Protect Your Organization and Provider Network from Insurance Fraud and Abuse in the Substance Use Disorder (SUD) Treatment Market

The following are increasingly common breaches in lawful or ethical practice allowed by an absence of regulation and oversight and willing reinforcement by third party payers.

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  • Out of network providers pay for prospective patient premiums (new PPO policies and COBRA) for the duration of treatment then allow the policies to lapse.
  • Patients are induced to admit by out-of-network providers waiving co-pays and providing sober living to IOP patients.
  • "Usual and customary" services rates are overstated (X10) by out-of-network providers to enhance revenues.
  • Out of network providers escalate their retail "usual and customary rate" for PPO which differs from that offered to their self-pay clientele. Out of network PPO reimbursement is maximized.
  • Payment for referrals are exchanged between out-of-network providers and to "call centers posed as treatment programs" on the internet.
  • Patients are brokered to out-of-network providers from internet call-centers which gage the rate of kick-back based upon the quality and quantity of the caller's insurance coverage or capacity to pay top-dollar out of pocket.
  • Revenues are enhanced by unnecessarily elaborate, costly and frequent urinalysis testing by out of network providers and laboratories.
  • Intensive outpatient program providers provide "sober living" residence to clientele through the combination of overstated "reasonable and customary" service rates and urinalysis over utilization.
  • UR and billing is contracted out by providers to specialty companies which overstate/ falsify acuity levels and "lethality" to heighten level of care need and length of stay.
  • Internet call-centers and corporate providers mislead viewers and callers about the level of care, type and location of services needed for their condition.
  • Patients are flown from state to state, across the country to engage in out-of-network residential treatment. Once the patient arrives their choices for level of care and between different service providers end.
  • Patients are misled about the amount that the insurance will pay and what will be their likely self-pay amount. "We take your insurance and whatever they don't cover we'll put on a reasonable payment plan". Residential treatment lengths of stay of thirty to ninety days are rarely medically necessary or covered by insurance.

The following are a few suggestions for third party payer oversight, investigation and enforcement:

  • Require that day treatment and intensive treatment benefits are paid when the patient returns to their residence to enable recovery to be integrated in real time to their real life circumstances.
  • Price up PPO options and replace with affordable EPO plans in benefit offerings.
  • Publicize to service providers and members ethical business standards.
  • Publicize investigations and prosecutions to provide warnings and precedents.
  • Verify acuity levels through second opinions provided by in-network providers.
  • Monitor new policy dates correlated by contemporaneous SUD treatment admission and investigate.
  • Call patients to verify acuity levels.
  • Investigate accuracy of contracted UR and billing.
  • Notify members or require authorized out-of-network providers to notify effected patients of their out of network coverage at the point of admission, including co-pay and deductible amounts and estimated length of authorized reimbursement in real time.
  • Notify or require authorized out-of-network providers to notify effected members and patients the ethical and legal requirements of the out of network provider to collect co-payment and notify them of lapsed level of care authorization.
  • Notify or require authorized providers to notify effected members and patients of in-network treatment providers and alternatives.
  • Deny out of state, out-of-network PPO authorization if in-state providers are available.
  • Deny authorization to providers who lack Joint Commission accreditation.

By:David Lisonbee

Twin Town Treatment Centers


Ten years ago managed care organizations were primary and foremost referral agents for those seeking addiction treatment. This was a time when case-management and referrals were managed by real people in real time. Since that time, insured members find SUD treatment providers independently and often through misleading call-centers/patient brokers on the internet. Head hunters get paid top dollar by out-of-network providers for PPO insured or well-funded candidates.

As some unscrupulous entrepreneurs build profitable businesses through unethical practices, their abundant marketing budgets have overtaken the market. Ethical, in-network, insurance contracted providers do not have comparable marketing capital to compete. They operate off of a highly discounted rate of reimbursement which results in meager marketing/promotion budgets.

SUD providers are incentivized to drop or avoid insurance contracts. Reimbursement is too low and contractual restrictions are too high.

The entrepreneurs are being rewarded by the same PPO plans they abuse, by being paid a percentage of their indiscriminately escalated "usual and customary" rates. Rather than managing ASAM continuing care where the patient resides, the PPO carrier enables the continuation of long residential stays away from home. Insurance carriers willingly pay out-of-area residential programs to extend residential stays by using the day treatment and intensive outpatient treatment benefit while the patient continues to reside in residential, away from home care. No benefits are left to assist the patient integrate recovery back where the wreckage, triggers and real-life problems reside. "Institutionalization" is reinforced by today's commercial healthcare market.

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  • Dr. Stone, I am so grateful to your program and also your generosity. I was a hopeless addict who believed there was no way of getting clean. Thanks to my sister and Cornerstone staff, I recently took my 90 day chip in N.A. Thanks, my life has been changed.
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First - compulsion. This is not all the time, it is not every day but it is obvious. The cocaine addict gets the urge to use cocaine, the alcoholic craves a drink and the Vicodin addict is driven to get the pills. Addicts get the compulsion to do "it" (what they are addicted to) ...

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Incidental Medical Services (IMS)

On January 1, 2016, Chapter 744, Assembly Bill 848 was enacted authorizing adult alcoholism or drug abuse recovery or treatment facilities that are licensed by the Department of Health Care Services (DHCS) to provide IMS. AB 848 amends sections 11834.03 and 11834.36, and adds sections 11834.025 and 11834.026 to the Health and Safety Code to allow licensed residential providers the option to apply to DHCS for approval to provide IMS in their facilities.

IMS are services provided at a licensed residential facility by a health care practitioner that address medical issues associated with either detoxification or the provision of alcoholism or drug abuse recovery or treatment services to assist in the enhancement of treatment services. IMS does not include the provision of general primary medical care. IMS must be related to the patient's process of moving into long-term recovery.

The following six categories of IMS services may be provided after receiving approval from DHCS:

  • Obtaining medical histories.
  • Monitoring health status to determine whether the health status warrants transfer of the patient in order to receive urgent or emergent care.
  • Testing associated with detoxification from alcohol or drugs.
  • Providing alcoholism or drug abuse recovery or treatment services.
  • Overseeing patient self-administered medications.
  • Treating substance abuse disorders, including detoxification.

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