. All drug overdose deaths totaled 4,868 in California that year, with 40% of them reported in Los Angeles, Orange, Riverside and San Bernardino counties.

Addiction treatment is projected to be a $42 billion industry by 2020, according to federal data. Petrie-Norris said California represents about 10 percent of that figure.

“There’s no other $4-$5 billion industry in this state with such lax regulation and oversight,” she said.

Stern said they needed help from their colleagues in both Sacramento and Washington, D.C. He didn’t want to overpromise, but said he was ready to work.

“Let’s get something done,” Stern said.

Nine graduates of the San Bernardino County Superior Court’s rehabilitative programs were honored May 17 at the annual Collaborative Treatment Court Celebration.

The graduates’ families and justice partners were among those who attended, along with local legislators.

The ceremony began with a welcome from Laura Martinez, Treatment Court coordinator, and opening remarks by Presiding Judge John P. Vander Feer, followed by presentation of the Judge Morris Award for 2019, to retired judge Pat Morris for his establishment of treatment courts in San Bernardino County.

Assembly Member Eloise Reyes, representing the 47th Assembly District, addressed the graduates and spoke about the positive impacts of the collaborative treatment courts, according to a press release from the San Bernardino County Superior Court.

This year’s justice partner honorees, recognized by Commissioner Ronald J. Gilbert, are John Mayor, Public Defender’s Office; Michelle Bergey, District Attorney’s Office; Gheiza Rosales, Probation Department; and Eric Butterfield, Department of Behavioral Health.

During the program, speakers noted that the focus of the collaborative programs is to treat people as human, according to the press release. One graduate said that the celebration was the first time she was referred to as “honoree” and not “inmate number.” Several other graduates said the programs saved their lives and they are now attending college, employed and had been reunited with their families and children.

“Hearing from past graduates was an impactful reminder that collaborative courts make a true difference in the lives of all those impacted, including the community,” Vander Feer said in the press release.

Collaborative justice courts, also known as problem-solving courts, are intended to reduce addiction, crime and recidivism while saving taxpayer dollars. California has more than 420 collaborative justice courts, with San Bernardino having five court types — Adult Drug Court, Juvenile Delinquency Drug Court, Adult Mental Health Court, Veterans Treatment Court and Shelter Court. More than 120 people have completed one of the rehabilitative programs since 2018, according to the press release.

In that unwieldy stack of newly proposed laws atop Gov. Gavin Newsom’s desk: Four bills that aim to require licensing, reduce fraud and false advertising and raise standards in California’s notoriously under-regulated addiction treatment industry.

“This has been a long time coming,” said reformer Ryan Hampton, author of “American Fix.” “Governor Newsom has the opportunity to make right what Governor Brown got wrong last session; and that’s to sign these bills immediately.”

One proposal that could be a game-changer is Assembly Bill 920, by Assemblywoman Cottie Petrie-Norris, D-Laguna Beach, and Sen. Jerry Hill, D-San Mateo. It would require outpatient centers, which are now completely unsupervised by the state, to be licensed, regulated, and to adopt treatment criteria set by the American Society of Addiction Medicine as the minimum standard of care.

“Anyone can hang that shingle and open an outpatient treatment center today. No license, no training or prior experience necessary at all. Nothing,” said Hill when he unveiled the plan earlier this year.

“We don’t know how many outpatient facilities are operating in the state, or how many people are returning to outpatient treatment after they relapse. If you wanted to know how many people died at outpatient facilities, we couldn’t tell you today.”

The bill is modeled after Hill’s SB 823, requiring the same rules of live-in treatment centers, which was signed into law last year.

Wendy McEntyre of Sky Forest lost her son, Jarrod, to an overdose in a sober living home in the San Fernando Valley in 2004. Twenty-four men were living in the three-bedroom, two-bath house at the time, and one brought in speedballs to share. McEntyre founded the nonprofit Jarrod’s Law in his memory and began fighting to change California’s laws. AB 920 is named in his honor.

“It really is phenomenal,” McEntyre said. “There’s so much more that needs to happen — we need to overhaul the system, and committees are meeting and working hard on that. But right now, this is phenomenal.”

No lies

Also making it to the governor’s desk is Senate Bill 589 by Sen. Pat Bates, R-Laguna Niguel, which would prohibit rehabs and sober homes from making false or misleading advertising statements. The law also would prevent one rehab operator from hijacking web traffic intended for another.

“We’re tightening the noose on these guys profiteering off the most vulnerable, and telling stories that are totally distorted about what a person is going to get in these facilities,” Bates said. “Kick the habit in 30 days? Come on. I hear these ads on TV, drawing people in. But these are lifetime problems. They’re not solved in 30 days. They’re promising things that can’t be delivered.”

Under Bates’ bill the California Department of Health Care Services would have the responsibility to respond to allegations of false claims and to sanction advertising.

No free rent

Insurance fraud, which is already illegal, has also been a big problem in the industry. But AB 919, also by Petrie-Norris, would crack down on financial conflicts-of-interest among rehab operators.

It would require that laboratories that test blood or urine for drugs, or outpatient treatment programs that lease, manage, or own housing offered to clients, have separate housing contracts, specifically stating that payment for housing is the patient’s responsibility. Rent should not be indirectly billed to health insurance, a practice that has become common in the industry.

If discounted housing or transportation is offered, the patient must enter into a repayment plan for any subsidized rent. The bill would empower the Department of Health Care Services to provide enforcement.

No scamming

And AB 290, by Assemblymember Jim Wood, D-Santa Rosa, would remove the financial incentive for treatment providers to lure people to California by promising “free” insurance coverage. Primarily directed at kidney dialysis schemes, the proposal also would rein in addiction treatment centers.

Addiction treatment centers have provided plane tickets to addicted people from other states, flown them to California, and then signed them up for private health insurance policies and paid the premiums. That allowed the centers to then bill up to hundreds of thousands of dollars, while paying a fraction of that to insurers.

When the insurance benefits run out, centers stop paying the premiums and kick patients out, often to the street. In the industry, the practice is common enough that it has a name — “curbing.”

AB 290 would crack down on what’s known as “financially-interested third-party payments.”

“This practice has led to the untimely death of countless people,” said reformer Hampton, who over the years has seen rehab bills gutted, watered down and killed over the years. “Our community has faith that the Governor will do the right thing and stand by family members and people impacted by the addiction crisis.”

High hopes

The Southern California News Group has been chronicling reports of death, sexual assault, drug abuse and paying for patients inside California’s addiction treatment industry for years. Lawmakers have been trying to tighten regulation of the industry, but with limited success.

This year’s crop of legislation is the most far-reaching to make it to the governor’s desk to date, and observers credit the new Bi-Partisan Legislative Substance Abuse Treatment Working Group, led by Petrie-Norris, with the progress.

The group seeks to significantly expand state oversight, improve patient protections and ensure that taxpayer dollars are spent on programs that work.

“I’m really, really thrilled we were able to get this done,” Petrie-Norris said. “I absolutely think the working group has allowed us to elevate the discussion and move things along. Unfortunately, more legislators are having to struggle with this as the problems become more widespread.”

Newsom’s spokeswoman, Vicky Waters, said the bills will be evaluated by the governor on their merits. He has until Oct. 13 to act.

Mark G. Mishek, chief executive of the Minnesota-based Hazelden Betty Ford Foundation, was stunned by California’s lenient rules when his organization merged with the Rancho Mirage-based Betty Ford Center. He has been urging officials to step up their game for years, and sent a letter to the governor asking him to sign the legislation.

“We like all of it,” said Mishek, “California is long overdue on licensing outpatient treatment.”

Laurie Girand of Advocates for Responsible Treatment in San Juan Capistrano has also been pushing for stronger legislation for years. She asks people to contact the governor to urge him to sign.

“Requiring licencing would be a big step forward,” she said. “You’d think we’re protected from false advertising — but we’re not. And a lot of times, insurance premiums are getting paid by the people hoping to profit from them.

“Gavin Newsom has an opportunity to turn around drug and alcohol rehab in California for the betterment of patients,” Girand said. “It’s on his desk. What are we waiting for?”

The good news, if there is any, is that opioid prescriptions and drug-related emergency room visits have declined in Orange, Los Angeles, Riverside and San Bernardino counties — as well as in California as a whole — since 2014.

The not-so-good news — and there’s plenty — is that fentanyl-related deaths have skyrocketed over the past five years, especially in Los Angeles County, which far outpaces the state average.

Fifteen people died from fentanyl overdoses in 2014 in L.A. County. In 2018, deaths spiked 1,247% — to 202, according to data from the California Department of Public Health.

Statewide, fentanyl deaths leaped by 614% to 743 in 2018.

The jump was smaller, but still staggering, in Orange and Riverside counties, where fentanyl deaths rose by 564% and 563%, respectively. In San Bernardino, they rose 267%.

Overdose deaths related to other drugs rose in the counties and state as well, but at a much more modest pace than did fentanyl-related deaths.

“It has become increasingly common for us to see drug dealers peddling counterfeit pharmaceuticals made with fentanyl,” said United States Attorney Nick Hanna in a statement. “As a consequence, fentanyl is now the number one cause of overdose deaths in the United States.”

Fentanyl is easily cut into authentic-looking pills that purport to be oxycodone, the prescription opioid-of-choice for many who become dependent on its chemically induced euphoria. Real oxy “takes away the pain — all the pain. In the brain, in the heart, in the body. That’s what we’re up against,” Joe DeSanto, an addiction medicine specialist, has said.

Pills made to look like the real thing are cut with fentanyl and can be made for about $1 each. They can sell for 20 times that on the streets of Southern California, prosecutors said.

High-profiles deaths

The dangers of the drug — a powerful synthetic opioid 50 to 100 times stronger than heroin — are illustrated by the high-profile deaths of Los Angeles Angels pitcher Tyler Skaggs and rapper Mac Miller.

Skaggs, 27, was found dead in his hotel room in Texas on July 1, just hours before the Angels were to face off against the Texas Rangers. An autopsy found Skaggs died from a mixture of fentanyl, oxycodone and alcohol.

Last year, 26-year-old rapper and record producer Miller died after snorting blue pills that looked like real oxys, but were laced with fentanyl, prosecutors said. His alleged dealer was arrested in September and charged with distributing a controlled substance.

The list of celebrity deaths linked to fentanyl goes on — Lil Peep, Tom Petty, Prince — but most of the dead were just regular people. Baby Leo Holtz, 10 months old, was snuggling in bed with his parents in 2017 when he swallowed blue pills that had spilled from his father’s pocket. The pills were marked as oxycodone. The baby died with fatal levels of fentanyl in his system.

“Fentanyl disguised as a genuine pharmaceutical is a killer — which is being proven every day in America,” U.S. Attorney Hanna said in a statement after the arrest of Miller’s alleged dealer. “Drugs laced with cheap and potent fentanyl are increasingly common, and we owe it to the victims and their families to aggressively target the drug dealers that cause these overdose deaths.”

All told, 1,649 people died from fentanyl in California over the five-year period examined.

The overwhelming majority — 59% — of those who died in 2018 were white, 28% were Latino, 9% were black, 3% were Asian and less than 1% were American Indian.

Though the problem is growing in California, it is still dwarfed by struggles elsewhere in the nation. There were 1.3 deaths per 100,000 people due to synthetic opioids in the Golden State in 2017. West Virginia, by comparison, had 37.4 such deaths per 100,000 people, according to the Centers for Disease Control and Prevention.

Why the jump?

Fentanyl can be manufactured illegally. It’s powerful. It’s cheap. And there are no quality controls, as there are with pharmaceutical-grade fentanyl, the Los Angeles County Department of Public Health said in an emailed statement.

“Illegally manufactured fentanyl is commonly sold as a powder or made into counterfeit pills that look like other prescription opioids,” the health agency said. “Additionally, fentanyl is mixed into other drugs such as heroin, cocaine, methamphetamine and MDMA. This poses profound overdose risks to drug users who often do not know that fentanyl is present in their drug supply.”

The rise in overdose deaths in California also coincides with major changes in how the legal system views drug-related offenses, and many in law enforcement see a link between the two.

“Since 2015, we have seen a reduction of people attending treatment programs because of Proposition 47, which passed in November 2014, and the prison realignment, AB 109, passing in 2011,” said Jodi Miller, a spokeswoman for the San Bernardino County Sheriff’s Department.

Assembly Bill 109 diverted those convicted of less-serious felonies from state prisons to county jails, while Prop. 47 recategorized many nonviolent offenses — such as drug and property crimes — from felonies to misdemeanors, thus eliminating or reducing jail time.

Without the real threat of prison or jail for drug offenses, the “stick” once used to compel desired behavior has disappeared, officials said.

San Bernardino County jails offer recovery programs such as Alcoholics Anonymous and Narcotics Anonymous, and there are more than 260 inmates currently enrolled, Miller said, but many simply don’t spend enough time in jail to complete treatment. And following through on the outside can be difficult.

“When a person is not court-ordered to attend these classes while incarcerated, they will avoid or come up with excuses to not attend the programs,” Miller said.

L.A. officials said that the coroner made testing for fentanyl part of standard procedure in 2016, which may be responsible for some of the increase there.

What to do?

Beyond having Narcan more widely available to reverse overdoses and controversial “supervised drug consumption” sites — which have been found to reduce overdose deaths — harm-reduction advocates say drug-testing kits can be used before drugs are ingested.

Originally intended to detect fentanyl in urine, fentanyl test strips also can detect the deadly substance in drugs themselves. Testing at Vancouver’s Insite supervised injection site showed that, during a single month in 2016, 86% of all drugs tested came up positive for fentanyl, whether pills or powder.

“While population-level data on the impact of FTS (fentanyl test strips) on overdoses is still emerging, recent studies suggest that FTS change individual behavior and promote safety precautions among drug users to reduce their risk of overdosing,” the L.A. County Department of Public Health said in a statement.

The test strips are available at syringe exchange programs across L.A. County, but access is limited beyond harm reduction-oriented programs, officials said.

In Los Angeles County, where 404 people have died over the five-year period — half of them in 2018 alone — the county has launched a public education campaign in English and Spanish “to increase awareness of the risks and harms of prescription pain medication misuse and abuse.”

“Opioid misuse trends in Los Angeles County are a serious public health concern,” Director Barbara Ferrer said in a statement when the campaign launched in June. “A key component in preventing addiction, overdose, and death is educating people about the significant risks associated with using prescription pain medications.

“If anyone is struggling with dependency, we want them to know and feel hopeful that treatment and recovery are possible. We are here to help with dozens of service providers throughout the county.”

The county launched a new website — available at ManagePainSafely.org and ManageAddiction.org — offering information and resources. It also has a Substance Abuse Service Helpline at 844-804-7500 to connect people with treatment.

Federal prosecutors, in the meantime, promise to crack down on those selling the deadly drug. On Wednesday, Oct. 2, three men were indicted by a federal grand jury in a scheme to distribute the fentanyl-laced pills that killed rapper Miller.

Crackdown consequences

The three men charged in the federal indictment — Cameron Pettit, 28, of West Hollywood; Stephen Andrew Walter, 46, of Westwood; and Ryan Michael Reavis, 36, a former West Los Angeles resident who relocated to Arizona — allegedly continued to sell narcotics after Miller’s death “with full knowledge of the risks their products posed to human life,” Hanna said.

“We will continue to aggressively target drug dealers responsible for the spread of this dangerous chemical,” he said.

Tighter regulations on opioid prescriptions by doctors has led to a decrease in the number of such prescriptions in California, but “unintended negative consequences to people with chronic pain are an emerging concern,” L.A. County health officials said.

“Abrupt tapering or discontinuation of prescription opioids for patients with chronic pain, particularly in the absence of offering effective alternatives, can lead to overdose and physical and psychological suffering.”

Federal agents raided four addiction treatment centers in Los Angeles and Orange counties last week seeking evidence in a criminal probe, officials said Monday.

FBI spokeswoman Laura Eimiller said the reasons for searches at four locations — contained in probable-cause affidavits — were filed under seal in federal court, and the FBI would not comment further on the nature of the investigation.

Agents searched Malibu California Model Drug Treatment Center Inc., doing business as Inspire Malibu on Kanan Road in Agoura Hills; Progressive Recovery Solutions LLC, doing business as Victory Detox Center on Morse Avenue in North Hollywood; BLVD Centers Inc., doing business as BLVD-Sawtelle on Sawtelle Boulevard in Los Angeles; and Reflections Recovery LLC, doing business as Reflections Recovery on Bush Street in Santa Ana, according to Eimiller and data from the state Department of Health Care Services, which licenses and certifies addiction treatment centers.

Calls, emails and social media messages seeking comment from the rehab facilities and their representatives were not immediately returned Monday.

The raids echoed similar action at embattled Sovereign Health treatment centers in 2017.

FBI agents — which Sovereign denounced as “jack-booted thugs” — raided Sovereign facilities in San Clemente, Culver City, Palm Desert and San Juan Capistrano in June of that year. They were hunting for evidence of health care fraud, wire fraud, conspiracy, “laundering of monetary instruments” and illegal payments for patient referrals, according to paperwork filed in federal court by attorneys for Sovereign.

Search warrants also were sealed for those Sovereign raids, but Sovereign filed suit demanding access to the underlying justification. The Sovereign warrants remain under seal, according to the U.S. Department of Justice, which would not update the status of the Sovereign investigation. Sovereign has ceased operations, though its CEO now works with another treatment program, enraging some critics.

The Southern California News Group has chronicled disturbing reports of deaths, sexual assault, drug abuse and paying for patients inside California’s loosely regulated addiction treatment industry over the past several years. Those reports have prompted federal probes, an Orange County task force, a sober living registry and new state laws designed to protect vulnerable people struggling with addiction.

Bills aiming to tighten up regulation and standards for addiction treatment further are on the governor’s desk, and lawmakers are working on a major overhaul of the industry they hope to introduce next year.

It’s unclear if such practices had anything to do with Thursday’s raids at the four treatment facilities.

Inspire Malibu offers a state-of-the-art treatment program and evidence-based therapies to address both alcohol and substance abuse issues, according to its website.

North Hollywood’s Victory Detox Center strives to provide superior clinical care and recovery services “in an upscale, private and very personalized environment,” its website says.

BLVD operates rehabs in several locations, including the one searched on Sawtelle in West Los Angeles, and touts the benefits of going to a new place to recover from substance abuse issues.

Reflections in Orange County bills itself as an affordable outpatient facility in a community that understands the importance of substance abuse rehab and of giving productive people another chance.