by Mike Vogel
Updated 2 months ago
Patient brokering. Kickbacks. Expensive urine tests. Insurance fraud. Shady operators in Florida’s substance abuse treatment industry turned recovering addicts into cash cows — producing overdoses, suicides and troubled neighborhoods.
On the corner in front of his brightly painted home in the Osceola Park neighborhood of Delray Beach, retiree and newly elected City Commissioner Jim Chard gestures toward a home across the street to the northeast, a “sober house” where recovering addicts live during part of the rehab process.
He points directly across the street to the north to another sober house. He points west. Two more sober houses. His immediate neighbor and the house just beyond to the south are sober houses. “If it were just one house, we would welcome them with open arms,” Chard says, but “it’s destroying neighborhoods.”
All together, eight sober houses and two addiction treatment clinics sit on or adjoin Chard’s block. He pulls out a real estate listing for a house two streets away. About 1,800 square feet, it’s listed for $399,999 and is advertised as capable of holding 13 beds. “Highest & best use as sober living/assisted living/wellness group home … Potential Gross Annual Income $135,000.”
As Delray and other communities around Florida have found out, there are big bucks to be made in the business of housing recovering and relapsed addicts.
The treatment industry and sober houses have a long, mostly good, pedigree in Delray Beach and Florida. Addicts in recovery — once, mostly just alcoholics — found that by living together, they could better encourage one another to stay sober. Research confirmed their view. Delray, with its thriving downtown and small-town charm, drew so many recovering addicts that the New York Times noticed in 2007. The paper called Delray an “oasis of sobriety” — a “funky outpost” that “experts consider the recovery capital of America” with more than 5,000 people in 12-step meetings weekly.
But the oasis got poisoned. In 2008, Congress passed and President George W. Bush signed the Mental Health Parity and Addiction Equity Act. In 2010, President Barack Obama’s Affordable Care Act became law. Both opened the floodgates of insurance money for addiction treatment, and the injection of money turned sober houses from informal, supportive communes into commercial enterprises.
Additionally, Obamacare’s provision allowing children to be carried on their parents’ health policies until age 26 meant that insurance companies had to begin paying for rehab for many young adult substance users. The law also specified that a relapse should be considered a new medical event, meaning that the insurance benefits began flowing anew each time an addict relapsed.
Meanwhile, the real estate recession had made houses by the thousands cheap for rent or purchase.
Then, Florida began shutting down its pill mills. The state had been the nation’s pill mill capital, home to 93 of the top 100 oxycodone- dispensing doctors. People flocked to Florida to storefront pain clinics. The response: Federal authorities, manufacturers, the Legislature, state Attorney General Pam Bondi — and her drug czar, former state Sen. Dave Aronberg — cracked down on rogue clinics and doctors and made pills harder to get and abuse.
It worked. But many of the addicted turned to heroin, often supplemented on the street with the more potent and lethal fentanyl and carfentanil.
New wave of addicts
Florida became a magnet attracting the new wave of addicts seeking treatment. A study by Minnesota-based health care company Optum found 75% of young adults treated in Florida for substance abuse came from out of state.
Addiction treatment often begins with expensive residential care as the addict detoxes and then progresses to outpatient counseling. Recovering addicts from out of state, or from another region of the state, need a place to stay while outpatients. What developed is known, even in Texas or California, as the “Florida model:” Once out of the rehab facility, recovering addicts become boarders at nearby sober houses and commute to therapy sessions.
A typical scenario: The parents of a young adult addict, living in another state, go online for solutions. As Delray Mayor Cary Glickstein puts it, they’re directed to Florida facilities that tout “success rates and palm trees and waterfront houses.” Parents call what seem to be addiction help lines that actually are marketers who are paid $1,000 to $5,000 per lead generated.
Deception is common. Even the Florida Alcohol and Drug Abuse Association, a statewide group representing providers and the industry, discovered once that a Google search of its name led to a phone number for a lead generator, says Executive Director Mark Fontaine.
Sending a young adult child with a drug problem to Florida appeals to parents because it removes the user from a destructive social circle, gives the parents a break and seems to make financial sense. An out-of-network provider in Florida will fight insurers for the money to pay for recovery.
“In theory, your kid is getting your best opportunity for success,” says John Lehman, president of the Florida Association of Recovery Residences, another term for a sober house.
The young adults — sometimes arriving via a free plane ticket from a marketer — land in a conflicted industry. Insurance covers their initial treatment at inpatient facilities. Once they complete the inpatient phase of rehab however, they need a place to live as they continue treatment — but insurance doesn’t cover those housing costs.
So centers funnel patients — and cash — to sober houses and sober houses funnel patients to centers. Patient brokering, as it’s known, is illegal but, according to a Palm Beach County grand jury’s December report, it’s the industry standard. Bad operators have been crowding out the good. “We started screaming all that to anyone who would listen in 2013,” Lehman says.
Brokers representing multiple sober houses can pull down $10,000 a week. Some sober houses are as advertised. But others are no more than flophouses “where crimes like rape, theft, human trafficking, prostitution and illegal drug use are commonplace,” the grand jury said.
While treatment centers need state licenses, the sober houses are unlicensed and largely unregulated — there’s no government oversight because sober houses provide no formal treatment.
No one knows how many sober houses there are in Florida, but most are likely in southeast Florida because treatment is concentrated treatment centers are in Palm Beach County. there — 38% of the state’s licensed treatment centers are in Palm Beach County.
In Delray alone, city officials count more than 700 sober residences. If each houses an average of six people, the city of 66,000 holds a “shadow” population of 4,200. Anecdotally, there are clusters of sober houses up the coast to St. Augustine and across the state in southwest Florida and counties in the Tampa Bay area.
Funding the industry, to a great degree, is revenue from urine tests. Some treatment clinics discovered that by turning a cost center — blood, saliva and urine tests to check if addicts are staying clean — into a profit center, they could soak insurers. Providers subject patients to constant urine tests — billing insurers at $150 to $200 a pop for an instant-results test that costs less than $10 and can be read by a layperson. The providers then send samples to labs for even more expensive “confirmatory” tests at $1,500 to $2,000 a pop.
The grand jury found one well-known clinic that billed $600,000, mainly in drug tests, for a single patient in seven months, which ended when the 24-year-old from Ohio died of an overdose of carfentanil.
Unscrupulous clinics found ways to compound that revenue stream: In many cases, they own or have an interest in the lab that evaluates the tests or they get kickbacks from the lab.
Sometimes clinic employees provide their own spit or urine so that insurers can continue to be billed after a patient has left. Chard says a prosecutor told him, “Your city runs on piss.”
After studying records and data, the Palm Beach Post concluded that at $1 billion annually, substance abuse was the county’s fourth-largest industry.
To keep the cash flowing, treatment centers pay sober houses $400 to $1,000 a week per addict, depending on the level of treatment for which an insurer can be billed.
When insurance is exhausted, patients are shown the door. Some become homeless. “Body snatchers” prowl recovery meetings and other places, looking for struggling or relapsed people — with insurance — to bring in and repeat the cycle.
The young adults recognize their monetary value and become complicit; they know that being back in treatment can mean free room and board, a phone, cigarettes, clothes, gift cards — and drugs.
“Even legitimate places have felt compelled to offer benefits. All their competitors do it. That’s the accepted way of doing business,” says Aronberg, now the State Attorney in Palm Beach.
Patient privacy law limits parental meddling and law enforcement investigation. “The cycle continues until someone dies,” Aronberg says. Despite the Affordable Care Act’s good intentions, he says, it incentivizes relapse, not recovery.
“It’s just unbelievably sad,” says Lehman. “They convince mom and dad they’re going to get excellent care down here and then the kid gets shipped home in a box because he overdoses.”
The Optum study found that young adults from out of state who got out-of-network benefits in Florida were readmitted at higher rates — 11% to 40% higher — than Florida residents getting in-network care. It also found that out-of- network care on average cost $36,645 per person, three times innetwork care.
Mayor Glickstein describes it as “a perfect business model. It’s not a recovery industry; it’s a relapse business.”
One of the most notorious operators was Kenneth Chatman, a sober house owner and convicted felon who used his wife’s name to shield his ownership of a treatment center. Federal authorities allege that from his centers in Lake Worth and Margate he worked with doctors, sober house owners and straw owners of sober houses from West Palm Beach to Delray to tony Parkland in north Broward and other cities. He billed more than 40 health plans.
Some patients told local police he provided them drugs, pushed them to take up prostitution, and oversaw phone calls to families. Chatman’s employees took drug tests for some patients and for people no longer getting treatment. Some patients were allegedly kept in locked houses; others got cigarettes, hair services, nail services, gift cards and drugs to stay.
According to court filings, American Clinical Solutions, a lab company based in Sun City Center, billed more than $14 million for testing urine and saliva samples collected by ACS salesman Stefan Gatt from one of Chatman’s centers. ACS received more than $3.8 million from insurers, court records say. Gatt provided standing orders for Chatman’s medical directors to sign, provided his own spit sometimes for absent or former patients and reaped salary increases from his employer and “hundreds of thousands of dollars” in commissions, according to court filings.
Gatt has pleaded guilty and awaits sentencing. (Efforts to obtain comment from American Clinical Solutions weren’t successful. The company, in a statement reported by south Florida media, said it had been unaware of illegal activity, took no part of payments to Chatman and cut him off when he demanded kickbacks.)
As sober houses proliferated, so have citizen complaints — about newly homeless addicts in public spaces, needles on streets and sirens as emergency personnel responded to overdoses and suicides.
In Delray in 2016, first responders went out on 1,400 overdose calls — about four a day. Nearly 95% were generated by out-of-state occupants of sober houses and treatment centers. Sixty-five ended in fatalities, about five a month.
It cost the city about $2,500 per 911 call and diverts responders away from serving regular Delray residents. Palm Beach County Fire Rescue in 2015 spent $55,725 to stock Narcan, an overdose antidote, jumping to $182,900 in 2016. “We are now subsidizing the care and treatment of this industry that is reaping millions of dollars in insurance proceeds,” says Glickstein.
“The people are not getting better,” he says. “There are people out there genuinely interested in helping people get over these terrible addictions. The problem is the number of bad actors long ago eclipsed the good guys.”
Chard, for his part, seems as concerned about the recovered addicts as he is with the impact on the city. When Chard purchased his home 15 years ago, not a sober house was in sight, he says. Now, “I call Osceola Park the epicenter of the epicenter.”
His two immediate neighbors — sober houses affiliated with musician Eric Clapton, who is sober after years of addiction and has a foundation to help people like himself — have never caused a problem, he says. But even with them, he questions how well people in recovery can truly integrate back into society when a community is awash in recovering people like themselves.
Meanwhile, the heavy dose of sober housing cripples the neighborhood. “Young families in particular move out. There are just too many bad actors, and it’s just overwhelming our services,” Chard says.
City officials have limited means to address the issue. The city of Boca Raton tried to limit sober houses there, only to get sued in 2003. The city spent $1.3 million on a losing effort in court to defend itself from the American Civil Liberties Union, backed by the Department of Justice under then President Bush. U.S. District Judge Donald Middlebrooks ruled Boca violated the Americans with Disabilities Act and the Fair Housing Act, which protect people in recovery. Afterward cities came to view sober houses as all but untouchable.
A Boca Raton attorney for sober house operators, Jeffrey Lynne, says cities have approached the issue incorrectly as one of property rights vs. civil rights. He says the real problem is that the state Department of Children and Families, which issues licenses for treatment providers, isn’t qualified to regulate the treatment industry. “Sober homes are simply a byproduct of a bigger issue. The focus has to be on helping this vulnerable class of people,” Lynne says.
Local leaders turned to Tallahassee, which eventually allocated $275,000 for Aronberg to set up a task force to combat the issue. He also empaneled a grand jury. Aronberg attacked the problem on several fronts. His office and federal and local law enforcement went after offenders based on existing laws against fraud and patient brokering. As of March, 21 arrests had been made. Lynne says his clients fear being caught in a witch hunt. “It’s a really bad time. I have a lot of clients scared to death about being arrested.”
Federal authorities arrested Chatman, and in March he pleaded guilty to conspiring to commit health care fraud, money laundering and forcing people into prostitution. He said insurers over time had disbursed from $9.5 million to $25 million to cover claims by his treatment centers and labs. He’s scheduled for sentencing this month by Middlebrooks, the judge who ruled against Boca’s sober house ordinance.
Aronberg’s grand jury and task force also examined changes that could be made at the state and federal level. The task force’s report recommended that the Legislature regulate the commerce between treatment centers and commercial sober house operators. The report says that obtaining a treatment center license should be a privilege rather than a right; sober houses should be licensed just as assisted living facilities are licensed, and oversight of the industry should possibly be moved from the ill-equipped DCF to the state Agency for Health Care Administration
Last year, a new state law took effect mandating that treatment centers licensed by the state can refer patients to independent sober houses only if the houses have voluntarily obtained certification from Lehman’s FARR, which evaluates them by national and state standards. As of early April, it had certified 61 programs representing 170 locations and 2,385 beds. Another 4,070 beds are seeking certification, Lehman says.
In November, the federal Justice and Housing and Urban Development departments, at south Florida leaders’ behest, released new guidelines on the disabilities and fair housing acts that city officials think will give them greater latitude in crafting ordinances to lessen the concentration of sober houses.
The key, officials and addiction treatment advocates agree, is coming at the problem from the direction of preventing patients from being exploited. “You can’t come at this with a not-in-my-backyard argument,” Aronberg says. “There’s a need for legitimate sober homes to get individuals healthy who have substance abuse disorder.”
Meanwhile, in Delray, petty property crime — car break-ins and such — is up 12%. The sober house issue dominated the March municipal elections in Delray and in other southeast Florida cities. Chard advocates an approach to the problem that includes working with area employers to put people in recovery in jobs.
Given the work the city is doing, the arrests, grand jury and task force work by Aronberg, anecdotal reports of some house operators closing down, the new federal guidelines and progress in Tallahassee, Chard’s encouraged. “I do think the tide is being turned,” he says.
What Is a Sober House?
Research shows recovering addicts can help each other stay sober by living together for a time in a group. Once out of an inpatient treatment center, many recovering addicts become boarders at sober houses and commute to therapy sessions at the treatment center.