The feds’ laborious effort to squash “body brokering” in California’s addiction treatment industry proceeds with allegations against two more men — pebbles tossed into a pond, rippling out to strike fear into ne’er-do-wells so they stick to the straight and narrow.

On his left forearm, Dillon DeRita had a tattoo of the Serenity Prayer. DeRita died at an Orange County rehab.
(Photo courtesy of Rich DeRita)

Does it work? Forgive us for our doubts. Despite new laws and crackdowns, our reporting — and a fraud investigator for the California Department of Insurance — suggest it’s as bad out there as it ever was, and maybe worse. Slaps-on-the-wrist from the criminal justice system almost mock the lives too often lost in a poorly regulated system that makes money off relapse, not recovery.

But first, the news: The U.S. Department of Justice indicted Terry Patton, who ran a marketing company called True Help LLC in San Bernardino County, with paying brokers to recruit patients who were then referred to addiction treatment facilities in Orange County. The facilities then paid Patton illegal kickbacks and bribes, the feds said. Patton has pleaded not guilty.

The feds have also filed an “information” against Francis Hiner, charging Hiner with conspiracy to pay, offer, solicit and receive illegal remuneration in exchange for referrals to treatment facilities. Public records identify Hiner as then-CEO of STAR Detox (Substance Treatment Addiction Recovery) in Anaheim, Huntington Beach and Santa Ana; as well as then-CEO of Newport Beach Recovery Center in Newport Beach and Santa Ana.

An information is like an indictment — minus the grand jury. It’s written by a prosecutor and reviewed by a judge, who decides if a criminal case can proceed. Somewhat mysteriously, details of Hiner’s case are not yet public-facing in federal court records; rather, documents in Patton’s file include Hiner’s case number and indicate that both “arise out of the same conspiracy, involve a same series of transactions, and involve common co-schemers,” according to court documents.

Hiner conspired to pay Patton for patients, the Department of Justice alleges in those documents. Other facilities allegedly paid Patton for patients as well, and Hiner’s case may be sealed to protect an ongoing investigation. It’s not clear if Hiner has entered a not guilty plea; phone messages and emails to Hiner were not returned, and DOJ officials did not detail why documents are not available  by deadline. Patton’s attorney also did not respond to phone and email requests for comment.

The alleged scheme

(Getty Images)

Does this sound agonizingly familiar?

An out-of-state “patient recruiter” convinced people to come to California for treatment, and referred them to Patton’s True Help “in exchange for illegal kickbacks and bribes.” Some of those kickbacks went into the patients’ pockets, to induce them to come and stay in treatment, the indictment alleges.

To avoid the toothsome Eliminating Kickbacks in Recovery Act of 2018 — a federal law that made pay-per-patient brokering illegal and carries penalties of up to 10 years in prison and $200,000 fines per violation — Patton and body brokers executed contracts paying monthly marketing fees to disguise the arrangement.

These “sham contracts and agreements…for purported ‘marketing services’ … purposefully failed to memorialize their unwritten agreement that the monthly fees, in fact, represented illegal kickbacks and bribes in exchange for the broker referring a certain number of patients per month,” court documents said.

There were elaborate attempts to obscure that, prosecutors allege: Patton would assign patients numerical values — often referred to as “units” or fractions thereof — based on the patients’ insurance, treatment type and length of stay (factors that determine how much insurers will be billed). Adjustments to the monthly payments would then be made, the indictment said. Patton paid at least $454,355 in illegal kickbacks to a broker between June 2019 and July 2022, the indictment said.

Then, Patton solicited and received illegal kickbacks and bribes from the treatment facilities for sending patients there. Patton got more than $2.3 million in illegal kickbacks and bribes for referrals over that time period, it said.

The treatment facilities then billed insurers like Anthem Blue Cross Blue Shield, Aetna and Cigna Behavioral Health, it said.

Stiff penalties? Really?

California has passed laws against patient brokering since SCNG began chronicling these problems in 2017 — but they are toothless, so state insurance fraud investigators prefer to route these cases to the DOJ because of EKRA’s potential bite.

It was a slow start, but hope ran high. In 2020, for example, officials charged 10 men with felony healthcare fraud for allegedly luring addicts to Southern California with promises of free treatment, then signing them up for private insurance, paying the premiums and generating million of dollars in bogus billings and insurance payouts.

(iStockphoto/Getty Images)

At the time, the arrests were heralded as a strike against human trafficking and exploitation. The defendants faced in excess of 20 years in prison and hundreds of thousands of dollars in fines if found guilty on all counts. Reformers rejoiced, hoping the tide was turning.

Five years later, a review of those cases found that one man had all charges dismissed; two had all felony charges dismissed and each pleaded guilty to one misdemeanor; three pleaded guilty to various felonies, and two were sentenced to prison; one pleaded not guilty and is slated for trial in December; and court records are no longer publicly available in the online court system for three defendants, indicating they may have pleaded guilty to minor misdemeanors such as failing to keep accurate health care records, behaved through a probationary period, and had their records scrubbed.

It’s the nature of the criminal justice beast to charge big and settle smaller. But the cost of  this kind of health care fraud isn’t just dollars, it’s lives.

There was outrage among reformers after Dylan Walker, who faced up to 62 years behind bars for 62 counts of patient brokering, signed a plea deal reducing the felony charges to misdemeanors in 2021. He was sentenced to a year of informal probation and had to pay $267,483 in restitution.

“It’s sending the message, once again, that addicts and alcoholics don’t matter, their families don’t matter, they’re disposable, they’re not real people, they do this to themselves so screw ’em, who cares,” said Nancy Clark, who ran treatment programs in Newport Beach and Costa Mesa for decades, at the time. “You get more punishment for shoplifting a $5 item.”

The answer is more complicated than just harsher penalties, though those would certainly help. Addiction treatment must come into the medical mainstream, be managed by licensed professionals and regulated as the life-or-death health care it actually is. That will require a wholescale revamp of the system that California has thus far refused to consider.

“They’re taking human beings and treating them as if they’re a commodity, as if they were oil or pork, and then selling them from one rehab center to another rehab center with no interest in actually helping them out,” Capt. Vlad Mikulich of the California Department of Insurance said recently. “It’s a massive industry about money…. There is nearly zero regulation on what’s happening.”

When will it change? When it’s the governor’s kid?

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Staff writer Tony Saavedra contributed to this report.