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Sober Homes and Fraud: An Even Darker Side of the Opioid Epidemic

By keeping addicts hooked on drugs, some sober homes engage in insurance fraud schemes that are both financially and physically costly.

Posted by Ann Snook on December 16th, 2019

According to CNBC, Americans are now more likely to die from a drug overdose than in a car accident. The opioid epidemic has rapidly increased the country’s demand for addiction treatment and, as a result, for treatment centers. The number of treatment facilities increased 600 per cent between 1999 and 2008, but not all of them are looking out for their residents’ best interests.

Some sober homes, which are designed to ease the transition from a treatment center to regular life, cash in on addicts when they are most vulnerable. By keeping addicts hooked on drugs, some sober homes engage in insurance fraud schemes that are both financially costly and morally reprehensible.


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What Are Sober Homes?


Sober homes, also known as sober houses, are group homes for people recovering from addiction. They’re meant to be halfway houses where recovering addicts live together in a substance-free setting to help them transition from rehab back to mainstream society.

Unlike formal treatment centers where patients have to be admitted, sober homes are like any other property where a tenant rents from a landlord. Because these facilities are owned by private landlords, they aren’t regulated federally, though 27 states have set standards to establish proper levels of care, quality-control procedures and a patient bill of rights for recovery residences.

Fraudulent sober houses make a profit by keeping addicts in a “relapse cycle”. Rather than offering treatment and support, they allow or even encourage drug use to “bring clients back time and again for treatment that is covered by health insurance.” Because most insurance providers only cover short recovery programs instead of lifelong addiction treatment, fraudsters rely on patients not getting better.


RELATED: Investigating Medicare Part D Fraud: Overcoming Major Challenges


Sober Home Fraud Schemes


Kickbacks and Patient Brokering


Both legitimate and sham sober houses perform regular drug tests on their patients to track their progress. Each home chooses the frequency of the tests as well as the labs where they send the samples.

However, the fraudulent homes often receive kickbacks from labs for providing them with patients. In order to keep their kickback payments flowing, fraudsters order excessive tests or make drug-addicted residents provide samples for patients who don’t exist.

Similarly, sober houses may receive payments from outpatient drug treatment centers. They direct their residents to certain facilities in exchange for a kickback, also known as patient brokering. Keeping residents in the relapse cycle is key to their business.


Fraudulent Drug Treatment Centers


Not only do operators of scam sober homes prey on addicts in recovery, but some take it a step further and position their sober homes as treatment centers. Those seeking addiction treatment are lured in by promises of comped living expenses or an innovative program, only to be thrust into an abusive, drug-riddled environment when they arrive.

These fraudulent treatment facilities “bill payers for services they never deliver or for services that are medically unnecessary and cost Medicare, Medicaid, and private insurers hundred of millions every year,” says Senator Ron Wyden of Oregon. Depending on a patient’s copay and deductible, they may also be stuck with high bills for treatments they didn’t receive.

Kenneth Chatman, the owner of a chain of sober homes and fraudulent drug treatment centers, was recently sentenced to 27 years in prison for healthcare fraud and related crimes. In his facilities, residents turned over their personal belongings upon check-in. He then charged their insurance for phony treatments, including billing a movie night as “group therapy.”

Chatman paid kickbacks to doctors who signed off on patients’ excessive and often fraudulent drug tests. He didn’t discourage drug use in his so-called sober homes and even provided drugs to female patients, withholding the supply if they refused to participate in his prostitution scheme.


Challenges of Investigating Sober Home Fraud


Delray Beach, Florida, a town with a population of 60,000, has at least 250 sober homes within its city limits. With more and more addiction recovery facilities popping up in warm locales such as South Florida and Arizona, it can be hard for authorities to keep track of which centers are legitimate and which are not.

Mark Mishek, president and CEO of the Hazelden Betty Ford Foundation, explains that US healthcare isn’t “a comprehensive system. It’s characterized by a variety of state laws, different levels of regulation, different levels of certification, kind of a lack of agreement in many cases on the right clinical standard for certain substance use disorders.”

In Chatman’s case, the FBI became suspicious of the facilities when they received an insurance fraud tip, followed by multiple patients’ deaths due to overdoses. Delray Beach sees 600 overdose deaths each year, as well as frequent drug-related EMS calls.

Authorities can help potential patients and their families find reputable facilities by providing guidance and tips. For example, provide a list of known legitimate treatment centers in the local area. In addition, create a checklist of red flags to look for, including:

  • Frequent, forced lab tests
  • Many return patients
  • Free treatments
  • Bad reputation with neighboring businesses and residents


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Another challenge comes with the size of many of these healthcare fraud schemes. With cohesive networks of shady doctors, addiction treatment facilities and sober homes, a patient’s treatment program may appear genuine, but in reality, they feel trapped in a cycle of abuse and fraud.

To combat fraudulent drug treatment centers and sober homes, some cities including Delray Beach and Prescott, AZ have adopted ordinances. By requiring sober houses to be certified by a trade association and restricting the density to one home per block, local authorities hope to weed out the fraudsters and make room for facilities that offer real treatment.

Ann Snook
Ann Snook

Marketing Writer

Ann is a marketing writer at i-Sight Software. She writes about issues related to investigations of fraud, employee misconduct, corporate security, Title IX, ethics & compliance and more.

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