A major thrust of the investigation is that some treatment providers in the state are engaging in “patient brokering-type” activities by exploiting loopholes in antikickback and patient enticement laws. This is being done by:
- Engaging in service agreements with non-profits where donations are provided in return for referrals of patients with private insurance. While the service agreement outlines no referral relationship, accounting audits and interviews confirmed that there were direct correlations between the size of donations and the amount of referrals sent to specific providers.
- Using third-party non-profit debit cards to pay for flights for patients coming into treatment. While it is illegal for a treatment provider to pay for flights under federal law, non-profits who aren’t actual service providers can still pay for flights. In this case, the non-profit was being used as a front for treatment providers to buy flights on their clients’ behalf.
- Paying business development representatives W-2 salaries, but then having unspoken agreements related to total compensation and bonuses related to the number of patients admitted.
Some other elements which the commission repeatedly highlighted also being causes of concern were:
- Food, accommodation, and transportation as forms of enticement
- Dubious UR practices designed to maximize length of stay
- The fact that treatment providers only took commercial insurance
- Double billing of overlapping services
- Flat-out fraudulent billing
In the case of Kingsway in particular, there was clearly identification of double billing, structuring of payments to avoid taxation, and other putative fraudulent practices. But the commission also spent a lot of time discussing what it considered to be the ethical responsibilities of treatment providers. Much emphasis was placed on the fact that providers in question only helped those with private insurance and that profit was the primary motive in the identified operators. Frequently cited were the “lavish lifestyles” and purchases of “luxury goods” by treatment center owners.
The commission was clearly concerned with not just the letter of the law, but the spirit of the law as well. Was UR being conducted because that was what was best for the patient, or was it simply a way to bill more days? Were donations to non-profits made in good faith or simply in return for admissions? Was food provided for its nutritional value or was it used as a form of enticement to get patients into the facility? When a referral is made to another facility, was it because of clinical appropriateness or because of some kind of unspoken referral agreement?
That level of scrutiny is a very serious one with far-ranging implications for how treatment operations are conducted. It is likely that we will see the expansion of such state commissions as well as additional federal legislation over the next five years looking to ensure any actions taken by a treatment center are driven by patient needs, not billing or revenue.
At the end of the day, treatment provider business models are no different than other areas of health care such as hospitals or senior living. However, the field continues to come under repeated scrutiny for a couple reasons:
- The population being treated is extremely vulnerable and often in a state of crisis when decisions to admit are being made. Legislators and the public rightly see a need to ensure that that vulnerability is not exploited. Inadequate or poor care is often cited as a factor in many overdose deaths as well, which prioritizes the need for additional oversight.
- Few treatment providers accept Medicaid or Medicare while most hospitals and senior living providers do.
- Bad actors seem to be more prevalent in the SUD space than in other fields of healthcare, bringing shady and fraudulent practices to the fore more often.
What all this means is that compliance centered around patient care needs to be one of the top 3 priorities for any provider. Obviously, this has always needed to be the case, but there is likely to be an increased diligence focusing on aspects of compliance often not given the full attention of many providers.
- When your team is performing UR and concurrent reviews, is there clear documentation related to the necessity of that request?
- How are level of care decisions made prior to and at intake? Are ASAM or other standardized and validated criteria being used?
- Are you looking for ways to start servicing Medicaid patients as well as the commercially insured?
- Related to referrals to other providers, is there clear documentation related to clinical appropriateness in the referral? As an industry informant in the investigation referencing how some referral relationships were conducted put it, “The addict becomes a commodity to trade.” It’s easy to see how the commission would view certain arrangements, formal or informal, as problematic.
- Are insurances being cherry-picked based on reimbursement rates? Laura Mercandetti, SCI Forensic Accountant specifically called out this practice in the proceedings, stating that Kingsway, “liked to have clients with Horizon and Aetna health insurances because they paid out the most for billable services.”
- When it comes to extracurriculars and amenities ranging from chef-made cuisine to equine therapy, do these elements have clear patient benefits related to clinical care or are they positioned more as enticements to enter treatment? This is particularly important as it relates to your marketing messaging. In Laura’s words again, “We have to keep in mind that all of the food, little to no rent, the transportation back and forth, that was a way that they could pull the clients in to get them to choose Kingsway… It all circles back to getting as much insurance monies as possible. How do they do that? How does Kingsway get the clients? One of the big ways…was to get those [patients staying at Graceway Sober Living also owned by the owners of Kingsway] residents to become clients at Kingsway.”
- Is all marketing clearly and transparently communicated through owned assets specific to the provider? This means no masked Facebook groups or pages, no unbranded sites or directories, no employment of recovery “influencers” or third-party employees (like hospital workers commonly receiving a second salary in order to funnel referrals) without upfront disclosures in all their communications. These gray areas have existed for years, but it’s clear now that entire states will be scrutinizing such practices.
- If sober housing is owned by a provider, is it 100% a separate entity with no insurance-reimbursed monies being used to support sober living operations? This issue was a key concern of the state’s investigation as detailed in the exhibit screenshot below.
- Are deductibles collected? Insurance providers now expect north of 50% of patient responsibility to be collected by the provider or they consider them to be operating in bad faith and can legally initiate clawbacks.
On the flip side of all of this, there was definitely an overly critical view by the witnesses called by the commission on some provider actions. UR was seen almost solely as a way to “increase insurance reimbursements.” Housing, food, and transport were only “enticements.” And there was an undercurrent that profit as a part of the business model was somehow inappropriate.
UR is often needed to provide additional treatment when clinically appropriate. Treatment is not one size fits all and the same formula of days can’t be applied across the board. Many struggling with addiction lack adequate food, housing, or transport, so they often do need these barriers eliminated in order to access treatment.
Additionally, a key function of any business is to make a return on invested capital. The profit incentive is a fundamental aspect of a capitalistic economic model. Prior to the Mental Health Parity and Addiction Equity Act, there was a dearth of addiction treatment providers in the US because it was incredibly hard to make money in the field. Nowadays, more than 15 years later, we have more providers than we need for some levels of care. That’s how capitalism is supposed to work. Profit drives entrepreneurs and investors to meet demand with supply and, as we saw prior to the passing of the Mental Health Parity Act, people were unwilling to invest millions of dollars to build treatment programs minus the prospect of returns. So, clearly, profit is an important economic driver that brings a lot of value by meeting patient demand with services provided.
Let’s also not forget, this is not just about for-profit treatment. The best non-profits are also ones that are self-sustaining, ones that can support ongoing operations through revenue from services rendered and are not overly reliant on donations.
But health care is a different type of business. Health care isn’t selling widgets, clothes, or kitchen remodels. People’s health and lives are at stake related to the services provided. For this reason, there is a higher bar expected of health care businesses. Profits are expected to be tempered with greater investments in safety and patient-centric practices. It’s one reason why the field is so heavily regulated.
The New Jersey commission was very focused on where profits came from, how much was made, and what they were spent on as provided below in Exhibit AR-85U. You can see specific references to distributions to the owners as well as profits used to purchase luxury goods.
Making a profit can and should be a part of health care. If someone can build an amazing healthcare system that saves more lives than other providers, then they should be justly rewarded no different than a Steve Jobs or Elon Musk in other spaces. This encourages others to also build high-quality programs at scale that help as many people as possible. But if someone instead builds a low-quality or mediocre program, then they are opening themselves up to questions on their profits and spending habits that would not necessarily be asked of someone who built a computer or a car company.
So, for all these reasons, this investigation can be seen as a sign that there is a serious need by quality providers to organize together and educate both the public and government officials on how treatment operates and what works for patients in order to contradict overly negative or inaccurate assessments of the field.
The bottom line is that any choice in a health care business, addiction treatment or otherwise, has to put patients first and profits second. As all good operators know, the best business model is exactly that. By putting patients first, quality operations are put into place that attract more patients, increase referrals, and lower legal risks, all allowing for more sustainable operations. This has always been the case, but the current commission’s inquiries help call that fact again into stark relief.
