How some Southern California drug rehab centers exploit addiction – OCRegister


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Timmy Solomon’s mood swings between euphoria and sadness after shooting heroin and crystal meth, a concoction aptly named “goofball.” One minute he’s dancing: “I’m the luckiest person in the world!” The next minute he’s crying because his ex-wife won’t allow him to see his 1 1/2-year-old daughter when he’s using. (Photo by Mindy Schauer, Orange County Register/SCNG)

Gabe Chaves finds Timmy Solomon, 28, sleeping on a piece of plastic behind a recycling bin in a San Clemente parking lot where you can hear the hum of traffic on the nearby freeway . The sun is setting on this late February afternoon and Timmy has goose bumps. A warm bed awaits at a sober living home in Whittier where he can detox.(Photo by Mindy Schauer, Orange County Register/SCNG)

After getting out of the hospital and being in a two-week induced coma for a throat abscess, Timmy is back on the street shooting up heroin and meth. He says he likes the feel of the needle, "to feel the tear, I like to see the blood,."(Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy hunts for cans in the garbage and turns them in for cash at the recycling station to buy drugs. On his best day he earned $220. "I never pictured this as my life, ever dude. I never thought I'd be 28-years old and sticking my hand in a f—ing trash barrel. It f—ing kills me. It makes me want to f—ing die. I'm that f—ing miserable," he says. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy sleeps in a tent under a tree near a busy corner in San Clemente. He keeps a razor and a toothbrush and toothpaste in his backpack for when he takes 'birdbaths' in public restrooms. Today he catches his reflection in a mirror at a donut shop and pauses to smooth his messy hair. He says he's embarrassed when people he knows see him stoned on the streets. (Photo by Mindy Schauer, Orange County Register/SCNG)

Gabe Chaves, left, and Jeff Dougherty, dubbed the Junkie Hunter, center, find addicts on the street like Timmy, foreground, to get them into rehab through their organization Foundations for Recovery. Today their patience grows thin as Timmy stalls to get high after saying he would let them drive him to a sober living home in Whittier. (Photo by Mindy Schauer, Orange County Register/SCNG)

Gabe Chaves, 37, left, is frustrated because he knows Timmy wants to get high one more time before heading off to detox at a sober living home in Whittier. Gabe knows all the tricks. He was a heroin addict himself. Now he is a vegan and a Buddhist, sober a year-and-a-half. He does outreach on the streets of Orange County with Foundations for Recovery. "I go to wherever the addicts are. I talk to them, share my story with them and offer them solutions. That's the boots on the ground marketing that we do," he says.(Photo by Mindy Schauer, Orange County Register/SCNG)

Fresh off the streets, Timmy rifles through his backpack at the home of Jeff Dougherty, who calls himself Jeff the Junkie Hunter. On the other side of the wall sits John Kelleher, one of Dougherty's business partners. They run Foundations for Recovery dedicated to finding addicts on the street and getting them into rehab. They claim they don't get kickbacks like body brokers.(Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy goes shopping with Manny Murillo, the house manager at his sober living home in Whittier. Murillo got out of Pelican Bay Prison a year ago after doing 13 years for running over a cop during a police chase while high on meth. He hopes to one day meet the officer he hit and apologize. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy expresses frustration during a one-on-one therapy session at his IOP, or Intensive Outpatient Program, in Redondo Beach. He and his sober living housemates in Whittier are shuttled there daily. Timmy says he wants to go to a hospital detox in San Clemente instead of detoxing at his sober living home. (Photo by Mindy Schauer, Orange County Register/SCNG)

Described a feeling like "100 knives are poking through your skin," Timmy has had enough of detox and sneaks out of his sober living home to buy beer. (Photo by Mindy Schauer,Orange County Register/SCNG)

Timmy walks out of his sober living home to buy beer at a convenience store to take the edge off withdrawal. House owner Doug finds out and intercepts Timmy, who was standing in line to buy a 22-ounce Bud Light. Doug talks him into going back to the house with him. Later that night Timmy climbs out his bedroom window and heads back to the store where he gets three 22-ounce cans and downs them before returning to the home. The owner shakes his head in disbelief and disappointment. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy checks on a housemate who appears unconscious at their sober living home. The roommate took too many pills and could barely function the entire day. It wasn't clear if the pills were legally prescribed or if he got them another way. The 21-year-old was told to leave the next day. (Photo by Mindy Schauer, Orange County Register/SCNG)

A cell phone picture shows Timmy passed out at what was supposed to be an outpatient therapy session. He had taken too much Xanax, an anti-anxiety medication, which had been prescribed to him while he was at a sober living home in Whittier. This episode got him kicked out of the home. He took a bus back to the streets of San Clemente with another housemate who was also kicked out. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy uses a lighter to cook black tar heroin in the torn off bottom of a soda can that he found in the garbage. He usually does this several times a day in a public restroom. Looking for cans in the trash embarrasses him. (Photo by Mindy Schauer, Orange County Register/SCNG)

On a wild day of drug use, Timmy ducks into a restroom at Sunset Park in Dana Point to shoot up again. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy answers questions from two Orange County Sheriff deputies after getting high in a public park restroom. The Dana Point park is filled with children and their parents, and Timmy and his friend have aroused suspicion. (Photo by Mindy Schauer, Orange County Register/SCNG)

On a wild day of drug use, Timmy ducks into a restroom at Sunset Park in Dana Point to shoot up again. The park is filled with children and their parents and he and a friend look out of place and arouse suspicion. When he leaves the bathroom two Orange County Sheriff deputies are waiting for them. (Photo by Mindy Schauer, Orange County Register/SCNG)

Stoned and crying, Timmy hears a voice. “What’s wrong, why are you so sad?” The voice belongs to Timothy, a homeless alcoholic, who is sleeping on concrete near a gas station. Timmy tells him Timothy that he misses his 1-year-old daughter, who he hasn’t seen in months. He gets no sympathy from Timothy who says he’s been estranged from his entire family for years. It puts Timmy’s life in perspective. “I’m sorry,” he says. (Photo by Mindy Schauer, Orange County Register/SCNG)

A few days after getting kicked out of a sober living home in Whittier Timmy is back on the Streets of San Clemente, getting high. He sweats profusely and his eyes roll back in his head after shooting up. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy peers into his tent, under a tree near a busy San Clemente corner. "It's gross, oh, it's gross, I told you it was bad," he tells visitors. The camp is littered with junk, including shoes, a hookah and a piece of art depicting Archangel Michael, a warrior saint who battled the Devil. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy calls Blue Cross to find a rehab facility after his new insurance card arrives in the mail. His mother, who lives in Boston, is paying the premium. After making several calls and leaving messages, the insurance provider finally tells Timmy to check himself into the emergency room at Mission Hospital Laguna Beach to wait for a bed on their detox floor. Five hours later he gets in.(Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy is giving sobriety yet another try on St. Patrick's Day, which also happens to be his mom Patty's birthday. He approaches Mission Hospital in Laguna Beach. His family back in Boston takes comfort knowing that if he is found dead on the street someday they will be able to identify him because his last name is tattooed on his calf. (Photo by Mindy Schauer, Orange County Register/SCNG)

Exhausted and coming down off crystal meth, Timmy waits for a bed at Mission Hospital Laguna Beach which has a detox unit. This is his 40th treatment center, by his count, in the last decade. "My bones hurt," he says during the five-hour wait to get in. (Photo by Mindy Schauer, Orange County Register/SCNG)

Thirty-seven days after entering detox at Mission Hospital Laguna Beach, Timmy walks out of his San Clemente sober living home to a nearby CVS. There he picks up a bottle containing 75 oxycodones, otherwise known as synthetic heroin. It's a Sunday but Timmy says his doctor was on call and prescribed it over the phone. Bottle in hand, Timmy walks back to his sober living home, goes into the bathroom, crushes up six of the pills, mixes them with water and shoots them into his vein.(Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy Solomon lights a glass pipe of crystal meth in the bathroom of his sober living home in San Clemente. He closes the window and turns the shower to steaming hot to disguise the smell. He said he got the meth a few days earlier from another addict at their outpatient treatment center in San Juan Capistrano. Less than an hour later his housemates call the house manager to report him being high. A few hours later he's kicked out and sent to Mission Hospital Laguna Beach where he spends the night.(Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy manages more than a month of sobriety after detoxing at Mission Hospital Laguna Beach. He is in a San Clemente sober living home where he smoked crystal meth and shot oxycodone, prescribed by a doctor, in the bathroom. He continuously checks under his bedroom door for eavesdroppers but no one is there. He will be kicked out of this home by nighttime. (Photo by Mindy Schauer, Orange County Register/SCNG)

After 35 days of sobriety Timmy binges on crystal meth and oxycodone. Emerging from a bathroom at a San Clemente Starbucks he creates a scene as he staggers throughout town acting erratically and scaring passersby. He sweats profusely and ducks into a tiny restaurant pleading for water. Soon three sheriff's cars and a fire truck are dispatched. He is searched and taken to jail and later sent back to his sober living home where he is kicked out for using. He is taken to the emergency room at Mission Hospital Laguna Beach and his attempt at sobriety starts yet again. (Photo by Mindy Schauer, Orange County Register/SCNG)

After more than a month of sobriety Timmy binges on crystal meth and oxycodone. Emerging from a bathroom at a San Clemente Starbucks, he creates a scene. Soon, three sheriff's cars and a fire truck pull up. He is searched and taken to jail and later sent back to his sober living home where he is kicked out for using. He is sent to the emergency room at Mission Hospital Laguna Beach and his attempt at sobriety starts yet again. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy cradles his cellphone showing a picture of his curly-haired toddler. He hasn't seen the 1 1/2-year-old girl in months because his ex-wife has a restraining order against him. The torture of losing his daughter is one of the things he talks about most when he gets stoned. "All I've ever wanted to be was a father." (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy Solomon, now 28, as a little boy in Boston.(Photo by Mindy Schauer, Orange County Register/SCNG)

A curly-haired smiling boy growing up in Boston, Timmy Solomon is now 28 and struggling with addiction. He started using drugs when he was 13. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy, sixth from left, is from a family of eight boys, most of whom still live in Boston where they grew up. (Photo by Mindy Schauer, Orange County Register/SCNG)

A sign on the mirror in Timmy's current sober living home in in Laguna Hills reminds him that he needs to take responsibility for drug use — his thinking is the problem, not the drugs, he explains. (Photo by Mindy Schauer, Orange County Register/SCNG)

Detoxed and several weeks sober, Timmy says he is happy, hopeful and trying to take his life one day at a time. (Photo by Mindy Schauer, Orange County Register/SCNG)

Part 1: Some rehabs use loopholes, Obamacare to exploit addicts
As they push their grocery carts and clutch their coffees, the shoppers scurrying through the Ocean View Plaza parking lot pay little attention to Timmy Solomon.
For many, he’s easy to ignore.
His hair is dirty and matted. His voice is raspy. And on this sunny Tuesday, Solomon is dragging around a bag full of cans and bottles that he hopes to sell to the RePlanet Recycling station behind the Ralph’s in San Clemente.
He wants to raise $20 so he can get high one last time before he goes into rehab.
As a kid, Solomon was taught not to steal or use drugs. But today, at 28, he’s grown up to become a shoplifter and a junkie, addicted to heroin and meth and benzodiazepines, one of the hardest drugs to kick.
Those aren’t the only contradictions in Solomon’s life.
As broke as he is, Solomon is worth hundreds of thousands of dollars. Chronic drug users like Solomon are commodities, exploited by a growing world of drug and alcohol rehab operators who put profit ahead of patient care. Everything from the opioid epidemic and Obamacare to prison realignment and legal loopholes has created conditions in which unethical operators can flourish, using addicts to bilk insurance companies and the public out of hundreds of millions of dollars.
Though many legitimate centers remain, critics and long-time insiders say a darker version of the industry is emerging, built around an illicit world of patient recruiters, fraud-driven clinics and drug-testing mills.
Southern California, where the implementation of Obamacare makes it easy for recent arrivals to sign on for insurance, is on the front line of the conflict.
Malibu has 47 licensed rehab centers and a population of fewer than 13,000 people, making it the city with the highest per-capita concentration of rehab centers in California, according to state data. No. 2 is Costa Mesa, with 102 centers and a population of about 110,000. And those cities aren’t distant outliers; Pasadena, Murrieta, San Bernardino, Woodland Hills, Long Beach – all are among the dozens of communities in Southern California where 10 or more rehab centers have opened shop.
In all, the region is home to 1,117 licensed rehab centers, a number that doesn’t include thousands of unlicensed sober living homes where addicts live as families.
Points show the primary addresses of all non-medical alcoholism and drug abuse recovery or treatment facilities licensed and/or certified by the California Department of Health Care Services as of May 4, 2017. (Map by Ian Wheeler, Orange County Register/SCNG)
Industry insiders call the Los Angeles basin “Rehab Riviera.”
Victims of this broken system run far beyond addicts such as Solomon, who churn through the system year after year without kicking their habit. Homeless camps throughout Southern California are peppered with drug addicts from around the country who have been wooed by local rehabs only to wind up on the streets. Police and emergency workers are diverted from other duties to deal with rehab-related complaints. Health services, including hospital emergency rooms, are strained by the volume of rehab patients. Entire neighborhoods are disrupted.
“It’s a horrible business. It’s ugly,” said Deb Herzog, a former federal prosecutor who has investigated the rehab industry for Anthem Insurance Co.
“It doesn’t mean all rehabs are bad. But because of the lack of regulation, there’s a huge potential for fraud.”
A Southern California News Group investigation of the industry uncovered numerous issues:
Critics see the lack of oversight for the rehab industry – and the consequences it is having on addicts, communities and taxpayers – as a catastrophe playing out in the open.
“These are not victimless crimes,” Dave Jones, California’s insurance commissioner, said when asked about fraud in the rehab industry. “The costs get passed on to the rest of us in the form of higher premiums.
“The fraud can also be… corrosive.”
Former insurance investigator Herzog said the industry is only starting to become aware of the scope of the problem.
“They haven’t touched the surface of what’s going on.”
The scheme at the center of rehab fraud is not new, but two recent developments are making it much worse.
First, the number of people who might need a stint in rehab – drug-dependent men and women like Solomon – is exploding. About 2 million Americans are addicted to prescription opioids, according to the Centers for Disease Control, and at least 1 million more are addicted to heroin and other illegal drugs. And many states, like California, increasingly are diverting drug addicts to treatment programs rather than sending them to prison.
Second, under the rules of Obamacare, insurance companies are required to pay for addiction recovery. And through Covered California, insurance can be purchased the day you arrive from out of state.
With those factors in play, rehab centers use TV and online advertising, telemarketing and third-party recruiters – sometimes called “body brokers” – to convince addicts from around the country to come to Southern California to get clean. If the patient is insured – and many people addicted to prescription opiates are – that’s a plus. But if they’re not, some rehab centers pay for the addict to travel to California and sign up for insurance.
“They tell the kids they’re getting ‘scholarships’ to go into rehab,” said Ashton Abernathy, who worked on the financial side of several Orange County-based rehab centers before starting her own medical billing company.
“They don’t tell them that, half the time, they’re signing them up for insurance.”
Once the addict is insured and in a center often a house he or she usually stays for three months or so. During that time, unethical operators run up daily medical bills, covering everything from detox monitoring to psychological counseling, while providing little in the way of effective recovery services. The bills often run into the hundreds of thousands of dollars per patient.
But billing for addiction recovery is just one way rehab operators and people connected to them make money.
Addicts must pass drug tests to show they’re staying sober while in rehab. Often, those tests are ordered up at labs sometimes owned by the owner of the rehab center, a circular bit of business that can turn Solomon’s urine into his most valuable asset, generating insurance bills of more than $1,000 a day in some cases.
Eventually, when the insurance money dries up, the addict is kicked out of the center and onto the streets, a practice so routine there’s a name for it “curbing.”
In this side of the rehab world, billing fraud is common and documents sometimes are faked. In some centers, and their affiliated (and unlicensed) sober living homes, street drugs are made available to patient-users so they can start the whole expensive process again, according to court documents and state records.
The depth of the problems aren’t well known outside the industry, but they haven’t gone unnoticed.
Insurance companies, state and federal regulators, and police agencies as diverse as the U.S. Drug Enforcement Agency and the Los Angeles County Sheriff are investigating or suing some of the rehab industry’s bigger players. This month, a single rehab operator Christopher Bathum, a convicted felon who controlled centers in Los Angeles and Orange counties was ordered to stand trial for insurance fraud alleged to be worth more than $176 million. Separately, he faces charges of sexual assault allegedly involving his female patients.
On another front, Democrat and Republican legislators are pushing for new state and federal regulations. And, in some cases, consumers and neighborhood groups and city councils are fighting back. Costa Mesa recently passed an ordinance calling for sober living homes to send patients back to the address they had before entering treatment, a move aimed at preventing homelessness.
Still, rehab beds never are empty long.
Solomon is part of a tidal wave of mostly young addicts from around the country who landed in Southern California over the past half decade.
Solomon’s street nickname is “Boston,” referring to his home before coming to a Dana Point rehab center four years ago. One of Solomon’s friends came here from Wisconsin to kick heroin. Another friend, Marcus who is 23, came here from Philadelphia.
All were brought to California by the centers where they did their initial stints in rehab.
Solomon, like many others, has spent much of the past four years sleeping in a string of rehab centers, sober living homes and the streets. He’s been in jail and in court. He’s been in emergency rooms and ambulances.
He’s run up bills that have hit taxpayers and insurance customers, and he’s put a strain on public services.
What he and many others haven’t done is find long-term sobriety.
Four years after his initial Dana Point rehab stint, and 20 minutes after he sold his recyclables, Solomon climbs into the passenger seat of a car that’s pulled in behind the Ralph’s.
Solomon gives his $20 to the driver, who hands over the ingredients for a goofball, a cocktail of heroin and methamphetamine.
Solomon puts the heroin into the bottom of a torn-off soda can and uses a lighter to heat it up, sprinkling in some meth as the concoction gets hotter. Finally, he dips a syringe into the liquid and sucks it up before sinking the same needle into the crook of his arm.
A minute-or-so later, Solomon’s head droops, his jaw drops and his eyes lose focus.
“I feel it,” Solomon says, his voice suddenly high-pitched and strained and loud.
He scratches his head with both hands, as if he has fleas.
“It’s heaven!”
He starts talking about how, just an hour ago, he learned there was another bed waiting for him at another rehab clinic. He claims he’s been in rehab 40 times.
But he’s a different man now than when he agreed to sober up – more interested in staying high than in getting clean. At the thought of leaving his dealer, he starts to cry and slap himself.
“He’s my best friend, he really is,” Solomon whimpers. “He’s always been there for me. We’ll be together in the end. I don’t have any other friends. Oh, God, I’m gonna miss you, buddy.”

The driver says nothing. He takes a drag on a cigarette, eats gummy worms from a bag and stares out the windshield. Outside, the recycling manager is packing up for the day.
Finally, Solomon gets out of the car.
“Bye, buddy!” he yells out as his dealer drives away.
Stoned again, he’s off to rehab.
There are 18,774 patient beds in licensed rehab centers in California, more than half in the Los Angeles area, from Malibu to Lake Arrowhead to San Clemente.
The potential to make money from each one of those beds is vast.
A billing dispute involving insurance giant Health Net and one rehab company, Satya Health of San Clemente, offers an example of the dollars in play.
“In 2013, before the schemes began in earnest, Health Net paid approximately $251,000 to out-of-network substance abuse providers. … By 2014, however, Health Net was paying $10 million in out-of-network claims from substance abuse providers,” Health Net wrote earlier this year in a court filing describing why the company should not continue making payments to Satya.
“Within an 11-month period, Satya went from billing Health Net under $50,000 a month to more than $13 million per month.”
Health Net, which in 2015 paid more than $190 million to Satya, argues that those bills were fraudulent.
Satya says the bills are legitimate and Health Net refused to reimburse $55 million in medically necessary services. The insurance company engaged in a “disgraceful scheme” to enrich itself by backtracking on their insurance promises “to recovering addicts and the mentally ill at the expense of providers who have devoted their professional lives to helping such individuals,” said Haroon Ahmad, a spokesman for Sovereign Health, a Satya affiliate.
Though it’s unclear how much of the industry’s billing is contested in court, or is otherwise viewed by insurance companies or regulators as questionable, the industry overall is exploding.
The number of drug addiction programs in Southern California have grown rapidly in recent years. With them come crime, homelessness and changing neighborhoods. Here is what you need to know about drug rehabs and sober living homes. (Video by Jeff Gritchen, Orange County Register/SCNG)
Last year, Americans spent about $35 billion on addiction treatment, a 44 percent increase from 2009, according to the Dept. of Health and Human Services. By 2020, spending is expected to grow another 20 percent, to $42 billion.
That flow of money is spawning secondary industries and jobs.
Real estate agents say sober living homes will pay inflated rental prices, and some in the industry now specialize in finding sober living tenants. Telemarketing companies – many legitimately – help match addicts with rehab centers.
There’s even a rehab-related trade that involves connecting addicts to centers, a job sometimes called “junkie hunting” or “body brokering.”
Some brokers troll Alcoholics Anonymous meetings, homeless camps and drug courts to find people they can send to rehab – for kickbacks from the centers. Often, when they have a prospect, brokers will call several rehab centers and seek competitive bids. Highest bidder gets the business.
Though the basic idea isn’t so different from other types of sales or marketing, critics – including some long-time rehab counselors – argue the desperation and pliability of the patients makes the practice akin to human trafficking. At best, they add, the practice makes little sense medically.
“They’re selling the client to whatever rehab will pay them the most, whether or not it’s clinically appropriate,” Laguna Hills psychologist and drug counselor Evan Fewsmith said.
Consider the case of Michelle Jenkins, a 21-year-old mother of two from Prescott, Ariz.
Early this year, while seeking help for alcohol addiction at an outpatient treatment center near her home, Jenkins met a man who said he could get her into a better place to sober up – an in-patient center near the ocean in San Clemente. He bought her a plane ticket and left it for her at the airport counter.
Jenkins went home, packed a bag and, the next day, Jan. 9, flew to Los Angeles, where she took a car to the first of two rehab centers she’d check into in San Clemente and Costa Mesa.
She stayed 10 weeks. Her father, John Jenkins, a professor at Embry-Riddle Aeronautical University, has a spreadsheet of her whirlwind tour through non-medical rehabs (she needed emergency hospital care twice because the centers were not equipped to handle Jenkins’ detox seizures), ambulances and a sober living home. The tab was $95,000, most of which was billed to the family’s Blue Cross/Blue Shield policy.
Some of that insurance money almost certainly wound up in the pocket of the man who lured Jenkins from Arizona to San Clemente, a concept that frustrates some within the industry who say they follow a different code of ethics.
“It’s unacceptable. … We have some gypsy interventionists who are getting thousands of dollars to send people to treatment centers,” said Pat Breshears, chairwoman of the Association of Intervention Specialists, a national group that wants to set ethical standards among advisers who help families and addicts.
“People are dying,” she added. “Poor regulation in the intervention industry allows this to happen.”
Jeff “the Junkie Hunter” Dougherty, works on this side of the business.
Dougherty picked up the “Junkie Hunter” moniker while working on a reality TV show that never got off the ground. He prefers to be called an “advocate” for the addicted.
He says recruiters shouldn’t be paid for specific clients. His payments, he says, are monthly retainers from rehab centers – not tied to any specific person or quota.
Court documents raise questions about that claim.
In May of last year, Sarah and Anthony Hernandez of Riverside were bingeing on methamphetamine and slot machines at Pechanga Casino, when they decided it was time to quit. They reached out to interventionists they knew from past efforts to detox, and those interventionists called Dougherty.
He told the couple to go to West Coast Rehab in San Juan Capistrano, which at the time marketed itself as a national leader in luxury drug and alcohol treatment.
In a deposition taken in a lawsuit brought by the Hernandezes against West Coast, the center’s CEO Dan Case testified that Dougherty collected $10,000 for “talking to us for two days” about the couple. Dougherty contends the money was for consulting services unrelated to the Hernandezes.
“They call themselves ‘interventionists,’” said the Hernandezes’ attorney, Mick Meagher.
“But they’re hucksters. It’s just obscene.”
It also might be perfectly legal.
State records show that Rueben “Benji” Grajeda, a one-time methamphetamine dealer with a half-dozen felony convictions in Orange and Los Angeles counties, took on a side job in 2014 – connecting addicts to rehab centers.
Technically, he impersonated them, state records allege. While using his own email and contact information, and the electronic portal to California’s Obamacare insurance marketplace, Grajeda falsely signed up at least 180 people for insurance that many then used at rehab centers, the state found.
For five patients treated at one center, Grajeda paid a total of $1,193 in upfront insurance costs. Those patients went on to generate claims of more than $4 million to Blue Shield, state records show.
Grajeda later demanded nearly $30,000 from the treatment center, based on the amount charged Blue Shield for patients’ care, according to the state.
Calling his actions “deceptive” and lacking “integrity, truthfulness and honesty in his interaction with the plans and the public,” the state barred Grajeda from selling insurance.
But they didn’t accuse him of a crime.
“There is no law against helping persons apply for insurance and then referring them to a treatment center in exchange for compensation from the treatment center,” said Grajeda’s attorney, Jeffrey Wilens.
“Despite the nasty rhetoric, Mr. Grajeda was not charged with any illegal conduct in connection with ‘deceptive’ or ‘dishonest’ actions,” Wilens added.
“What is the ‘deceptive conduct’ in helping people enroll in health plans? There is no indication the patients were not eligible or improperly obtained health plan benefits. I would think helping strung-out druggies get coverage is a good thing.”
Grajeda was working for a Brea company providing medical billing services to substance abuse treatment centers at the time of the investigation. He has moved on to a rehab in Anaheim, according to documents from the California Department of Managed Health Care and his LinkedIn profile.
Problems in the rehab business reach far beyond the unprofessional centers and the addicts they often fail to help. Everyone from insurance companies to neighborhood associations has taken rehab operators to court, claiming fraud.
And lawmakers on both sides of the political aisle are starting to pay attention.
“Allowing people’s lives to be used as economic tools has an effect on everybody in America,” said Rep. Darrell Issa, a Republican whose 49th district includes south Orange County, which has a disproportionate number of treatment centers and sober living homes.
Issa, among others, said collateral disruption from rehab centers is particularly tough on neighborhoods.
“They will keep (addicts) as long as the money is rolling in. And as soon as the money runs out, (they’re) out of there.”
That, Issa added, contributes to street crimes.
“Your bicycle is going to get stolen. Your car is going to get broken into.”
It also degrades other elements of health care.
“Every night our ER has six to 10 or 15 patients in crisis, either addiction or mental health,” said Dr. Michael Brant-Zawadzki, who leads the neuroscience department at Hoag Hospital in Newport Beach, the closest hospital in the county to the 102 rehab centers in Costa Mesa.
“What does that do for the people who have to come in for heart attacks or stroke from our own community?”
There are other victims: families of the addicts.
Addiction tears at families. But addiction that isn’t adequately managed – or addiction that’s used as a pawn in a money-making scheme – deepens the loss. Parents take out second and third mortgages. Bankruptcies are common.
And fear becomes as all-consuming as any drug.
“Parents will do anything” to help their addicted children, said Timmy Solomon’s mother, Patty Solomon, a special education teacher in Boston.

Timmy Solomon, now 28, as a little boy in Boston.(Photo by Mindy Schauer, Orange County Register/SCNG)

A curly-haired smiling boy growing up in Boston, Timmy Solomon is now 28 and struggling with addiction. He started using drugs when he was 13. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy, sixth from left, is from a family of eight boys, most of whom still live in Boston where they grew up. (Photo by Mindy Schauer, Orange County Register/SCNG)

Timmy Solomon, right, and his younger brother Christopher. (Photo Courtesy of Patty Solomon)

Timmy Solomon in a school play. (Photo Courtesy of Patty Solomon)

Timmy Solomon, left, with brother Christopher. (Photo Courtesy of Patty Solomon)

Timmy Solomon as a baby, held by older brother Scott and surrounded by other brothers. His mom Patty says he was "a perfect baby with a wonderful temperament." (Photo Courtesy of Patty Solomon)

Patty Solomon, Timmy's mom, says Timmy was "a perfect baby with a wonderful temperament." Her life has been a roller coaster ride with her son's addiction, she says. (Photo Courtesy of Patty Solomon)

Her son was recruited to Southern California to get clean four years ago. But his addiction has grown more horrific over time. She still hopes he’ll become healthy and sober, but that hope isn’t easy to maintain.
“Your vision is still of this little blond-haired kid who ran around the house,” she said. “You are out of your mind with worry. And I don’t know where it ends.
“Well, I do,” she added.
“It ends with death.”
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Part 2: Many recovery centers fail to deliver
The fight of Dillon DeRita’s life was etched into his flesh.
On his left forearm was a tattoo of the Serenity Prayer, with its plea for redemptive power:
“… to accept the things I cannot change; Courage to change the things I can; and wisdom to know the difference.”
On his right were needle tracks from years of injecting heroin.
Last year, that struggle brought DeRita 2,600 miles from his home in Florida to Pacific Coast Detox in Costa Mesa. The center was one of the 1,117 licensed drug and alcohol treatment facilities in Los Angeles, Orange, Riverside and San Bernardino counties, an area known in the industry as the Rehab Riviera.
DeRita put his faith – backed by an insurance policy that would have paid tens of thousands of dollars for his sobriety – in an industry that regulators, elected officials and some recovery experts say too often fails addicts in its care.
On June 26, just two days into his detox regime at Pacific Coast, DeRita spent the night in a chair on a patio. The next day he was found dead from a heart attack – at 21.
In California, one customer dies every 16 days in a licensed rehab center.
DeRita’s father, Rich, watched his son struggle with drugs for years and knew he’d gone to California for another shot at sobriety. But he still was shocked when a woman from Pacific Coast called to tell him about Dillon’s death. “I was freaking out.”
The woman from the rehab center told Rich DeRita something else during that call – that Pacific Coast staff had checked on Dillon while he was on the patio and found him to be OK.
Later, a security video and other documents surfaced that contradicted her claim.
In their records, emergency responders in Costa Mesa wrote that when they arrived at Pacific Coast and got to Dillon DeRita, at exactly 12:07 p.m., he was unresponsive. Craig Harvey, former chief of investigations for the Los Angeles County Coroner, reviewed the incident report later and said that data on that report indicates DeRita had been dead for at least 35 minutes and possibly as long as two hours when the EMT squad showed up.
But records written by Pacific Coast made note of the same time, 12:07 p.m., and claimed something else – that rehab workers checked on DeRita and found him very much alive.
“Client observed on the patio … snoring,” the Pacific Coast log states.
A video also showed rehab workers checked on DeRita earlier in the morning, found him unresponsive and walked away. The video doesn’t show them calling for medical help or performing CPR.
Officials with the California Department of Health Care Services later focused on the discrepancies, and other problems, when investigating Pacific Coast. In a settlement with state regulators, the center agreed to surrender its license. Pacific Coast declined to discuss the death, but said the company cooperated with the state.
Rich DeRita, who is suing Pacific Coast, said simply: “They didn’t take care of my son the way they were supposed to.”
It’s not an unusual lament.
From 2013 through 2016, the annual number of complaints filed against rehab centers nearly doubled, according to state regulators. During the same period, insurance companies investigated and, in some cases, sued specific centers and chains, alleging widespread billing fraud and poor care. At least three rehab centers surrendered their licenses after state regulators investigated in-patient deaths.
This month, a Los Angeles Superior Court judge ruled that one of the biggest rehab operators in Southern California, Christopher Bathum, must stand trial on charges of insurance fraud. Charges of sexual assault against clients still are pending. Bathum, a convicted felon, ran at least 15 centers in Los Angeles and Orange counties.
Rehab operators point out that drug- and alcohol-addicted patients aren’t a healthy or easy population to deal with. Many suffer chronic health conditions beyond their addictions. Some have mental health issues. Some are suicidal.
But the death rate inside centers, one dying every 16 days, doesn’t include hundreds of others who died after leaving rehab centers with their addictions still raging. And many critics, including some long-time rehab operators and drug counselors, say that reflects the poor care – sometimes nonexistent care – offered in many rehab centers. They add that substandard care, which can be more profitable than thorough treatment, is part of the business model for some centers.
SCNG-L-REAHB-DEATHS-0521Part of the problem inside rehab centers, critics add, is lack of oversight.
“There are many providers who are (cheating) the system because there’s no regulatory system in place,” said Deb Herzog, a former federal prosecutor and ex-investigator for insurance company Anthem.
“Anybody and their brother can open up one.”
There are few bars to getting a license to run a rehab center in California, regardless of academic or criminal background. Physicians who have had their medical licenses revoked by the state serve as chairmen or chief executives of some centers. And with some state prison systems offering classes in rehab center management, it’s not unusual for ex-cons to serve as hands-on operators.
Providing legitimate treatment services is expensive, and profit margins are low even with insurance paying the bills. As a result, long-time rehab owners describe their industry as a modern, medical version of the “Wild West,” saying it’s tough to stay in business while providing good medical care when a growing percentage of your competitors are profiteers.
What nobody can say for sure is what percentage of rehab operators are as interested in treatment as they are in profit.
“I’m not going to sit here and tell you the industry does not have bad players. It does,” said Stampp Corbin, president of the Addiction Treatment Advocacy Coalition, a Westlake Village-based organization that represents owners of rehab centers and drug-testing labs.
Still, Corbin added, the “bad players” don’t outweigh the good work provided by legitimate operators.
Centers are required to hire some credentialed counselors and, often, some medical personnel. But it’s also not uncommon for counselors in training to spend time working with people in life-or-death crises. By law, apprentice counselors can work with patients for up to five years, as long as they’re working toward their state certification.
Over the years, California’s loose regulations and lack of background screenings have allowed sex offenders and unethical staff members to work with addicts at their most vulnerable moments, according to a 2013 investigation by the state Senate.
“Many counselors draw from their own struggles with alcoholism and drug addiction to excel at a difficult job for not much pay,” state investigators wrote.
“But some come to the profession with serious criminal backgrounds that raise questions about their fitness to treat clients, who are often at one of the most vulnerable points in their lives.”
Health regulators say since 2013 the state has implemented a quality review system to weed out poor applicants, monitor routine licensing and improve investigations of rehab centers.
Some rehab owners say the state’s regulations – patient limits, requirements for security and food services, insurance and legal fees – actually encourage fraud by making it tough for legitimate operators to make a profit.
“The California model for addiction treatment is broken,” said Corbin, of the Addiction Treatment Advocacy Coalition. “At current rates you cannot run a facility appropriately or profitably.”
Other rehab operators agree.
“I would love to see a much more professionalized industry, but it’s going to take all of us to make that happen,” said Michael Cartwright, CEO of American Addiction Centers, a publicly traded treatment chain that operates centers in several states, including A Better Tomorrow, in Murrieta, where four patients died between 2008 and 2010.
“California has the most problems when it comes to licensing.”
In October, Cartwright’s company agreed to maintain compliance, internal audit and quality review programs for its California centers for three years as part of a settlement in one of the deaths at its Murrieta center.
Still, in many other ways, the industry doesn’t seem over-regulated.
SCNG-L-REHAB-MAP-0521The California Department of Health Care Services has just 16 investigators, all headquartered in Sacramento, looking into nearly 2,000 licensed rehab centers.
What’s more, the state lets rehab centers keep information away from consumers in ways it doesn’t allow for other licensed industries.
Paper records about rehab centers, and consumer complaints against them, are available to the public in Sacramento, or by filing a public records request and waiting weeks for electronic copies. Unlike information about restaurants or auto repair shops, the state doesn’t put consumer information about rehab centers or their operators online.
For many patients, the closest they get to consumer information about the entity from which they hope to attain life-changing sobriety comes from Yelp.
Such information might have been helpful to Sarah Hernandez and her husband, Anthony, in May 2016, when the Riverside couple checked in to West Coast Rehab in San Juan Capistrano.
Hernandez said she didn’t know that the center’s chief executive, Dan Case, learned the addiction counseling profession in 2014, while serving a two-year prison sentence in Arizona for using a stolen credit card and passing forged drug prescriptions, according to court records.
Sarah and Anthony Hernandez from Riverside said they entered West Coast Rehab in San Juan Capistrano in May 2016 and paid $65,000, though they stayed only 36 hours. They said this video, given to the Southern California News Group by their attorney Mick Meagher, shows West Coast Rehab CEO Dan Case providing them drugs. Case's attorney was contacted and provided the video but neither he nor Case commented on it.
The Hernandezes are suing Case and West Coast Rehab, claiming fraud and negligence. As part of that lawsuit, Case testified in a deposition that the Hernandezes were too intoxicated to fill out an admittance sheet or sign a contract when they arrived at his facility.
He did accept a $65,000 personal check from Sarah Hernandez, who says the money came from an inheritance from her late mother.
Though the couple left the center after 36 hours, Hernandez claims Case tried to persuade her to invest in his business. The complaint also alleges the couple were given drugs that Case, in his deposition, said were prescribed by a doctor. The Hernandezes’ Escondido attorney, Mick Meagher, claimed during Case’s deposition that the doctor denied writing such a prescription.
Case could not be reached for comment and his attorney declined to be interviewed. In court papers, Case and other defendants denied “the myriad of allegations set forth in the complaint.” West Coast Rehab has since closed down, according to state regulators.
Sarah Hernandez said she is living sober now, but she doesn’t credit that to her rehab stay in San Juan Capistrano.
“I thought I was going to die there.”
While it’s hard to find detailed information from state regulators, it can be tough to avoid rehab centers’ rosy marketing pitches.
“This place did for me what I couldn’t do for myself. From the minute I walked in the door they took care of me,” says a man’s voice in an advertisement for American Addiction Centers, one of the nation’s largest for-profit treatment chains.
The words “Stay Clean & Sober – or return for 30 days treatment FREE” float on a backdrop of soothing water trickling into a placid creek.
“This place saved my life,” a 20-something man in a beanie says.
The ad – and others from myriad treatment providers – provides an 800 number to call and offers free insurance verification.
But rehab centers offer little objective, independent data on how well their programs work over the long haul. While that might be intentional deception by some unethical operators, it’s also an industry norm. There is little hard data on recovery, and there are no industry-accepted standards for elastic terms such as “sobriety” or “relapse” or “success.”
In a 2016 report on drug and alcohol rehabilitation, then-U.S. Surgeon General Vivek Murthy’s office noted the difficulty in quantifying addiction-related deaths. Instead, the report described addiction as a disease that should be “managed on a day-to-day basis,” as a lifelong illness, and that commercial promises of cures are “often empty.”
The report did emphasize that long-term sobriety requires dedication to follow-up treatment outside a rehab center and, above all, patience.
“By some estimates, it can take as long as 8 or 9 years after a person first seeks formal help to achieve sustained recovery.”
That hard message isn’t common in rehab advertising.
Robert Harris, a policy adviser for the California Society of Addictive Medicine, a physicians group that is seeking to increase the quality and availability of addiction treatment, said idyllic claims about rehab are part of the business model for many centers, luring people from around the country to California treatment programs.
“TV advertisements are a big problem,” Harris said.
“Besides the stuff that’s out-and-out fraud, there’s a lot of semi-fraud.”
While the state tracks licensed rehab centers, there is little oversight or regulation related to sober living homes. Experts say there are thousands of sober living homes in California, but nobody knows the exact number.
What these homes ostensibly provide sounds great – fellowship and support for people struggling to stay clean; housing for people who might otherwise be homeless; structure.
The living arrangement, in fact, is considered a family by law. And cities and counties can’t ban sober living houses because the residents – like patients in licensed rehab centers – are legally protected under the Americans With Disabilities Act.
But critics suggest sober living homes also are where some of the most egregious abuses of the rehab system take place.
Timmy Solomon repeatedly lapsed in sober living homes.
In 2013, Solomon, now 28, came from his hometown, Boston, to Dana Point, to get sober. Since then, the long-time addict has lived in rehab centers, sober living homes and on the streets.
Earlier this year, to get a glimpse of what happens inside rehab, the Southern California News Group followed Solomon for about 90 days. During that time he spent separate stints in a string of detox hospitals, residential rehabilitation centers and sober living homes in Los Angeles and Orange counties.
Timmy Solomon knows hes a disaster. He knows you probably wont like him or see him as the man he says he is. Hes an addict, yes. Hes also a beloved son, brother and friend. He has an endearing personality, a sense of humor, and describes himself as having a big heart. When the Register first met Timmy, he made clear he wasnt happy with himself either. I never pictured this as my life. Ever, dude. I never thought Id be 28 years old and sticking my hand in a f---ing trash barrel. It f---ing kills me. It makes me want to f---ing die. Im that f---ing miserable. Timmy let the Southern California News Group follow him for months, documenting his dark days as a chronic user and his optimistic days trying to get clean - hoping his story might make a difference at a time when heroin and opioid addiction are epidemic. I hope I can help people so they dont go through this hell, he said. (Video by Jeff Gritchen and Mindy Schauer, Orange County Register/SCNG)
The pattern for Solomon was consistent and depressingly familiar – shooting up narcotics, entering rehab, relapsing and eviction.
Solomon’s journey revealed a key point – sober living homes can be places where recovery falls apart.
One of Solomon’s relapses came after Solomon claimed he’d been drug-free, in a sober living home, for more than a month. A friend at a San Juan Capistrano recovery center gave him a bag of methamphetamine, he said, and he used it.
During another meeting with reporters, at a Whittier-area sober living home, Solomon showed up saying he’d just knocked back three beers to ease the side-effects of detoxing cold turkey.
On St. Patrick’s Day, Solomon entered Mission Hospital in Laguna Beach for detox. He spent 10 days there before leaving for a sober living home in San Clemente.
In late April, on what was supposed to be his 40th day clean, Solomon escorted reporters into a bathroom in the San Clemente home, where he shut the door, locked it and turned on the shower. As the room steamed up, he dumped a baggie of new needles on the counter, along with a bottle of 75 oxycodone pills he said a doctor had just prescribed him. “He’s trying to help me get off heroin,” Solomon said of the physician. “I haven’t slept in two nights.”
Solomon then crushed up six pills, mixed them with methamphetamine and water, and injected it all into his vein.
Sober living managers don’t need to be credentialed in any way. In some homes, they’re recovering addicts or former drug dealers. Critics say some rehab centers use sober living homes as way stations of sorts, places to store patients who can be given or encouraged to use drugs again so they can become candidates to return to lucrative in-patient rehab.
“The thing that’s causing the most problems is the sober living home environment,” said Harris, the policy adviser at the California Society of Addictive Medicine.
Congressman Darrell Issa, a Republican who represents south Orange County, said he’s pushing to undo what he views as overly bureaucratic protections for sober living homes.
“If you’re interested in getting (addicts) back into productive lives, (the current protections) don’t make sense.”
Another politician, California Assemblywoman Melissa A. Melendez, a Republican from Lake Elsinore, is sponsoring a bill (AB 285) that would require the state to regulate and monitor sober living homes for the first time.
She became interested in the rehab industry after a string of four deaths between 2008 and 2010 at a rehab center in Murrieta and other rehab deaths in Lake Arrowhead. She’s targeting sober living homes because they can provide a fallback for unscrupulous rehab center operators.
“What happens to these facilities when they shut down?” Melendez asked.
“Do (the operators) up and move into another California community with another name and another cast of characters doing the same thing?”
Melendez didn’t differentiate between licensed centers and sober living homes when she first learned about the industry.
Prosecutors sometimes don’t either.
Experts say the case against Los Angeles-based rehab operator Bathum offers a glimpse into how the industry can break down.
Bathum, whose empire included the Seasons rehab center in Malibu and who described himself as “The Rehab Mogul,” is accused of sexually assaulting nine female patients, sometimes providing them with drugs as they struggled to overcome their addictions. He denies those allegations.
Bathum also is accused of fraudulent billing to the tune of $176 million, prosecutors said. The alleged billing includes charges for services that prosecutors say were never provided.
Bathum has denied all of the fraud allegations as well, and his attorney declined to comment.
Still, regulators say the criminal case is also a case study.
The allegations against Bathum “illustrate the medical provider fraud that can and does occur,” California Insurance Commissioner Dave Jones said. “It’s egregious.”
For addicts like Dillon DeRita, the Florida man who died last year in Costa Mesa, getting inside a rehab center in California proved to be an ending, not a new start.
DeRita’s father said family members last year began seeking new treatment options for his drug-addicted son, who had relapsed several times. And even though they lived in a region that was ripe with rehab centers, South Florida, they believed California offered better facilities and more.
“It seemed a little more laid back,” Rich DeRita said.
After arriving in Southern California, Dillon DeRita tried one rehab center, in Orange, before moving to Pacific Coast Detox.
DeRita’s final hours at Pacific Coast were described in the state complaint against the treatment center and in internal company records obtained by the Southern California News Group.
The records include an email written by Lucy Weiss, former vice president of compliance for Sprout Health, the New Jersey-based parent firm of Pacific Coast. Weiss, who wrote the note to other managers, confirmed that the memo is authentic but did not provide it to a reporter.
The company’s records say Pacific Coast employees performed welfare checks on DeRita at least every 30 minutes on the day DeRita died, observing him at various times asleep in his room and on a patio.
But Weiss, in her memo, wrote that a 12-hour security video showed DeRita never moved from the patio chair and that staff didn’t check on him.
“Throughout the video there are a few clients from time to time that come out to smoke but still no staff present. Per the video the client had never left the chair.”
“Some staff said they did checks and then later admitted to not to doing them,” Weiss added. “I am guessing they knew that this would be seen on the video.”
Company records describe DeRita sitting in a chair, smoking, during a final midday welfare check. But the state’s complaint against Pacific Coast says that record was hastily written after DeRita had been found unresponsive and emergency medical rescuers had been called.
The state says Pacific Coast’s log was fiction.
“Literally, as paramedics were en route to Pacific Coast Detox, two staff members made false entries,” the state complaint says.
Rich DeRita remembers a final phone call from Dillon two days earlier. Dillon told his father he was happy to be entering Pacific Coast and that he loved him.
He also recalls the hope his son brought with him to California.
“He didn’t want to be who he was,” he said. “He wanted to get through it.”
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Part 3: Recovery homes can make tough neighbors
A hulking man stormed from the house next door, screaming, “I’m going to kill you! I’m going to (expletive) kill you!”
He raged at a woman inside a waiting car while neighbors watched from their windows and alerted police. Eventually, he climbed into the car and they drove away, but it was another blow to the serenity of Geoff Szabo’s once-quiet Murrieta neighborhood, which fractured after the drug treatment program moved in.
Similar encounters across Southern California are fueling a quietly-raging, grassroots war between homeowners and what they say is a disruptive — if not destructive — intrusion of addiction recovery centers that fundamentally change their neighborhoods.
Murrieta is one of many cities across the region with a high concentration of addiction rehab centers, according to state data. Malibu has the densest per capita concentration of licensed facilities in California with 47, or one for every 274 residents. That’s more than far larger cities of San Francisco (46), San Jose (32), Riverside (25) and Long Beach (22), according to a Southern California News Group analysis of state licensing data.
Costa Mesa is No. 2 with 102 licensed treatment centers, up from 39 in 2010. That’s one for every 1,100 residents, a per capita rate 14 times higher than Los Angeles and 25 times higher than San Diego. Murrieta has 12, more than twice the statewide average.
Those tallies don’t include an even bigger group of sober living homes that are not licensed or tracked by state regulators, but have the same right as any family under federal law to settle next door or down the street.
Southern California’s “Rehab Riviera” is marketed nationwide. Treatment programs advertise ocean views and luxurious accommodations, private chefs and gourmet cuisine, yoga classes and swimming pools, Jacuzzis and massage therapists, even equestrian therapy and acupuncture. Glitterati such as Britney Spears, Ben Affleck, Diana Ross, Robert Downey Jr. and Charlie Sheen have sought treatment along the gold coast, lending an air of glamour.
But for those living close to recovery centers, the toll can be personal.
“It was horrible,” said Szabo. “Absolutely horrible.”
It can include more crowded parking from rehab-related cars, gaggles of young people gabbing in yards, and smoke wafting over fences from the one drug recovering addicts may still use freely: nicotine.
And there are the disruptions that come when sober living neighbors relapse; people urinating or vomiting on lawns; emergency rooms clogged with overdoses; the wails of sirens from police or ambulances; the occasional body on a gurney.
The Southern California News Group examined the addiction industry and found that it is peppered with financial abuse that bleeds untold millions from public and private pockets. Body brokers steer addicts to treatment centers based on kickbacks; some treatment centers overuse high-priced urine tests to jack up bills; and addicts are imported from other states and enrolled in “Preferred Provider Organization” health plans through the state’s Covered California insurance marketplace, so treatment centers can collect payments that exceed what otherwise would be paid by Medi-Cal, the government-funded health insurance for the poor.
The state has been plagued by weak and ineffective oversight of the industry.
Cities that try to regulate recovery-related centers wind up spending millions defending themselves in court. And everyone pays in the form of higher health insurance premiums, higher taxes for government-funded medical programs, lost productivity and lives lost, officials said.
Orange County’s blessings have been its curses, say officials who’ve spent years battling what they see as an out-of-control addiction treatment industry.
“We’re close to the beach, but at a price point that’s attractive,” Costa Mesa Mayor Katrina Foley said. “We’re heavy on rental properties, and a lot of distressed properties were bought up during the recession. Property owners have found that they can get three times as much money by renting to a recovery home operator than by renting to just a regular family. So they’ve just exploded.”
Many patients are young and from out-of-state. They don’t have any income or support network in the community.
“They’re coming here to be treated, and for whatever reason it’s not working out, and they’re kicked to the curb. You see them at Starbucks with their suitcases. They have no place to go and they end up on the streets, in a worse situation than they began in,” Foley said.
Costa Mesa’s homeless population has jumped 46 percent since 2011, according to the most recent count by Vanguard University. “Curbing” may have something to do with it.
Early last year, Health Net, one of the state’s largest insurers, asked rehab centers to prove that patients — not the centers themselves — were paying for insurance. It wanted to know if rehab centers were offering compensation to patients “to induce procurement services from your facility.” Health Net also demanded documents showing that medical services were necessary and where clients lived before and after treatment.
Some rehab centers responded by discharging many clients — the day they received Health Net’s letter.
In Costa Mesa, dozens of houses suddenly closed, said Ashton Abernathy, a former treatment center worker who runs a healthcare billing and consulting firm. She said she received more than 350 calls from addicts who’d been “curbed” in a single 24-hour period. “They were saying, ‘Hey, I have no place to go,’” Abernathy said. “Most of them had no clue as to why they were being kicked out. They were dumped in parks, they were dumped everywhere.”
Though Abernathy managed to get several dozen people with insurance into new programs, the process wasn’t quick or easy on the community, she said.
The state’s Department of Managed Health Care opened an inquiry into Health Net’s actions after a group of for-profit treatment programs formally complained that the company improperly withheld payments for services already provided. Individuals were harmed and the availability of treatment services was reduced, the complaint said. Health Net declined to comment on the inquiry, which is continuing.
Rick Francis, Costa Mesa’s assistant city manager, has seen vans pull up to local parks and disgorge rehab dropouts with their luggage.
“They congregate with other people in the same situation, pooling pennies, couch surfing,” he said. “Sometimes they have enough for a motel room, and you’ll have four, five, six people to a room.
“It’s sad to see these kids. These guys are so drug-addicted. Unless you meaningfully break that cycle, they can’t escape it.”
Similar laments can be heard all over Southern California, where neighborhood groups keep careful tallies of 911 calls to rehab-related facilities and post them on the Internet.
After Szabo’s next-door neighbors in Murrieta moved out a few years ago, he saw a white Ford in their driveway with a woman sitting inside. He went over to welcome her to the neighborhood, and she gave him her card. The property would be a licensed rehab, she told him. It would help people struggling with addiction get their lives back together, and they would work to be good neighbors. If there were any problems, she told him, just give her a call.
“I thought, ‘This might be OK,’” said Szabo.
It wasn’t. Life at the facility went on into the wee hours, making it hard to sleep. He asked the neighbors to quiet down, but the next night the same thing would happen again.
Shortly after the man stormed out of the rehab screaming about killing someone, Szabo received something unexpected in his mailbox — a cease-and-desist order from the rehab center. His complaints were described as “aggressive behavior” toward the facility. The notice instructed him not to set foot on the property, not to talk to anyone coming in or out of it and not to contact anyone by phone. Szabo said he was afraid to even call over the fence: “Could you please keep it down?”
Szabo and his neighbors appealed to the City Council for help with a touch of humor, recording a song to alert the world to their distress: “We Got a Prison in the Neighborhood.”
The city asserted there was little it could do. But Szabo said he was lucky. After the rehab’s lease was up, his former neighbors moved back into their house. All was forgiven, and life returned to normal.
“It’s a business. Clearly a business,” Szabo said. “They make thousands of dollars a day for people to be there. They should not be in residential areas. They should be in commercial areas.”
In Long Beach, last year, the city attorney took to task a sober living home on Lake Avenue that had more than 18 residents, three times more than its permit allowed. It was not operating as a single-family unit, as a true sober living facility must by law. And most of the residents were felons on “supervised release” under the state’s realignment program to reduce prison overcrowding, said Arturo D. Sanchez, deputy city attorney.
“It appeared the landowner was receiving payments directly from the Los Angeles County Probation Department for these felons who qualified for early release from prison,” Sanchez said. “The home was being run more like a ‘halfway house’ rather than a sober living facility. Halfway homes are considered group homes under the Long Beach Municipal Code, and require a conditional use permit to operate, as well as a business license.”
Eventually, the property owner decided to close. But the Lake Avenue home was not unique; the city has received complaints about several other sober living facilities run in a similar manner, Sanchez said. “The homes were basically trying to cram as many beds in so that they could collect the rent being paid by County Probation for placing the individuals there.”
In Malibu, locals complain that rehabs have bought up so many properties that once-quiet cul-de-sacs have become veritable drug treatment campuses.
Thursday nights are particularly busy on Broad Beach Road, where The Beach House facility – “The world’s most elegant and beautiful sober living environment located in exclusive and private Malibu,” according to its website – hosts AA meetings, neighbors said. Neighbors said people arrive by the vanload, and a dozen vehicles line the narrow road. What gives them the right to turn a residential neighborhood into a commercial zone, irritated neighbors have asked City Hall.
Charles Bentz, owner of the Beach House, felt bad that the neighbors didn’t feel comfortable enough to come to him directly with their concerns.
“We understand not everyone is thrilled that we’re here,” Bentz said. “It’s really important to understand addiction as a chronic and long-term illness and disease, and a long-term recovery program is really in everyone’s best interest. We want to be a part of the community, and give back to the community.”
The AA meetings, Bentz said, will be phased out this month at the Broad Beach Road facility.
Operators say most recovery centers try to be good neighbors, and that critics’ fears are unfounded and based in NIMBYism (not-in-my-backyard syndrome). But police records show that centers can place unusual demands on emergency services and introduce spasms of chaos into otherwise-quiet communities.
In San Juan Capistrano, a city of about 33,000 residents, more than 60 emergency calls involving recovery centers were made to the Orange County Sheriff’s Department over the past year, according to department records. Officials will not assemble logs of recovery-related calls for fear of legal liability, so Advocates for Responsible Treatment – a group of concerned residents in San Juan Capistrano – collects and publishes the information itself.
The logs show deputies summoned to recovery facilities for dozens of disturbances, three suspected overdoses on heroin and meth and six attempted suicides over the past year. Some examples:
The Sheriff’s logs suggest that conflicts between patients and staff are frequent; that patients often bolt from recovery centers with nowhere to go; and that drug use during recovery is not uncommon. In January, a meth overdose was reported at a sober living facility; in February, three people high on heroin or other opiates bolted from a recovery facility and drove away; and in March, an 18-year-old man ran into traffic on Rancho Viejo Road, trying to kill himself.
“The impacts on the neighborhood are bad enough,” said Warren Hanselman of Advocates for Responsible Treatment. “What’s happening to the patients who are paying all that money is tragic.”
Recovery homes have proliferated in scenic Lake Arrowhead – “the Alps of Southern California” – over the past several years as well. Tensions rose as neighbors congregated in front of treatment homes waving signs saying, “Addicts Also Deserve Rehab Done Right.”
Drug overdoses led to 2,356 emergency room visits in San Bernardino County in 2015, up from 1,922 in 2006, according to statistics from the California Department of Public Health.
“Things out there are getting worse, and I don’t see any break on the horizon until we develop more robust treatment,” said Tom Lynch, administrator of the Inland Counties Emergency Medical Agency, which serves San Bernardino, Inyo and Mono counties.
“Since they started prescribing 30 days of Oxycontin for a tooth extraction, you see it everywhere – in parks, alleys and homes, from inner city to suburb to rural. Those of us in emergency services have had to adjust to the new normal.”
In response to complaints that recovery homes were upending neighborhoods, San Bernardino County adopted new rules in 2014. Each block could have no more than two sober living homes, each with six or fewer residents.
“It didn’t change much,” said Scott Vanhorne, communications director for San Bernardino County Supervisor Janice Rutherford, who introduced the ordinance. “These facilities have federal protection because they’re serving a disabled community. Our hands are almost tied.”
That’s what Palm Springs also discovered after residents complained about recovery centers setting up shop in kitschy hotels – including the beloved former Tiki Spa. The city grappled for a solution, only to discover it had little room to move.
“State law requires that residential care facilities that serve six or fewer residents be considered a residential use of property,” a Palm Springs staff report said. “These facilities must be treated the same as a single-family home, and the residents (clients) and operators are considered a family for zoning purposes.”
Such homes can’t be subject to any business tax, local registration fee, use permit fee or any other fee or regulation that isn’t also imposed on regular single-family homes, it said.
In 2014, Palm Springs classified some recovery centers as assisted-living facilities. It was accused of discrimination against the disabled, and will defend itself in federal court this week.
Palm Springs is not alone. Cities that try to regulate such enterprises regularly find themselves hit with lawsuits, both state and federal, spending millions of taxpayer dollars on the fight.
Newport Beach was the pioneer. In 2008, the city council approved an ordinance to regulate group homes for recovering addicts. The ordinance, still in place, requires city approval for new homes for recovering addicts in certain neighborhoods, and establishes quiet hours, parking and smoking areas and van routes.
Three operators sued Newport Beach, saying it violated anti-discrimination and fair housing laws. A truce was reached in 2015, when Newport Beach settled with Pacific Shores Properties, Newport Coast Recovery and Yellowstone Women’s First Step House. The city paid the operators a total of $5.25 million, on top of the $4 million it had already spent on litigation.
Others have followed in Newport’s expensive footsteps – most notably, Costa Mesa, whose rules about 650-feet-between-facilities and mandatory tickets home for exiting patients have raised ire. Dana Point, Palm Springs and San Clemente are ensnared in legal battles. The city of Los Angeles considered a plan to regulate group homes that would strike a balance between the needs of the disabled and the quality of life in single family neighborhoods, but it was staunchly opposed by sober living advocates and never implemented.
Malibu took a novel tack. It sued the California Department of Health Care Services and its director in 2015, seeking the revocation of eight separate licenses issued to Passages Malibu facilities.
That suit didn’t get far – a judge declined to tell the state licensing agency how to do its job.
Litigation is rampant.
Rehabs sue each other for misappropriation of trade secrets. Rehabs sue former employees for breach of contract, negligence and fraud. Former employees sue rehabs for fraud, sexual harassment and wrongful termination.
Parents who lost children in rehabs sue for wrongful death. Patients sue rehabs for injuries suffered during the course of treatment. Rehabs sue patients for non-payment of bills.
Rehabs also sue critical neighbors, charging them with libel, trespassing and harassment. Many residents contacted for this story refused to speak on the record for fear of being hit with a lawsuit – fears which are not unfounded.
Sovereign Health was preparing to open a residential treatment center in San Clemente last August when, according to Sovereign, neighbors Nathan Brown, Jodi Brown and Chris Penna barged onto the property, yelled at employees, took photos and videos and refused to leave. Neighbors Sean and Eva O’Keefe – critics who were not at the showdown – were responsible as well, according to a harassment suit filed against them by Sovereign.
The neighbors said that’s nonsense. They did not trespass, and several of those targeted were actually at work when the incident occurred, according to court documents.
Near Lake Arrowhead, activist Wendy McEntyre has been sued for libel and loss of economic advantage by Above It All treatment centers. Ann Parker, an activist in Costa Mesa, was named alongside the city of Costa Mesa when three treatment centers filed suit over tightened regulations.
The intent of such suits is not to win, the attorney for the Browns and McEntyre argues, but only to intimidate and harass critics into silence by tying up their resources in costly and time-consuming litigation.
“Everything arises from my clients’ long history of protest,” said Mick Meagher. “People are being sued for exercising their First Amendment rights. It’s a business tactic.”
Kyle Avarell, who runs Above It All, strongly disagrees. McEntyre’s opinion is protected, he said, but she has gone much farther, publicly accusing him of being a murderer and other “outlandish stuff,” he said.
Such suits can require neighbors to spend thousands of dollars on legal fees fighting for dismissals, arguing these are “strategic lawsuits against public participation.”
A judge concluded that the suits against the O’Keefes was improper, as were two of the three actions against the Browns. They’re trying to recover attorney’s fees from Sovereign; the bill is more than $20,000 in the Browns’ case alone.
McEntyre, of Sky Forest, lost her son Jarrod to a heroin overdose he took while living in a sober living home in the San Fernando Valley in 2004. There were 24 men living in the three-bedroom, two-bath house at the time, and one brought in speedballs to share. Jarrod was 23.
McEntyre has been pushing for reform ever since. “I became an instant advocate,” McEntyre said. “Keeping silent would have killed me.”
She believes sober living homes should be licensed and regulated by cities; managers should be required to be trained in first aid; facilities should have Narcan – a widely used drug that reverses the effects of a heroin overdose – and defibrillators on site; and they should be searched regularly with drug-sniffing dogs.
“These people (who run recovery homes) hold themselves out as a lot more than ‘landlord,’” she said. “They need to do their due diligence. If they claim to have a drug-free environment they really have to provide that.”
Public Safety Advocate Wendy McEntyre founded the nonprofit Jarrod's Law after her son, Jarrod Autterson, died at age 23 of an overdose in a sober living home. She holds his high school graduation photo. "The bottom line is nothing is going to stop me from taking down these rogue rehabs that are killing people...I've lost everything so there is really nothing anyone can take from me that will hurt me," she said.
A half-dozen bills are pending in Sacramento that would attack rehab-related issues from various, and sometimes contradictory, angles.
Criminal background checks are required for acupuncturists, dental hygienists, optometrists and veterinarians, notes Assemblyman Reggie Jones-Sawyer, D-Los Angeles – but substance abuse counselors can work with vulnerable addicts for five years without one. “The ability to easily evade regulators represents a gaping loophole in California’s system,” says an Assembly analysis of Jones-Sawyer’s bill, which would require such checks.
Another bill, by Sen. Steven Bradford, D-Gardena, would forbid patient brokering, kickbacks and scam call centers. Rehabs would be forbidden from paying “body brokers” for bringing in clients, and the state could fine rehabs or revoke their licenses if brokering continues.
Sen. Pat Bates, R-Laguna Niguel, seeks a study examining whether group homes should be licensed if they provide counseling, manage a resident’s schedule or do urine tests to ensure a drug-free environment; and Sen. Tony Mendoza, D-Artesia, seeks to address over-concentration by requiring at least 300 feet between new rehab-related facilities – a distance critics say should be at least twice that.
And as Orange County has the densest concentration of recovery-related facilities in California, Assemblywoman Sharon Quirk-Silva is pushing a bill that would place a complaint investigator directly in Orange County. Now, the state’s 16 investigators are in Sacramento, and it takes between 90 days to three years to resolve a complaint, according to an analysis of her bill.
“The idea is to get someone out there who understands community and is local so the people filing complaints can get some type of reprieve in more timely manner,” she said. “We’re not looking to shut down sober living homes. But if there are complaints, we want to get them resolved so those who need care get care, and those who live in close proximity have confidence.”
Earlier efforts to regulate the industry have been mixed. Of more than two dozen bills on sober living 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.
Some lawmakers and health experts worry that tighter regulations would choke off desperately needed rehab beds as millions of Americans are addicted to opioids. But pressure from residents and embattled cities may force lawmakers to forge a middle ground.
Last year, 20 Congress members asked the U.S. Government Accountability Office to probe state and federal oversight of sober living homes. And a bill by Rep. Darrell Issa, R-Vista, would amend the Fair Housing Act to allow local and state governments to limit the number of rehab-related facilities in residential zones, “provided that the limitation is necessary to preserve the residential character of the area, allows for a reasonable number of such facilities … and does not place an overall cap on their number.” It would also require facilities get operating licenses or use permits, or satisfy a set of consumer protection standards.
“Allowing people’s lives to be used as economic tools has an effect on everybody in America,” Issa said.
Timmy Solomon, a long-time addict from Boston, called his mother on St. Patrick’s Day – her birthday – to say he was checking into Mission Hospital in Laguna Beach. It was the best gift she could hope for, she said.
In late April, on what was supposed to be his 40th day clean, Solomon got a prescription for oxycodone. He crushed up six pills, mixed them with methamphetamines and water, and injected them into his vein in the bathroom of his San Clemente sober living home.
The house manager kicked him out. He stuffed his backpack and headed to a Starbucks in downtown San Clemente. There, he gazed at cell phone photos of his 18-month-old daughter, kissing the screen, saying something about a restraining order that prevents him from seeing her and that’s why he gets high.
An addict friend met Solomon at the coffee shop. They agreed to split a motel room that night and look for new sober living homes the next day. Solomon left to use the restroom and was gone for 15 minutes. He emerged, sweating and staggering, and threw himself onto the floor. He ran out the door screaming for water, startling tourists and diners.
“I’m comin’ to get you,” he growled.
Within 10 minutes, three sheriff’s cars and a fire truck arrived. They found Solomon in an alley. He was loaded into the cruiser and taken to jail, crying.
Solomon was released later that night, and headed back to the hospital for another round of detox, his mother said. Then he was planning to check into a new recovery center in Mission Viejo.
Back to the top
More in this series
Read the latest on the Southern California rehab industry.
The Southern California rehab industry spans the nation, and more key findings from this investigation
Graphic: How rehabs use loopholes to grab money from the health insurance system
Is there a link between neighborhood rehab programs and petty crime in California?
Before you check into your rehab center, ask these questions
Where and how much deadly addictions have consumed America
Editor’s note on our ‘Rehab Riviera’ investigation
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