Medicaid fraud propels a host of abuses in Philadelphia

The opposite of addiction is connection. Perhaps the only thing worse than being a person with an active substance use disorder is being someone who exploits those who are disadvantaged, disabled or disenfranchised. A June 1 article in the Philadelphia Inquirer reveals yet another such network of addiction treatment providers and boarding house operators.

The process, known as “pimping out,” is fueled by Medicaid dollars. Housing operators send their boarders to cooperative outpatient treatment programs that bill Medicaid for treatment services, and the centers then funnel some of the reimbursements to the housing operators. The system is organized to the point that it even includes van rides for the residents to and from the treatment centers participating in the scheme. One longtime program manager calls it a “pay-to-play system of kickbacks” in which individuals are trapped in systems that provide neither practice-based evidence of effective addiction treatment and recovery support nor the equally essential safe, recovery-supportive housing.

The Pennsylvania Alliance of Recovery Residences (PARR), and similar affiliates of the National Alliance for Recovery Residences (NARR), offer solutions that build sustainable networks of recovery-oriented systems of care. We know that these conditions need not exist, and that alternatives will deliver superior outcomes without the human cost associated with systems such as the one described in the Inquirer article.

Robert Fairbanks, the author of How It Works, an in-depth look at housing, programs and neighborhoods highlighted in the Inquirer article, is cited in the article: “Ultimately, it's difficult to blame many of the people involved in pimping out. Kickbacks … are strategies developed by people stuck in hard place, trying to survive.” Fairbanks thinks of the treatment center/recovery house matrix as a “meat market and a messy poverty management system in one.”

The system is not new. Fairbanks' book was published in 2009, and before then the described abuses were known to elements of the criminal justice system, social services agencies, and city government.

Pattern repeated elsewhere

This storyline is disturbingly similar to others, including a recent one about New York City that was covered by The New York Times in May 2015. As in Philadelphia, the scheme's financing was provided by Medicaid-funded addiction treatment providers. NARR responded at the time that such schemes are a predictable result of a large population of Medicaid-dependent individuals with substance use and/or other disorders, acute demand that exceeds the availability of habitable low-cost housing, lax oversight and enforcement of funder rules and housing standards, and a failure to promote legitimate recovery housing options.

Importantly, these systems cannot persist without their tacit acceptance by many influential people in private and governmental agencies. Margaret Heffernan, in Willful Blindness: Why We Ignore the Obvious at Our Peril, acknowledges that we turn a blind eye to feel safe, to avoid conflict, to reduce anxiety, and to protect prestige. She goes on to say, however, that greater understanding leads to solutions, and it begins with challenging our biases, encouraging debate, discouraging conformity, and not backing away from difficult or complicated problems.

These kinds of abuses are not limited to Medicaid. Similar questionable and unethical practices in the private insurance market have been the subject of federal indictments of treatment providers and housing operators. In addition to illegal diversion of insurance funds, allegations surrounding these arrangements include “body brokering” of insured clients to treatment centers willing to pay big money for the referrals.

As in New York City, Philadelphia officials know that the “pimping out” system is thriving. Although some officials minimize its scope, the system could include as many as 4,000 individuals in 200 different “recovery houses.” Many defend this system as the only way to house and treat people in recovery who have few or no resources. No one claims this is a good way to deliver care—it's certainly not a point of pride for city officials. Such a system may be better than living on the street, but it cannot provide either effective treatment or decent housing that supports recovery. Instead, it creates the opposite: sustained dependency and disenfranchisement.

Recovery is difficult, and the populations targeted by these schemes face especially tough challenges in overcoming barriers to health and well-being. Medicaid reimbursements are usually insufficient relative to the actual costs of delivering covered services, and provide no surplus enabling providers to pay for referrals (even if it were legal to do so). It's not surprising that operators paying or receiving kickbacks provide inferior care. For example, the Inquirer article notes that group sessions can be quite large—as many as 60 individuals. That's four times the number allowed by many states, including California, which limits Medicaid reimbursements for group therapy to no more than 15 per group.

The system's detractors and defenders agree that many individuals seeking recovery will not succeed when they are homeless. However, recovery housing costs money to operate—more than can be financed by illicit Medicaid kickbacks. The Department of Housing and Urban Development (HUD) offers some resources, but its Housing First approach creates obstacles for the formation and maintenance of alcohol- and other drug-free environments. As in New York City, Philadelphia solutions must be found in the context of underfunded (at best siloed and fragmented, and at worst uncompassionate) Medicaid and social services systems.

Attack sources of dysfunction

Sometimes there are no easy solutions—only tradeoffs—and good options are often constrained by funding realities. Those constraints are weak reasons to accept and perpetuate the status quo. In these cases, we should at least address the most obvious sources of a dysfunctional system. Lasting solutions can't be effective until Philadelphia gets serious about Medicaid fraud. Barring predatory and substandard providers from the Medicaid program goes a long way toward stopping the abuses, provided that the city has the will to do so.

Enforcement of existing anti-fraud laws and Medicaid quality-of-care regulations will dry up the funding that feeds the system, but that addresses only part of the problem. Thousands of people seeking recovery lack safe and supportive residential environments. Without access to recovery housing, their chances of recovery are poor, even with access to outpatient treatment. Unfortunately, the self-styled “recovery homes” featured in the Inquirer article are nothing of the sort. The housing appears to be poorly managed, often unsafe, and usually overcrowded. No one with any other option would choose to live there.

Fortunately, Philadelphia does not lack the potential housing capacity for this at-risk population. The housing stock in the affected communities may be in poor condition, but much of it can be renovated to meet current standards of habitability. Unlike temporary shelters and many supportive housing models, recovery residences can operate in virtually any housing footprint, including renovated row houses.

The issue of poor management and lack of oversight has existing solutions too. The city has access to housing expertise. PARR administers nationally recognized standards for recovery housing, trains operators, and certifies recovery residences. PARR-certified homes are subject to its oversight. Importantly, none of the “recovery homes” implicated in the current scandal are PARR-certified, and that certification is required for residences participating in a city-funded recovery housing program. PARR can play a significant role in sustaining systems of well-operated recovery residences, but its effectiveness depends on adequate funding and support.

Congress recently appropriated funds to address the opioid epidemic through the 21st Century CURES Act. States are permitted to use those funds to support organizations such as PARR for operator training and related work to upgrade and maintain recovery housing systems. The National Council for Behavioral Health and other organizations are urging state addiction agencies to use a portion of the CURES funding to support their NARR affiliates, or for formation of affiliates in states without them.

The Pennsylvania legislature is currently considering a certification system for recovery residences that could go a long way toward creating a better system of recovery housing. The system would require that referrals from federally and state-funded programs could be made only to certified residences accountable to third-party oversight. The better of the two competing plans would rely on NARR's nationally recognized standards as the basis for certification. The state Department of Health Services could utilize PARR to train, support and certify recovery residences.

Medicaid does not recognize recovery housing as a reimbursable service, so funding for residents to access it is a challenge. Solutions exist, however. The city already pays for resident stays in approximately 20 residences through another funding source. California recognized the need to provide both treatment and recovery housing for some of its Medicaid population, and recently received permission to utilize recovery residences as benefits in its Medicaid program. If Pennsylvania were to seek similar permission, it could offer the benefits of outpatient addiction treatment plus recovery-supportive housing without the current abuses.

Other states have funded renovations and property acquisitions. The Ohio legislature made a significant appropriation for that purpose. Public/private housing finance organizations are also sources of funds. In Massachusetts, MassHousing has been funding recovery housing projects for years. As is the norm elsewhere, funding can be tied to compliance with accepted national operating standards.

The existence and growth of exploitative systems usually are not the result of deliberate planning. They are, however, the predictable result of conditions over which local, state and federal governments and public health systems share influence. Addiction and recovery support services, including recovery housing, can be delivered with integrity. Systems of safe, healthy and well-managed recovery residences flourish when properly supported. In the case of Philadelphia, the recent article should mark the beginning of constructive planning for the city to do the right thing.

David Sheridan is president of the National Alliance for Recovery Residences.