Existing law provides for the licensure and regulation by the State Department of Health Care Services of adult alcoholism and drug abuse recovery and treatment facilities. facilities, and authorizes the department to enforce those provisions. The department also requires that an individual providing counseling services working within an alcohol and alcoholism or drug abuse recovery and treatment program be registered with or certified by a certifying organization approved by the department to register and certify counselors. Existing law also requires the department to develop standards and regulations for alcohol and other drug treatment recovery services describing the minimal level of service quality required of the service providers to qualify for and obtain state certification.

This bill would prohibit certain persons, programs, or entities, including an alcoholism or drug abuse recovery and treatment program facility and persons employed by, or working for, that program, facility, from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services. A violation of these provisions would be a misdemeanor and would also be punishable by a fine not exceeding $2,500 per violation. The bill also would authorize the department to investigate and take specified disciplinary action against those persons or programs for violating those prohibitions. Because a violation of the above-described provisions would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law provides for the licensure and regulation by the State Department of Health Care Services of adult alcoholism and drug abuse recovery and treatment facilities. The department also requires that an individual providing counseling services working within an alcohol and drug abuse recovery and treatment program be registered with or certified by a certifying organization approved by the department to register and certify counselors.

This bill would prohibit certain persons, programs, or entities, including an alcoholism or drug abuse recovery and treatment program and persons employed by, or working for, that program, from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services. A violation of these provisions would be a misdemeanor and would also be punishable by a fine not exceeding $2,500 per violation. The bill also would authorize the department to investigate and take specified disciplinary action against those persons or programs for violating those prohibitions. Because a violation of the above-described provisions would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law provides for the licensure and regulation by the State Department of Health Care Services of adult alcoholism and drug abuse recovery and treatment facilities. The department also requires that an individual providing counseling services working within an alcohol and drug abuse recovery and treatment program be registered with or certified by a certifying organization approved by the department to register and certify counselors.

This bill would prohibit certain persons, programs, or entities, including an alcoholism or drug abuse recovery and treatment program and persons employed by, or working for, that program, from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services. A violation of these provisions would be a misdemeanor and would also be punishable by a fine not exceeding $2,500 per violation. The bill also would authorize the department to investigate and take specified disciplinary action against those persons or programs for violating those prohibitions. Because a violation of the above-described provisions would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Date of Hearing: August 8, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 1268

Author:(Bradford) – As Amended Ver:August 6, 2018

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill addresses financial incentives or "kickbacks" for referral to drug treatment services. Specifically, this bill:

1. Prohibits specified people and entities from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services. Those prohibited from receiving remuneration include:
   1. Licensed or certified alcoholism or drug abuse recovery treatment programs (treatment programs).
   2. Anyone who holds an interest of at least 10% in a treatment program.
   3. A person employed by, or working for, a treatment program, including registered and certified counselors and licensed professionals.
2. Permits the Department of Health Care Services (DHCS) to investigate allegations and assess a penalty on a treatment program, suspend or revoke the license or certification of the program, and suspend or revoke the registration or certification of a counselor, if a violation is found.
3. Permits DHCS to investigate allegations against a licensed professional providing counseling services at a treatment program that is licensed, certified, or receives state funds, and to recommend disciplinary actions, including, but not limited to, termination of employment at a program and suspension and revocation of licensure by the respective licensing board.
4. Establishes the violation of the provisions of this bill as a misdemeanor that is punishable by a fine not exceeding $2,500 per violation.

FISCAL EFFECT:

1. Staff costs of $1 million GF to Department of Health Care Services (DHCS) to review for compliance with this bill, perform audits and investigations, and conduct disciplinary proceedings.
2. To the extent penalties are assessed pursuant to this bill, potential, likely minor, GF revenues.

COMMENTS:

1. Purpose. According to the author, this bill will ban patient brokering, which is the practice of allowing unscrupulous and unqualified persons to prey on those seeking treatment for addiction. The author contends the inability to prohibit patient brokering has led to unethical, corrupt financial relationships between treatment providers and referral agents.
2. Background. DHCS licenses drug treatment centers, which provide 24-hour non-medical care to adults struggling with substance use disorders (SUDs). These facilities range in size from six-bed facilities in residential neighborhoods to centers that accommodate more than 100 beds. The basic services provided by facilities include group, individual and educational sessions, alcoholism or drug abuse, recovery and treatment planning.

Insurance coverage for substance use treatment services has increased, which may have helped spark an increase in questionable referral practices. So-called "parity" laws have removed restrictions on coverage for substance use services in recent years. In addition, the federal Affordable Care Act, effective 2014, newly included mental health and SUD treatment as one of the ten elements of "essential health benefits," meaning many health insurance products must now include services for substance use disorders.

1. Senate Health Committee informational hearing. On January 31, 2018, the Senate Health Committee held an informational hearing to examine the SUD treatment system with a focus on treatment and services provided in residential treatment facilities, insurance coverage, patient referrals, and the state’s regulation and oversight of the system. The hearing provided an overview of recent issues regarding unscrupulous facility operators, and gave an opportunity for state regulators to highlight efforts they have undertaken to combat exploitation of the SUD system.

There have been many stories in the media and there is much anecdotal evidence from the field about the practice of patient brokering. Generally, individuals (sometimes called “interventionists”) are receive payment for referring clients seeking SUD treatment services to facility operators that fraudulently bill insurance plans for the services.

1. Support. Supporters of this bill, largely treatment providers and county behavioral health representatives, argue that current law does not prohibit the practice of selling patients to addiction treatment centers and programs that pass kickbacks to referral agents and others. Provider groups attest to the harm this practice causes clients who need substance use disorder treatment services.
2. Oppose unless amended. The Addiction Treatment Advocacy Coalition (ATAC) and Advocates for Responsible Treatment both independently seek amendments to this bill to remove their opposition.
3. Related Legislation.
   1. SB 1317 (Portantino) would have permitted a city, county, or city and county to adopt by local ordinance health and safety standards and enforcement mechanisms for structured sober living homes, as specified. SB 1317 was held on the Suspense File of the Senate Appropriations Committee.
   2. SB 1290 (Bates) would have made it unlawful to engage in patient brokering and also established the Commission on Substance Abuse and Recovery to provide comprehensive recommendations to the Legislature to effectively confront the statewide addiction and substance abuse crisis, as specified. SB 1290 was held on the Suspense File of the Senate Appropriations Committee.
   3. SB 1228 (Lara), pending in this committee, would prohibit a licensed RTF or an employee of a licensee from referring a patient to a facility, residence, or dwelling that is not either a licensee or certified, or engaging in patient brokering, as defined, and would require DHCS to establish a program to approve organizations that certify facilities, residences, or dwellings that provide SUD continuum of care, are not licensees, and meet specified requirements that include a ban on patient brokering.
   4. SB 992 (Hernandez), pending in this committee, requires DHCS licensed and certified programs to disclose business relationships, as specified, and makes changes to current licensing law to improve client treatment and provide DHCS more oversight authority over licensed facilities.
   5. SB 902 (Bates) requires DHCS to conduct background checks for an applicant before issuing a license and deny an application for licensure or take other action if DHCS determines that individual has a criminal conviction or criminal charge pending, as specified. SB 902 was held on the Suspense File of the Senate Appropriations Committee.
   6. AB 3162 (Friedman), pending in the Senate Appropriations Committee, requires DHCS to deny an application for a new residential treatment facility license if the proposed location is in proximity to an existing RTF that would result in overconcentration, among other provisions.
   7. AB 2214 (Rodriguez), which was held on the Suspense File of this committee, establishes a voluntary certification process for recovery residences, as defined, by an organization approved by DHCS to certify a residence as a recovery residence.
4. Prior Legislation. SB 636 (Bradford) of 2017 contained provisions substantially similar to this bill and would have prohibited specified entities from using runners, cappers, steerers, or other persons to procure clients, patients, or customers for any form of medical care or treatment provided by an alcohol-related or narcotic-related program, facility, or dispensary. SB 636 was never heard in Senate Health Committee.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: June 26, 2018

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

SBPCA Bill Id:SB 1268

Author:(Bradford) – As Amended Ver:April 16, 2018

SENATE VOTE: 39-0

SUBJECT: Addiction treatment referrals: payment.

SUMMARY: Prohibits licensed or certified alcoholism or drug abuse recovery treatment programs (treatment program), an owner, partner, officer, or director, or a shareholder who holds an interest of at least 10% in a treatment program, or a person employed by, or working for, a treatment program, including registered and certified counselors and licensed professionals providing counseling services, from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services (treatment services). Specifically, this bill:

1. Permits the Department of Health Care Services (DHCS) to investigate allegations and assess a penalty upon a treatment program, suspend or revoke the license or certification of the program, and suspend or revoke the registration or certification of a counselor, if any of those entities give or receive remuneration or anything of value for the referral of a person who is seeking treatment services.
2. Permits DHCS to investigate allegations against a licensed professional providing counseling services at a treatment program that is licensed, certified, or receives state funds, and to recommend disciplinary actions, including, but not limited to, termination of employment at a program and suspension and revocation of licensure by the respective licensing board.
3. Establishes the violation of the provisions of this bill as a misdemeanor that is punishable by a fine not exceeding $2,500 per violation.

EXISTING LAW:

1. Establishes DHCS to license adult alcoholism or drug abuse recovery or treatment facilities. Permits new licenses to be issued for a period of two years, and requires DHCS to conduct onsite program visits for compliance at least once during the two year licensing period.
2. Defines “alcoholism or drug abuse recovery or treatment facility” as any premise, place, or building that provides 24-hour residential nonmedical services to adults who are recovering from problems related to alcohol, drug, or alcohol and drug misuse or abuse, and who need alcohol, drug, or alcohol and drug recovery treatment or detoxification services.
3. Establishes requirements for application for licensure of a facility, requires DHCS to terminate licensure if these requirements are not met, and authorizes DHCS to deny a license of applicants that do not demonstrate an ability to comply with specified requirements.
4. Makes it unlawful, for specified health care providers and under specified conditions, the offer, delivery, receipt, or acceptance of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom these patients, clients, or customers are referred.
5. Requires, if an applicant intends to provide incidental medical services, such as obtaining medical histories, monitoring health status, testing associated with detoxification from alcohol or drugs, and overseeing patient self-administered medications, evidence of a valid license of a physician and surgeon who will provide or oversee those services, and any other information deemed appropriate by DHCS, as specified.
6. Authorizes DHCS to assess civil penalties on facilities that provide alcoholism or drug abuse recovery, treatment, or detoxification services without a license.
7. Grants DHCS the authority to implement a program certification procedure for alcohol and other drug treatment recovery services and to develop standards and regulations for the alcohol and other drug treatment recovery services describing the minimal level of service quality required of the service providers to qualify for and obtain state certification.
8. Requires substance use disorder (SUD) counselors that work in a facility licensed or certified by DHCS to be registered with or certified by a counselor certification organization (CO) recognized by DHCS.
9. Prohibits, through regulation, “licensed professionals,” as defined, in good standing with their licensing agencies from being required to become certified by a CO in order to work at a facility licensed or certified by DHCS. Defines “licensed professional” as a physician licensed by the Medical Board of California; a psychologist licensed by the California Board of Psychology (CBP); a clinical social worker or marriage and family therapist licensed by the California Board of Behavioral Sciences (BBS); or an intern registered with the CBP or the BBS. Defines “in good standing” as the professional’s license being valid and not revoked, suspended, or otherwise terminated.

FISCAL EFFECT: According to the Senate Appropriations Committee, the DHCS estimates a total cost of $1.04 million General Fund for Fiscal Year (FY) 2019-20, and $973,000 for FY 2020-21, and ongoing, for implementation and staffing for seven positions (one staff services manager, five associate governmental program analysts, and one attorney III).

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, this bill will ban patient brokering, which is the practice of allowing unscrupulous and unqualified persons to prey on those seeking treatment for addiction. The author states that the inability to prohibit patient brokering has led to unethical, corrupt financial relationships between treatment providers and referral agents. The author concludes that other states have banned financial incentives and kickbacks for patient referral and it’s time for California to do the same.
2. BACKGROUND. Treatment facilities provide 24- hour non-medical care and specialize in providing services to chemically dependent adults who do not require treatment in an acute-care medical facility on an inpatient, intensive outpatient, outpatient, and partial hospitalization basis. These facilities range in size from six-bed facilities in residential neighborhoods to centers that accommodate more than 100 beds. The basic services provided by facilities include group, individual and educational sessions, alcoholism or drug abuse, recovery and treatment planning. Detoxification services are also provided and are defined by the DHCS as services to support and assist an individual in the alcohol and/or drug withdrawal process and to explore plans for continued treatment. These services can be provided by a variety of health care providers such as alcohol and drug counselors, mental health therapists, social workers, psychologists, nurses, and physicians.
   1. Treatment Facility Licensing and Certification. DHCS has sole authority to license facilities that have seven or more treatment beds and provide 24-hour residential nonmedical services to eligible adults who are recovering from problems related to alcohol or other drug misuse or abuse. Licensure is required when at least one of the following services is provided: detoxification; group sessions; individual sessions; educational sessions; or, alcoholism or other drug abuse recovery or treatment planning. Additionally, facilities may be subject to other types of permits, clearances, business taxes, or local fees that may be required by the cities or counties in which the facilities are located. Many facilities licensed by DHCS are also certified by DHCS. Certification by DHCS identifies those facilities which exceed minimum levels of service quality and are in substantial compliance with State program standards, specifically the Alcohol and/or Other Drug Certification Standards. DHCS does not license alcohol and drug residential treatment programs with six or less beds, known as "sober living homes"(SLHs).
   2. Sober living homes. A sober living home is a residence for people in recovery from substance abuse. It may serve as a crucial, or even indispensable, support for individuals undergoing treatment but it does not provide treatment or care, whether medical or personal (as in an assisted living facility). The state laws and licensing requirements that govern treatment and care facilities do not currently include sober living homes. The California Research Bureau estimates that there are at least 12,000 sober living beds in the state to serve an eligible population of between 25,000 and 35,000 individuals. Unfortunately, it is difficult to estimate the total number of sober living homes because there is no existing requirement for sober living homes to identify themselves as such in any official capacity, unless they are participating in programs beyond the minimum legal requirements for such a home to exist. About 750 homes are members of one of the two major associations that organize and promote sober living in California: the Sober Living Network and the California Consortium of Addiction Programs and Professionals, however, these organizations do not capture every sober living home or equivalent establishment in the state.
   3. Senate Health Committee informational hearing. On January 31, 2018, the Senate Health Committee held an informational hearing to examine the SUD treatment system with a focus on treatment and services provided in residential treatment facilities (RTFs); insurance coverage; patient referrals; and, the state’s regulation and oversight of the system. The hearing provided an overview of recent issues that have affected the state regarding unscrupulous facility operators, and gave an opportunity for state regulators to highlight efforts they have undertaken to combat the exploitation of the SUD system. The goal of the hearing was to examine the issues and to seek strategies and policies that will prevent unscrupulous individuals from exploiting the various industries that are supposed to help treat those with SUDs, as well as to recognize federal and state protections for those with disabilities, and to ensure that policies are not enacted, either at the local or state level, that will limit the number of treatment options for those who need them.
   4. Reports about “patient brokering.” Several news articles (“How Some Southern California drug rehab centers exploit addiction,” Orange County Register, May 21, 2017; “A Choice for Recovering Addicts: Relapse or Homelessness, New York Times, May 30, 2015; “California’s Rehab System is in Crisis … ” CityWatch Los Angeles, June 23, 2016; and “Special Report: Two states with an ocean view, and an ethical cloud,” Addiction Professional, March 18, 2013) highlight the issue of “patient brokering,” whereby unscrupulous individuals (sometimes called “interventionists”) lure clients seeking SUD treatment services, buy insurance policies for the clients or offer to pay their deductibles, and “sell” them to facility operators that do not provide any type of treatment services or regular monitoring, all the while billing the insurance plan. Some individuals involved in this practice have been quoted in news articles as acknowledging that the practice may be wrong; however, they also claim that the practice is so ubiquitous in California that they would have no clients at all if they did not engage. As a result, some facility operators keep interventionists on retainer, often for $5000 to $10,000 a month, regardless of how many clients an interventionist refers to them, in order to remain in business. After clients’ insurance coverage is exhausted, unscrupulous facility operators have been allegedly discharging clients with nowhere to go, and clients end up homeless on the streets where they continue their addictions. In many news articles, the issue is largely attributed to facilities that do not require state licensure or oversight, including SLHs and what New York refers to as “three-quarter houses,” which are New York’s equivalent to California’s SLHs.
3. SUPPORT. Supporters of this bill, largely treatment providers and county behavioral health representatives, argue that current law does not prohibit the practice of selling patients to addiction treatment centers and programs that pass kickbacks to referral agents and others. Many of the provider groups attest to the harm this practice causes clients who need substance use disorder treatment services. Supporters argue that the inability to prohibit the practice has led to unethical, corrupt financial relationships between treatment providers and agents, with the guise of helping individuals overcome their alcoholism or drug addiction. Supporters state that referrals are commonly based on financial incentives rather than the health and well-being of the client who struggles with a substance use disorder. Supporters further argue that other states have already taken action to prohibit patient brokering, such as Florida, where the practice constitutes a third-degree felony under state law. Supporters state that this bill will help put an end to the predatory practice, in order to protect the health and well-being of individuals in recovery from addiction.
4. OPPOSE UNLESS AMENDED. The Addiction Treatment Advocacy Coalition (ATAC) writes to oppose this bill because it does not contain language from the previous version of this bill, which gave substance use providers the ability to manage their business based upon information provided by health plans. ATAC would like to see Legislative intent language from SB 636 (Bradford) of 2017, added to this bill, which stated the intent that providers of alcohol or narcotic addiction treatment receive information from health insurance providers regarding client coverage of treatment services, such as that verification that services are covered constitutes an intent to cover the costs; that any verification that cost of extending the duration of services will be covered constitutes an intent to cover the costs; and that an authorization of services constitutes an affirmative representation that the services are covered and treatment providers are entitled to rely on that authorization. Advocates for Responsible Treatment (ART) write in opposition that while this bill proposes actual penalties for patient brokering, the target criminal of the bill is too narrowly defined and the penalty is too low. ART states that the concept of this bill is right. ART opposes this bill unless it is amended to target anyone participating in patient brokering, and to levy real consequences.
5. RELATED LEGISLATION.
   1. SB 1317 (Portantino) would have permitted a city, county, or city and county to adopt by local ordinance health and safety standards and enforcement mechanisms for structured sober living homes, as specified. SB 1317 was held under submission in the Senate Appropriations Committee.
   2. SB 1290 (Bates) would have made it unlawful for any licensee, operator, manager, consultant, employee, or patient of an RTF, or any other person to, among other things, offer or pay a commission, benefit, bonus, rebate, kickback, or bribe, or engage in any split-fee arrangement to induce the referral of a patient or patronage to or from an RTF, or to solicit or receive a commission, benefit, bonus, rebate, kickback, or bribe in return for referring a patient or patronage to or from an RTF. Would have established the Commission on Substance Abuse and Recovery to provide comprehensive recommendations to the Legislature to effectively confront the statewide addiction and substance abuse crisis, as specified. SB 1290 was held under submission in the Senate Appropriations Committee.
   3. SB 1228 (Lara) would prohibit a licensed RTF or an employee of a licensee from referring a patient to a facility, residence, or dwelling that is not either a licensee or certified, or engaging in patient brokering, as defined. Would require DHCS to establish a program to approve organizations that certify facilities, residences, or dwellings that provide SUD continuum of care, are not licensees, and meet specified requirements that include a ban on patient brokering. SB 1228 is pending in the Assembly Public Safety Committee.
   4. SB 992 (Hernandez) requires DHCS licensed and certified programs to disclose business relationships, as specified, and makes changes to current licensing law to improve client treatment and provide DHCS more oversight authority over licensed RTFs. Requires DHCS to develop a program, after stakeholder input, for the voluntary registration of recovery residences, as specified. SB 992 is pending in the Assembly Appropriations Committee.
   5. SB 902 (Bates) requires DHCS to conduct a state and federal level criminal history background check for an applicant before issuing a license and, subsequent to initial licensure, for any manager, consultant, or employee of a facility, as specified. Requires DHCS to deny an application for licensure, or suspend or revoke a license, of an applicant, and would require the facility to refuse or terminate the employment, residence, or presence of a manager, consultant, or employee of the facility, if DHCS determines that individual has a criminal conviction or criminal charge pending, as specified. SB 902 was held under submission in the Senate Appropriations Committee.
   6. AB 3162 (Friedman) requires DHCS to deny an application for a new RTF license if the proposed location is in proximity to an existing RTF that would result in overconcentration, as specified. Makes other changes to RTF licensing law, including making initial licenses for RTFs provisional, requiring all programs and medical services offered or provided by an RTF to be specified in the license application, and increasing penalties for a violation of licensing law and regulations, as specified. AB 3162 is pending in the Senate Appropriations Committee.
   7. AB 2214 (Rodriguez) establishes a voluntary certification process for recovery residences, as defined, by an organization approved by DHCS to certify a residence as a recovery residence. AB 2214 was held in the Assembly Appropriations Committee.
6. PREVIOUS LEGISLATION. SB 636 (Bradford) of 2017 contained provisions substantially similar to this bill and would have prohibited specified entities from using runners, cappers, steerers, or other persons to procure clients, patients, or customers for any form of medical care or treatment provided by an alcohol-related or narcotic-related program, facility, or dispensary. SB 636 was never heard in Senate Health Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

American Addition Treatment Association

Association of California Life and Health Insurance Companies

Associated Rehabilitation Program for Women, Inc.

Azure Acres Recovery Center

California Access Coalition

California Association for Alcohol/Drug Educators

California Association of Alcohol and Drug Program Executives, Inc.

California Behavioral Health Directors

California Consortium of Addiction Programs and Professionals

California Council of Community Behavioral Health Agencies

Community Social Model Advocates, Inc.

Cornerstone

County Behavioral Health Directors Association of California

Northbound Treatment Services

Soroptimist House of Hope, Inc.

Sun Street Centers

The Villa Center, Inc.

Twin Town Treatment Centers

Valley Recovery Center of California

Young People in Recovery

Opposition

Addiction Treatment Advocacy Coalition (unless amended)

Advocates for Responsible Treatment (unless amended)

Analysis Prepared by: Paula Villescaz / HEALTH / (916) 319-2097

 THIRD READING  

Bill No: SB 1268

Author:

:

Vote:

SENATE HEALTH COMMITTEE: 9-0, 4/11/18

AYES: Hernandez, Nguyen, Leyva, Mitchell, Monning, Newman, Nielsen, Pan, Roth

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/25/18

AYES: Lara, Bates, Beall, Bradford, Hill, Nielsen, Wiener

SUBJECT:

SOURCE: Author

DIGEST:

This bill prohibits specified persons, programs, or entities from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery or treatment services. This bill permits the Department of Health Care Services to take action against specified persons, programs, and entities that violate the prohibition, including suspending or revoking licensure or certification and assessing a penalty, as specified.

ANALYSIS:

Existing law:

1. Requires the Department of Health Care Services (DHCS) to license alcoholism or drug abuse recovery or treatment facilities (RTFs) that provide 24-hour residential non-medical services to adults who are recovering from problems related to alcohol, drug, or alcohol and drug misuse or abuse, and who need alcohol, drug, or alcohol and drug recovery, treatment, or detoxification services. [HSC §11834.01, et seq.]
2. Requires RTF licensees to provide at least one of the following: recovery, treatment, or detoxification services. Requires DHCS to adopt regulations requiring records and procedures appropriate for the type of service provided. Provides that the records and procedures can include all of the following: admission criteria; intake process; assessments; recovery, treatment, or detoxification planning; referral; documentation of provision of recovery, treatment, or detoxification services; discharge and continuing care planning; or indicators of recovery, treatment, or detoxification outcomes. [HSC §11834.26]
3. Grants DHCS the authority to implement a program certification procedure for alcohol and other drug treatment recovery services and to develop standards and regulations for the alcohol and other drug treatment recovery services describing the minimal level of service quality required of the service providers to qualify for and obtain state certification. [HSC §11830.1]
4. Requires substance use disorder (SUD) counselors that work in a facility licensed or certified by DHCS to be registered with or certified by a counselor certification organization (CO) recognized by DHCS. [HSC §11833]
5. Prohibits, through regulation, “licensed professionals,” as defined, in good standing with their licensing agencies from being required to become certified by a CO in order to work at a facility licensed or certified by DHCS. Defines “licensed professional” as a physician licensed by the Medical Board of California; a psychologist licensed by the California Board of Psychology (CBP); a clinical social worker or marriage and family therapist licensed by the California Board of Behavioral Sciences (BBS); or an intern registered with the CBP or the BBS. Defines “in good standing” as the professional’s license being valid and not revoked, suspended, or otherwise terminated. [Title 9 CCR §13015]

This bill:

1. Prohibits the following persons, programs, or entities from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery or treatment services:
   1. An alcoholism or drug abuse recovery and treatment program licensed or certified by DHCS;
   2. An owner, partner, officer, or director, or a shareholder who holds an interest of at least 10% in an alcoholism or drug abuse recovery and treatment facility licensed or certified by DHCS; and,
   3. A person employed by, or working for, an alcoholism or drug abuse recovery and treatment program licensed or certified by DHCS, including registered and certified counselors and licensed professionals providing counseling services.
2. Permits DHCS to investigate allegations and assess a penalty upon an alcoholism or drug abuse recovery and treatment program licensed or certified by DHCS; suspend or revoke the license or certification of the program; and suspend or revoke the registration or certification of a counselor for violating the provisions in 1) above. Deems a violation of 1) above a misdemeanor and punishable by a fine not to exceed $2,500 per violation.
3. Permits DHCS to investigate allegations against licensed professionals providing counseling services at an alcoholism or drug abuse recovery and treatment program licensed or certified by DHCS, and to recommend disciplinary actions, including, but not limited to, termination of employment at a program, and suspension and revocation of licensure by the respective licensing boards.

Comments

1. Author’s statement. According to the author, this bill will ban patient brokering, which is allowing unscrupulous and unqualified persons to prey on those seeking treatment for addiction. The inability to prohibit patient brokering has led to unethical, corrupt financial relationships between treatment providers and referral agents. Other states have banned financial incentives and kickbacks for patient referral. It is time for California to do the same.
2. Licensed and certified programs. RTFs licensed by DHCS, based on what is commonly referred to as the social model, provide recovery, treatment, or detoxification services. (The Department of Public Health licenses medical model RTFs known as chemical dependency recovery hospitals.) The services provided by these RTFs include group and individual counseling, educational sessions, and alcoholism or drug abuse recovery and treatment planning. Social model RTFs are allowed to provide clients first aid and emergency care, and since the passage of AB 848 (Stone, Chapter 744, Statutes of 2015), RTFs can apply to DHCS for an additional license to provide incidental medical services by a licensed physician and surgeon or other health care practitioner, as specified. DHCS also offers a voluntary facility certification to those programs that provide the following services: day treatment, outpatient, and nonresidential detoxification. The certification is granted to programs that exceed minimum levels of service quality and are in substantial compliance with state program certification standards. Certification is available to both residential and nonresidential programs. The majority of facilities licensed by DHCS are also certified. DHCS licenses about 1,020 RTFs and certifies approximately 900 outpatient facilities. As part of their licensing and certification functions, DHCS conducts reviews of licensed and certified programs every two years, or as necessary; checks for compliance with statute, regulations, and certification standards to ensure the health and safety of clients; investigates all complaints; and has the authority to suspend or revoke a program’s license or certification for a violation of statute, regulations, and certification standards.
3. Reports about “patient brokering.” Several news articles (“How Some Southern California drug rehab centers exploit addiction,” Orange County Register, May 21, 2017; “A Choice for Recovering Addicts: Relapse or Homelessness, New York Times, May 30, 2015; “California’s Rehab System is in Crisis … ” CityWatch Los Angeles, June 23, 2016; and “Special Report: Two states with an ocean view, and an ethical cloud,” Addiction Professional, March 18, 2013) highlight the issue of “patient brokering,” whereby unscrupulous individuals (sometimes called “interventionists”) lure clients seeking SUD treatment services, buy insurance policies for the clients or offer to pay their deductibles, and “sell” them to facility operators that do not provide any type of treatment services or regular monitoring, all the while billing the insurance plan. Some individuals involved in this practice have been quoted in news articles as acknowledging that the practice may be wrong; however, they also claim that the practice is so ubiquitous in California that they would have no clients at all if they did not engage. As a result, some facility operators keep interventionists on retainer, often for $5000 to 10,000 a month, regardless of how many clients an interventionist refers to them, in order to remain in business. After clients’ insurance coverage is exhausted, unscrupulous facility operators have been allegedly discharging clients with nowhere to go, and clients end up homeless on the streets where they continue their addictions. In many news articles, the issue is largely attributed to facilities that do not require state licensure or oversight, including sober living homes (SLHs) and what New York refers to as “three-quarter houses,” which are New York’s equivalent to California’s SLHs.
4. California Department of Insurance (CDI) investigation. On November 10, 2016, the CDI issued a press release about an investigation that resulted in the arrest of the operators of some Southern California sober living homes, Community Recovery of Los Angeles (CRLA). The operators were arrested on several felony counts of grand theft and identity theft for allegedly conspiring to defraud clients and insurers out of more than $176 million. Affected insurers paid nearly $44 million before discovering the suspected fraud and stopping payments to CRLA. CRLA was accused of luring people with treatment marketing schemes and stealing patient identities to buy health insurance policies for people without their knowledge, as well as committing such acts as submitting claims for services not provided, falsely representing CRLA as a licensed RTF while not being licensed as such, and filing fraudulent health insurance policy applications. A document posted on DHCS’s Internet Web site indicates that CRLA operated both sober living homes, which were claiming to be licensed, and DHCS-certified outpatient programs. On March 15, 2018, the Orange County Register reported that one of the operators of CRLA plead guilty to 46 felony counts involving the insurance billing scheme and received 11 years in state prison following a plea to 28 counts of money laundering, seven counts of grand theft, six counts of identity theft, and five counts of insurance fraud. The other CRLA operator is awaiting trial on 46 counts of fraud and was convicted in a separate case of 31 counts, including sexual assault or exploitation of seven clients of CRLA and offering controlled substances.
5. Senate Health Committee informational hearing. On January 31, 2018, the Senate Health Committee held an informational hearing to examine the SUD treatment system with a focus on treatment and services provided in RTFs; insurance coverage; patient referrals; and the state’s regulation and oversight of the system. The hearing provided an overview of recent issues that have affected the state regarding unscrupulous facility operators, and gave an opportunity for state regulators to highlight efforts they have undertaken to combat the exploitation of the SUD system. The goal of the hearing was to examine the issues and to seek strategies and policies that will prevent unscrupulous individuals from exploiting the various industries that are supposed to help treat those with SUDs, as well as to recognize federal and state protections for those with disabilities, and to ensure that policies are not enacted, either at the local or state level, that will limit the number of treatment options for those who need them.

Related/Prior Legislation

SB 636 (Bradford of 2017) would have contained provisions substantially similar to this bill and would have prohibited specified entities from using runners, cappers, steerers, or other persons to procure clients, patients, or customers for any form of medical care or treatment provided by an alcohol-related or narcotic-related program, facility, or dispensary. SB 636 was never heard in the Senate Health Committee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Committee on Appropriations:

DHCS estimates a total cost of $1.04 million General Fund for Fiscal Year (FY) 2019-20, and $973,000 for FY 2020-21, and ongoing, for implementation and staffing for seven positions (one staff services manager, five associate governmental program analysts, and one attorney III). DHCS notes staffing would be funded 100% from the General Fund.

SUPPORT: (Verified 5/23/18)

American Addiction Treatment Association

Associated Rehabilitation Program for Women, Inc

Azure Acres

California Access Coalition

California Association of Alcohol and Drug Program Executives, Inc

California Council of Community Behavioral Health Agencies

Community Social Model Advocates, Inc.

County Behavioral Health Directors Association of California

Northbound Treatment Services

Soroptimist House of Hope

Sun Street Centers

Twin Town Treatment Centers

Villa Center, Inc.

Young People in Recovery

14 individuals

OPPOSITION: (Verified 5/23/18)

Addiction Treatment Advocacy Coalition

Advocates for Responsible Treatment

ARGUMENTS IN SUPPORT: Supporters of this bill, largely treatment providers and county behavioral health representatives, argue that current law does not prohibit the practice of selling patients to addiction treatment centers and programs that pass kickbacks to referral agents and others. Many of the provider groups attest to the harm this practice causes clients who need substance use disorder treatment services. Supporters argue that the inability to prohibit the practice has led to unethical, corrupt financial relationships between treatment providers and agents, with the guise of helping individuals overcome their alcoholism or drug addiction. Supporters state that referrals are commonly based on financial incentives rather than the health and well-being of the client who struggles with a substance use disorder. Supporters further argue that other states have already taken action to prohibit patient brokering, such as Florida, where the practice constitutes a third-degree felony under state law. Supporters state that this bill will help put an end to the predatory practice, in order to protect the health and well-being of individuals in recovery from addiction.

ARGUMENTS IN OPPOSITION: The Addiction Treatment Advocacy Coalition (ATAC) writes to oppose this bill because it does not contain language from the previous version of this bill, which gave substance use providers the ability to manage their business based upon information provided by health plans. ATAC would like to see Legislative intent language from SB 636 added to this bill, which stated the intent that providers of alcohol or narcotic addiction treatment receive information from health insurance providers regarding client coverage of treatment services, such as that verification that services are covered constitutes an intent to cover the costs; that any verification that cost of extending the duration of services will be covered constitutes an intent to cover the costs; and that an authorization of services constitutes an affirmative representation that the services are covered and treatment providers are entitled to rely on that authorization. Advocates for Responsible Treatment (ART) write in opposition that while this bill proposes actual penalties for patient brokering, the target criminal of the bill is too narrowly defined and the penalty is too low. ART states that the concept of this bill is right. ART opposes this bill unless it is amended to target anyone participating in patient brokering, and to levy real consequences.

Prepared by:

5/26/18 14:44:21

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 1268 (Bradford) - Addiction treatment referrals: payment

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 1268 would: 1) prohibit a licensed alcoholism or drug abuse recovery and treatment program (substance use disorder (SUD) treatment facility), an owner, partner, officer, or director, or shareholder who owns at least 10 percent of a licensed SUD treatment facility, or an employee of an SUD treatment facility, from receiving anything of value for the referral of a person to an SUD treatment facility; 2) grant the Department of Health Care Services (DHCS) the authority to investigate allegations and assess a civil penalty upon a licensed SUD treatment facility for any violations of the statute; 3) grant DHCS the authority to investigate and suspend or revoke the registration or certification of a counselor for violations of the statute; 4) grant DHCS the authority to investigate allegations of violations of the statute against a licensed professional working in an SUD treatment facility and recommend termination of employment and/or disciplinary actions to the licensed professionals’ respective board; and 5) provide that a violation of the statute would constitute a misdemeanor and would be punishable with a fine not exceeding $2,500.

Fiscal Impact:

The DHCS estimates a total cost of $1.04 million General Fund for Fiscal Year (FY) 2019-20, and $973,000 for FY 2020-21, and ongoing, for implementation and staffing for seven positions (one staff services manager, five associate governmental program analysts, and one attorney III). The DHCS notes staffing would be funded 100 percent from the General Fund. For additional detail, please see staff comments, below.

Background:

The DHCS licenses recovery or treatment facilities (RTF) that provide 24-hour residential non-medical services to adults who are recovering from problems related to alcohol, drug, or alcohol and drug misuse or abuse, and who need alcohol, drug, or alcohol and drug recovery, treatment, or detoxification services. DHCS must determine the qualifications, including the appropriate skills, education, training, and experience of personnel working within licensed or certified alcoholism or drug abuse recovery and treatment programs.

RTFs licensed by DHCS, based on what is commonly referred to as the social model, provide recovery, treatment, or detoxification services. Since the passage of AB 848 (Stone, Chapter 744, Statutes of 2015), RTFs can apply to DHCS for an additional license to provide incidental medical services by a licensed physician and surgeon or other health care practitioner, as specified. DHCS currently licenses about 1,020 RTFs. As part of their licensing functions, DHCS conducts reviews of licensed RTFs at least once every two years, or as necessary; checks for compliance with statute and regulations to ensure the health and safety of clients; investigates all complaints; and has the authority to suspend or revoke an RTF’s license for a violation of statute or regulations.

Proposed Law:

The bill prohibits the following persons, programs, or entities from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services:

• An alcoholism or drug abuse recovery and treatment program licensed or certified under the bill;
• An owner, partner, officer, or director, or a shareholder who holds an interest of at least 10 percent in an alcoholism or drug abuse recovery and treatment program licensed or certified under the bill; and
• A person employed by, or working for, an alcoholism or drug abuse recovery and treatment program licensed or certified under this part, including registered and certified counselors and licensed professionals providing counseling services.

The bill authorizes the department to investigate allegations and assess a penalty upon an alcoholism or drug abuse recovery and treatment program licensed or certified under this part, suspend or revoke the license or certification of the program, and suspend or revoke the registration or certification of a counselor for, a violation of Section 11833.1.

The bill authorizes the department may investigate allegations against a licensed professional providing counseling services at an alcoholism or drug abuse recovery and treatment program licensed, certified, or funded under this part, and recommend disciplinary actions, including, but not limited to, termination of employment at a program and suspension and revocation of licensure by the respective licensing board.

In addition, the bill provides that a violation of a person, program or entity that gives or receives remuneration or anything of value for a referral of a person seeking alcoholism or drug abuse recovery and treatment services constitutes a misdemeanor and is also punishable by a fine not exceeding two thousand five hundred dollars ($2,500) per violation.

Related Legislation:

The Legislature is considering several approaches to alcoholism and drug recovery or treatment facilities (RTFs), including:

• SB 902 (Bates) requires the Department of Health Care Services (DHCS) to conduct a state and federal criminal history background check for specified individuals prior to issuing an initial license for an alcoholism or drug abuse recovery or treatment facility. The bill would also prohibit specified individuals from being issued a license at, or from working at, a recovery or treatment facility. The bill is pending in the Senate Appropriations Suspense File.
• SB 992 (Hernandez) requires DHCS licensed and certified programs to disclose business relationships, as specified, and makes changes to current licensing law to improve client treatment and provide DHCS more oversight authority over licensed RTFs. The bill is pending in the Senate Appropriations Suspense File.
• SB 1268 (Bradford) prohibits certain persons, programs, or entities, including a licensed RTF and persons employed by, or working for, that program, from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services, as specified. The bill is pending consideration at the Senate Appropriations Committee May 22 hearing.
• SB 1290 (Bates) makes it unlawful for any licensee, operator, manager, consultant, employee, or patient of a licensed RTF, or any other person to, among other things, offer or pay a commission, benefit, bonus, rebate, kickback, or bribe, or engage in any split-fee arrangement to induce the referral of a patient or patronage to or from an RTF, or to solicit or receive a commission, benefit, bonus, rebate, kickback, or bribe in return for referring a patient or patronage to or from an RTF. Establishes the Commission on Substance Abuse and Recovery to provide comprehensive recommendations to the Legislature to create a coordinated and unified effort among state and local agencies to effectively confront the statewide addiction and substance abuse crisis. The bill is set to be heard at the Senate Appropriations Committee’s May 22 hearing.
• SB 1317 (Portantino) permits a city, county, or city and county to adopt by local ordinance health and safety standards and enforcement mechanisms for structured sober living homes, as specified. The bill is set to be heard at the Senate Appropriations Committee’s May 22 hearing.
• AB 572 (Quirk-Silva) requires DHCS to establish a pilot program, if the City of Costa Mesa elects to participate, whereby DHCS assigns a compliance analyst to investigate complaints against licensed RTFs within the City of Costa Mesa or other local governments within Orange County, as specified. The bill is pending in the Assembly Health Committee.
• AB 2200 (Patterson) requires a person who has responsibility for residents or frequent or routine contact with residents of an RTF to be subject to a criminal record review prior to that person’s involvement in the provision of services, as specified. The bill is pending in the Assembly Appropriations Committee Suspense File.
• AB 2214 (Rodriguez) establishes a voluntary certification process for recover residences, as defined, by an organization approved by DHCS to certify a residence as a recovery residence. The bill is pending in the Assembly Appropriations Committee Suspense File.
• AB 3162 (Friedman) requires DHCS to deny an application for a new RTF license if the proposed location is in proximity to an existing RTF that would result in overconcentration, as specified. The bill also increases penalties for a violation of licensing law and regulations, as specified, among other provisions. The bill is pending in the Assembly Appropriations Committee.

Previous Legislation.

• SB 636 (Bradford, 2017), which was not heard in Senate Health.
• AB 285 (Melendez, 2017), which was held on suspense in Assembly Appropriations.
• SB 1283 (Bates, 2016) failed passage in Senate Health.
• AB 2255 (Melendez, 2016), held on suspense in Assembly Appropriations 2016
• AB 848 (Stone), Ch. 744, Stats. of 2015
• AB 2491 (Nestande), held on suspense in Senate Appropriations 2014

Staff Comments:

The bill specifies that no reimbursement is required pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

According to the department, the bill would require DHCS to be responsible for monitoring, compliance and other administrative duties. To achieve and complete these activities, DHCS would have to hire new staff. Additionally, DHCS staff would have to develop and implement new regulations. New responsibilities for staff would include, but not be limited to, providing additional oversight over the practices involving clients, conducting complaint investigations and handling any litigation matters.

DHCS would require the following positions to properly oversee the requirements of SB 1268:

• One (1) Staff Services Manager I position: This position would be required to supervise the staff and oversee the overall DHCS/SUDCD compliance with the requirements of SB 1268. This position would be full time and permanent with a cost of $151,000 for FY 2019-20 and $142,000 for FY 2020-21 and on-going.
• Five (5) Associate Governmental Program Analyst (AGPA) positions: These positions would be required to establish the application review process for registration required by SB 1268. The AGPAs would review and ensure compliance with the requirements of SB 1268 by conducting periodic reviews, site visits, and auditing of referral documentation. These positions would also be responsible for investigating complaints as required by SB 1268. These positions would be full time and permanent with a cost of $671,000 for FY 2019-20 and $626,000 for FY 2020-21 and ongoing.
• One (1) Attorney III position in MHSUDS OLS: This position would be required to review and provide legal support for complaints, and investigations of those complaints made directly to DHCS, provide legal support, and coordination with the Administrative Litigation team for administrative hearings based on revocations of certification and/or licenses of alcohol and drug treatment programs. This position would be full time and permanent and have a cost of $214,000 for FY 2019-20 and $205,000 for FY 2020-21 and ongoing.

Staff notes, on November 10, 2016, the CDI issued a press release about an investigation that resulted in the arrest of the operators of some Southern California sober living homes, Community Recovery of Los Angeles (CRLA). The operators were arrested on several felony counts of grand theft and identity theft for allegedly conspiring to defraud clients and insurers out of more than $176 million. Affected insurers paid nearly $44 million before discovering the suspected fraud and stopping payments to CRLA. CRLA was accused of luring people with treatment marketing schemes and stealing patient identities to buy health insurance policies for people without their knowledge, as well as committing such acts as submitting claims for services not provided, falsely representing CRLA as a licensed RTF while not being licensed as such, and filing fraudulent health insurance policy applications. A document posted on DHCS’s Internet Web site indicates that CRLA operated both sober living homes, which were claiming to be licensed, and DHCS-certified outpatient programs. On March 15, 2018, the Orange County Register reported that one of the operators of CRLA plead guilty to 46 felony counts involving the insurance billing scheme and received 11 years in state prison following a plea to 28 counts of money laundering, seven counts of grand theft, six counts of identity theft, and five counts of insurance fraud. The other CRLA operator is awaiting trial on 46 counts of fraud and was convicted in a separate case of 31 counts, including sexual assault or exploitation of seven clients of CRLA and offering controlled substances.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Ed Hernandez, O.D., Chair

BILL NO: SB 1268

SUBJECT: Addiction treatment referrals: payment

SUMMARY:

Prohibits specified persons, programs, or entities from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery or treatment services. Permits the Department of Health Care Services to take action against specified persons, programs, and entities that violate the prohibition, including suspending or revoking licensure or certification and assessing a penalty, as specified.

Existing law:

1. Requires the Department of Health Care Services (DHCS) to license alcoholism or drug abuse recovery or treatment facilities (RTFs) that provide 24-hour residential non-medical services to adults who are recovering from problems related to alcohol, drug, or alcohol and drug misuse or abuse, and who need alcohol, drug, or alcohol and drug recovery, treatment, or detoxification services. [HSC §11834.01 et seq.]
2. Requires RTF licensees to provide at least one of the following: recovery, treatment, or detoxification services. Requires DHCS to adopt regulations requiring records and procedures appropriate for the type of service provided. Provides that the records and procedures can include all of the following: admission criteria; intake process; assessments; recovery, treatment, or detoxification planning; referral; documentation of provision of recovery, treatment, or detoxification services; discharge and continuing care planning; or indicators of recovery, treatment, or detoxification outcomes. [HSC §11834.26]
3. Grants DHCS the authority to implement a program certification procedure for alcohol and other drug treatment recovery services and to develop standards and regulations for the alcohol and other drug treatment recovery services describing the minimal level of service quality required of the service providers to qualify for and obtain state certification. [HSC §11830.1]
4. Requires substance use disorder (SUD) counselors that work in a facility licensed or certified by DHCS to be registered with or certified by a counselor certification organization (CO) recognized by DHCS. [HSC §11833]
5. Prohibits, through regulation, “licensed professionals,” as defined, in good standing with their licensing agencies from being required to become certified by a CO in order to work at a facility licensed or certified by DHCS. Defines “licensed professional” as a physician licensed by the Medical Board of California; a psychologist licensed by the California Board of Psychology (CBP); a clinical social worker or marriage and family therapist licensed by the California Board of Behavioral Sciences (BBS); or an intern registered with the CBP or the BBS. Defines “in good standing” as the professional’s license being valid and not revoked, suspended, or otherwise terminated. [Title 9 CCR §13015]

This bill:

1. Prohibits the following persons, programs, or entities from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery or treatment services:
   1. An alcoholism or drug abuse recovery and treatment program licensed by DHCS;
   2. An owner, partner, officer, or director, or a shareholder who holds an interest of at least 10% in an alcoholism or drug abuse recovery and treatment facility licensed by DHCS; and,
   3. A person employed by, or working for, an alcoholism or drug abuse recovery and treatment program licensed or certified by DHCS, including registered and certified counselors and licensed professionals providing counseling services.
2. Permits DHCS to investigate allegations and assess a penalty upon an alcoholism or drug abuse recovery and treatment program licensed or certified by DHCS; suspend or revoke the license or certification of the program; and suspend or revoke the registration or certification of a counselor for violating the provisions in 1) above. Deems a violation of 1) above a misdemeanor and punishable by a fine not to exceed $2,500 per violation.
3. Permits DHCS to investigate allegations against licensed professionals providing counseling services at an alcoholism or drug abuse recovery and treatment program licensed or certified by DHCS, and to recommend disciplinary actions, including, but not limited to, termination of employment at a program, and suspension and revocation of licensure by the respective licensing boards.

FISCAL EFFECT:

This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. Author’s statement. According to the author, this bill will ban patient brokering, which is allowing unscrupulous and unqualified persons to prey on those seeking treatment for addiction. The inability to prohibit patient brokering has led to unethical, corrupt financial relationships between treatment providers and referral agents. Other states have banned financial incentives and kickbacks for patient referral. It is time for California to do the same.
2. Licensed and certified programs. RTFs licensed by DHCS, based on what is commonly referred to as the social model, provide recovery, treatment, or detoxification services. (The Department of Public Health licenses medical model RTFs known as chemical dependency recovery hospitals.) The services provided by these RTFs include group and individual counseling, educational sessions, and alcoholism or drug abuse recovery and treatment planning. Social model RTFs are allowed to provide clients first aid and emergency care, and since the passage of AB 848 (Stone, Chapter 744, Statutes of 2015), RTFs can apply to DHCS for an additional license to provide incidental medical services by a licensed physician and surgeon or other health care practitioner, as specified. DHCS also offers a voluntary facility certification to those programs that provide the following services: day treatment, outpatient, and nonresidential detoxification. The certification is granted to programs that exceed minimum levels of service quality and are in substantial compliance with state program certification standards. Certification is available to both residential and nonresidential programs. The majority of facilities licensed by DHCS are also certified. DHCS licenses about 1,020 RTFs and certifies approximately 900 outpatient facilities. As part of their licensing and certification functions, DHCS conducts reviews of licensed and certified programs every two years, or as necessary; checks for compliance with statute, regulations, and certification standards to ensure the health and safety of clients; investigates all complaints; and has the authority to suspend or revoke a program’s license or certification for a violation of statute, regulations, and certification standards.
3. Reports about “patient brokering.” Several news articles (“How Some Southern California drug rehab centers exploit addiction,” Orange County Register, May 21, 2017; “A Choice for Recovering Addicts: Relapse or Homelessness, New York Times, May 30, 2015; “California’s Rehab System is in Crisis … ” CityWatch Los Angeles, June 23, 2016; and “Special Report: Two states with an ocean view, and an ethical cloud,” Addiction Professional, March 18, 2013) highlight the issue of “patient brokering,” whereby unscrupulous individuals (sometimes called “interventionists”) lure clients seeking SUD treatment services, buy insurance policies for the clients or offer to pay their deductibles, and “sell” them to facility operators that do not provide any type of treatment services or regular monitoring, all the while billing the insurance plan. Some individuals involved in this practice have been quoted in news articles as acknowledging that the practice may be wrong; however, they also claim that the practice is so ubiquitous in California that they would have no clients at all if they did not engage. As a result, some facility operators keep interventionists on retainer, often for $5000 to 10,000 a month, regardless of how many clients an interventionist refers to them, in order to remain in business. After clients’ insurance coverage is exhausted, unscrupulous facility operators have been allegedly discharging clients with nowhere to go, and clients end up homeless on the streets where they continue their addictions. In many news articles, the issue is largely attributed to facilities that do not require state licensure or oversight, including sober living homes (SLHs) and what New York refers to as “three-quarter houses,” which are New York’s equivalent to California’s SLHs.
4. California Department of Insurance (CDI) investigation. On November 10, 2016, the CDI issued a press release about an investigation that resulted in the arrest of the operators of some Southern California sober living homes, Community Recovery of Los Angeles (CRLA). The operators were arrested on several felony counts of grand theft and identity theft for allegedly conspiring to defraud clients and insurers out of more than $176 million. Affected insurers paid nearly $44 million before discovering the suspected fraud and stopping payments to CRLA. CRLA was accused of luring people with treatment marketing schemes and stealing patient identities to buy health insurance policies for people without their knowledge, as well as committing such acts as submitting claims for services not provided, falsely representing CRLA as a licensed RTF while not being licensed as such, and filing fraudulent health insurance policy applications. A document posted on DHCS’s Internet Web site indicates that CRLA operated both sober living homes, which were claiming to be licensed, and DHCS-certified outpatient programs. On March 15, 2018, the Orange County Register reported that one of the operators of CRLA plead guilty to 46 felony counts involving the insurance billing scheme and received 11 years in state prison following a plea to 28 counts of money laundering, seven counts of grand theft, six counts of identity theft, and five counts of insurance fraud. The other CRLA operator is awaiting trial on 46 counts of fraud and was convicted in a separate case of 31 counts, including sexual assault or exploitation of seven clients of CRLA and offering controlled substances.
5. Senate Health Committee informational hearing. On January 31, 2018, this Committee held an informational hearing to examine the SUD treatment system with a focus on treatment and services provided in RTFs; insurance coverage; patient referrals; and the state’s regulation and oversight of the system. The hearing provided an overview of recent issues that have affected the state regarding unscrupulous facility operators, and gave an opportunity for state regulators to highlight efforts they have undertaken to combat the exploitation of the SUD system. The goal of the hearing was to examine the issues and to seek strategies and policies that will prevent unscrupulous individuals from exploiting the various industries that are supposed to help treat those with SUDs, as well as to recognize federal and state protections for those with disabilities, and to ensure that policies are not enacted, either at the local or state level, that will limit the number of treatment options for those who need them.
6. Related legislation. SB 1317 (Portantino) permits a city, county, or city and county to adopt by local ordinance health and safety standards and enforcement mechanisms for structured sober living homes, as specified. SB 1317 is pending in the Senate Health Committee.

SB 1290 (Bates) makes it unlawful for any licensee, operator, manager, consultant, employee, or patient of an RTF, or any other person to, among other things, offer or pay a commission, benefit, bonus, rebate, kickback, or bribe, or engage in any split-fee arrangement to induce the referral of a patient or patronage to or from an RTF, or to solicit or receive a commission, benefit, bonus, rebate, kickback, or bribe in return for referring a patient or patronage to or from an RTF. Establishes the Commission on Substance Abuse and Recovery to provide comprehensive recommendations to the Legislature to effectively confront the statewide addiction and substance abuse crisis, as specified. SB 1290 is pending in the Senate Health Committee.

SB 1228 (Lara) prohibits a licensed RTF or an employee of a licensee from referring a patient to a facility, residence, or dwelling that is not either a licensee or certified, or engaging in patient brokering, as defined. Requires DHCS to establish a program to approve organizations that certify facilities, residences, or dwellings that provide SUD continuum of care, are not licensees, and meet specified requirements that include a ban on patient brokering. SB 1228 is pending in the Senate Health Committee.

SB 992 (Hernandez) requires DHCS licensed and certified programs to disclose business relationships, as specified, and makes changes to current licensing law to improve client treatment and provide DHCS more oversight authority over licensed RTFs. Requires DHCS to develop a program, after stakeholder input, for the voluntary registration of recovery residences, as specified. SB 992 is set to be heard in the Senate Health Committee on April 11, 2018.

SB 902 (Bates) requires DHCS to conduct a state and federal level criminal history background check for an applicant before issuing a license and, subsequent to initial licensure, for any manager, consultant, or employee of a facility, as specified. Requires DHCS to deny an application for licensure, or suspend or revoke a license, of an applicant, and would require the facility to refuse or terminate the employment, residence, or presence of a manager, consultant, or employee of the facility, if DHCS determines that individual has a criminal conviction or criminal charge pending, as specified. SB 902 is pending in the Senate Health Committee.

AB 3162 (Friedman) requires DHCS to deny an application for a new RTF license if the proposed location is in proximity to an existing RTF that would result in overconcentration, as specified. Makes other changes to RTF licensing law, including making initial licenses for RTFs provisional, requiring all programs and medical services offered or provided by an RTF to be specified in the license application, and increasing penalties for a violation of licensing law and regulations, as specified. AB 3162 is set to be heard in the Assembly Health Committee on April 17, 2018.

AB 2214 (Rodriguez) establishes a voluntary certification process for recovery residences, as defined, by an organization approved by DHCS to certify a residence as a recovery residence. AB 2214 is pending in the Assembly Appropriations Committee.

AB 572 (Quirk-Silva) requires DHCS to establish a pilot program, if the City of Costa Mesa elects to participate, whereby DHCS assigns a compliance analyst to investigate complaints against licensed RTFs within the City of Costa Mesa or other local governments within Orange County, as specified. AB 572 is pending in the Senate Health Committee.

1. Prior legislation. SB 636 (Bradford of 2017) contained provisions substantially similar to this bill and would have prohibited specified entities from using runners, cappers, steerers, or other persons to procure clients, patients, or customers for any form of medical care or treatment provided by an alcohol-related or narcotic-related program, facility, or dispensary. SB 636 was never heard in this Committee.
2. Support. Supporters of this bill, largely treatment providers and county behavioral health representatives, argue that current law does not prohibit the practice of selling patients to addiction treatment centers and programs that pass kickbacks to referral agents and others. Many of the provider groups attest to the harm this practice causes clients who need substance use disorder treatment services. Supporters argue that the inability to prohibit the practice has led to unethical, corrupt financial relationships between treatment providers and agents, with the guise of helping individuals overcome their alcoholism or drug addiction. Supporters state that referrals are commonly based on financial incentives rather than the health and well-being of the client who struggles with a substance use disorder. Supporters further argue that other states have already taken action to prohibit patient brokering, such as Florida, where the practice constitutes a third-degree felony under state law. Supporters state that this bill will help put an end to the predatory practice, in order to protect the health and well-being of individuals in recovery from addiction.
3. Oppose unless amended. The Addiction Treatment Advocacy Coalition (ATAC) writes to oppose this bill because it does not contain language from the previous version of this bill, which gave substance use providers the ability to manage their business based upon information provided by health plans. ATAC would like to see Legislative intent language from SB 636 added to this bill, which stated the intent that providers of alcohol or narcotic addiction treatment receive information from health insurance providers regarding client coverage of treatment services, such as that verification that services are covered constitutes an intent to cover the costs; that any verification that cost of extending the duration of services will be covered constitutes an intent to cover the costs; and that an authorization of services constitutes an affirmative representation that the services are covered and treatment providers are entitled to rely on that authorization. Advocates for Responsible Treatment (ART) write in opposition that while this bill proposes actual penalties for patient brokering, the target criminal of the bill is too narrowly defined and the penalty is too low. ART states that the concept of this bill is right. ART opposes this bill unless it is amended to target anyone participating in patient brokering, and to levy real consequences.
4. Technical amendments. The author may wish to take the following technical amendments for consistency throughout the bill:
   1. On page 2, line 8, after “licensed” insert:

or certified

• 1. On page 2, line 11, after “licensed” insert:

or certified

SUPPORT AND OPPOSITION:

Support: American Addiction Treatment Association

Azure Acres

California Access Coalition

California Council of Community Behavioral Health Agencies

Community Social Model Advocates, Inc.

County Behavioral Health Directors Association of California

Northbound Treatment Services

Soroptimist House of Hope

Sun Street Centers

Twin Town Treatment Centers

Villa Center, Inc.

14 individuals

Oppose: Addiction Treatment Advocacy Coalition (unless amended)

Advocates for Responsible Treatment (unless amended)

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