The son of a high-profile Chicago politician died in February at a sober living home affiliated with addiction treatment provider New Existence Recovery.
In March, a co-owner of New Existence, possibly distraught over that death, died after an apparent overdose.
Tim Flinn (Courtesy of Facebook)
Mark Vallas (Courtesy of Facebook)
Nancy Clark speaks at a public hearing on rehabilitation exploitation and health care trafficking. Clark opened her substance abuse treatment facility in Costa Mesa in 1990. (Photo by Bill Alkofer, Contributing Photographer)
Orange County District Attorney Tony Rackauckas announces the creation of a Sober Living Home Accountability Task Force during a meeting in the Costa Mesa Senior Center on Monday, March 12. (Photo by Bill Alkofer, Contributing Photographer)
In addition, last month, a man committed suicide by hanging himself at a mental health facility run by embattled Sovereign Health. Also last month, Luminance Recovery in south Orange County filed for bankruptcy in the wake of shrinking insurance reimbursements, according to public records.
Such human and financial misery is a cranked-up version of what passes for normal in the region’s drug and alcohol recovery industry. Patients die often in rehab; and many rehabs are financially challenged.
But after years of being largely ignored by regulators and state lawmakers, the chaotic industry is starting to attract closer scrutiny.
The Orange County District Attorney launched a specialized task force in March to probe insurance fraud and human trafficking, seen as common abuses in the world of addiction recovery. The O.C. task force comes as other agencies, including the Los Angeles District Attorney and the U.S. Department of Justice, continue open investigations of some of the region’s bigger rehab providers. It also comes as state and federal legislators are proposing new rules aimed at cleaning up the industry.
“People in need of recovery are being exploited,” said D.A. Tony Rackauckas at a public hearing on rehabilitation exploitation and health care trafficking that attracted dozens of people demanding change.
Rackauckas’ bid to look harder at the recovery business comes in the wake of a Southern California News Group investigation into what is known in the industry as “Rehab Riviera,” the cluster of more than 1,000 licensed recovery centers and thousands of unlicensed sober living homes operating in Los Angeles, Orange, Riverside and San Bernardino counties.
The SCNG investigation found that rehab industry includes many unscrupulous operators who thrive on a business model that can turn a single drug addict or alcoholic into huge profit, often without providing much in the way of recovery services.
Some operators use offers of free travel and treatment “scholarships” to lure addicts from other states into Southern California. Those addicts then are signed up for health insurance via Covered California, often under false pretenses, with treatment centers paying the premiums and then billing insurance companies — a slight-of-hand move that can put hundreds of thousands of dollars into the operator’s pocket. Often, when the insurance runs dry, those addicts wind up on Southern California streets, destitute and still addicted. Sometimes addicts die while in the care of non-medical centers that would not be allowed to open in other states.
Many rehab operators are themselves former addicts or convicts, with little or no training in the science of addiction treatment — a fact that frustrates others who say their industry is suffering from a combination of poor oversight and greed.
“I’m thrilled to have this getting the attention of the DA’s office,” said Nancy Clark, who opened her substance abuse treatment facility in Costa Mesa in 1990.
“What I’m seeing is a lot of (providers) who used to be addicted to dope are now addicted to money. They have come upon a business plan that’s incredibly profitable to them.”
People who knew Tim Flinn said he was having a hard time after a client, 24-year-old Mark Vallas, died on Feb. 23 at a Huntington Beach sober living home associated with New Existence. Vallas was the son of former Chicago Public Schools CEO and Illinois gubernatorial candidate Paul Vallas.
The Huntington Beach Police Department’s investigation of Vallas’ death is ongoing, officials said.
Flinn also struggled with addiction, and co-founded New Existence in 2016 with friend Dylan Walker. One of Flinn’s last posts on Facebook said, “I would break my back for the ones I love…but how many would push the wheelchair for me after?”
Flinn was found dead at his Fountain Valley home on Tuesday, March 13, police said. He was a burly man covered with tattoos, but those who knew him said his tough exterior sheathed a tender heart.
“He was a stand-up guy who really cared about what he did,” said a former client. “He helped hundreds of people, maybe more than a thousand… He’d say, ‘What can I do for you to keep you safe?’”
Flinn was apparently facing pressure on several fronts.
In addition to the Vallas death, and a complaint about the company’s advertising that had been filed with the state, the California Department of Health Care Services concluded in December that two New Existence homes in Costa Mesa constituted an “unlicensed facility in violation of the law.” A March update from the state shows that both facilities are now licensed.
New Existence’s business practices have also come under fire from people in the nearly-4,000-member, “It’s Time for Ethics in Addiction Treatment,” a Facebook group of rehab counselors and others who discuss problems within the industry.
Last year, a text exchange between Flinn’s business partner, Walker, and an addict, went public in that forum, laying bare an increasingly-common scam scam: Addicts demanding to be paid to get surgical implants of opioid-blocking drugs. The idea is that the addicts know rehab operators and doctors can bill insurance companies thousands of dollars per procedure.
“New Existence has not and will not engage in any unlawful or unethical treatment or business practice,” a spokeswoman for the company said by email when the text exchange became public in October. “Unfortunately, the addiction treatment industry is fraught with questionable practices, and we have encountered similar requests or demands in the past—which have all been rejected.”
But pressure on Flinn’s company didn’t go away.
Last month, Advocates for Responsible Treatment filed a complaint with the state Department of Health Care Services that said New Existence is licensed as a non-medical detox and did not appear to have state approval to provide incidental medical services. Still, the New Existence web site said, “Our specialized staff and doctors are handpicked to provide each client with the best medical detox care possible. From the moment the individual walks in they will be medically assessed by the on-staff doctor.”
The complaint filed with the state argued that New Existence’s message to customers was criminally misleading: “It is our understanding that this level of service belongs only in a clinic and therefore the operator is acting illegally.”
Walker declined comment for this story.
The Department of Health Care Services confirmed that it is investigating one death linked to New Existence. While it probes all deaths in licensed treatment facilities, both Flinn and Vallas reportedly died at unlicensed homes. Sober living homes are not subject to licensure or state regulation, and generally are not controlled by city zoning rules and other legal oversight because drug addicts and alcoholics are protected under the Americans with Disabilities Act.
Last year, Huntington Beach code enforcement officers received five complaints about homes associated with New Existence’s owners, officials said. City records list complaints such as “over 10 people, bottles on lawn,” “Sober Living facility with drugs on premises,” “residents smoking marijuana, graffiti on fence” and “sober living facility with 14 people.”
Code enforcement officials visited the homes and found that the number of residents either was less than six, or that residents denied the facilities were sober living homes, or that officers couldn’t confirm the number of residents because no one responded, city officials said.
Whatever the pressures Flinn faced, industry observers suggest his death is stark evidence of how thin the line can be, particularly in California, between addicts seeking treatment and the people who often make big money by selling an opportunity for sobriety.
“Heroin won again, and that makes me very said,” said David Skonezny, a certified drug and alcohol counselor, who created the Facebook group that has been critical of New Existence, in reference to Flinn’s death.
“Here’s a guy who, at his core, was probably a good guy, but in the end, (he was) a victim of his addiction,” said Skonezny, who has served on the board of directors for California Consortium of Addiction Programs and Professionals.
“We need to have an honest conversation about what that looks like,” Skonezny added.
“I hope they memorialize Tim as a human being, but don’t overlook the hurt and harm that were caused through his actions.”
Luminance Recovery, a detoxification and rehab facility based in San Juan Capistrano, abruptly shut down last month without issuing paychecks, according to several workers who asked not to be identified because they fear it could affect their prospects for future employment.
Michael Castanon, founder and chief executive officer of Luminance, delivered news of the closure to about 100 employees during a company-wide meeting and conference call that lasted about 10 minutes.
After Castanon’s announcement, some workers left immediately, leaving others to help place dozens of clients at other rehab facilities in San Clemente, Laguna Niguel, Dana Point and Ladera Ranch, employees said.
Castanon later acknowledged Luminance’s financial difficulties.
“The situation is we are struggling with receiving insurance payments,” he said last month. “We have been subsidizing the company with our own cash. We have not been able to pay our investors and they have frozen our bank accounts.We didn’t anticipate it happening. We hope to be able to turn it around and take care of employee payroll.”
However, he wasn’t sure when workers might be paid.
There have been other repercussions since Luminance’s closure. Flat screen televisions, computers, a conference table and other items have been stolen in two break-ins at the company’s headquarters, and another at a sober living home in San Clemente, said Castanon, who believes the burglaries are related to his inability to cut paychecks.
“It’s tragic,” he said. “I understand people are upset.”
Luminance filed for federal bankruptcy protection on March 21, detailing liabilities of more than $2.3 million.
Last year, as the insurance industry looked hard at rehab operators, reimbursements fell from 45 percent of billed claims to just 25 percent, Luminance’s bankruptcy filings said. The cutbacks came as insurers argued that some providers were committing fraud.
Castanon and other Luminance officials were described as conscientious by several employees.
“Being part of the Luminance family was so much different that working in any other job in the recovery field,” said Holly Layte, a case manager for Luminance. “I feel they truly care about our clients. I understand the frustrations from employees, but we are in the midst of being paid from the insurance companies.”
Luminance asked the bankruptcy court for permission to use available cash to fund Castanon’s nearly $180,000 annual salary, and that of other key executives, in order to pursue collections.
Death at Sovereign
Mental health provider Sovereign Health has been having a rough time as well.
In June, after Sovereign became entangled in civil lawsuits with insurance giant HealthNet over the validity of its billings, it was raided by the Federal Bureau of Investigation. More than 100 agents stormed Sovereign offices and treatment centers in south Orange County, hunting for evidence of health care fraud, wire fraud, conspiracy, “laundering of monetary instruments” and illegal payments for patient referrals, according to paperwork filed in federal court by attorneys for the company.
Like Luminance and many other providers, Sovereign has struggled because of reduced reimbursements from insurers. Last month, as Sovereign closed and consolidated several treatment centers, a 26-year-old client, Brandon Nelson, hung himself at a company facility on Calle Vallarta in San Clemente.
“All of our staff is deeply saddened by this young man’s death. Our thoughts are with his family and loved ones. Federal privacy laws preclude us from discussing this tragic event further,” said Haroon Ahmad, Sovereign spokesman.
The San Clemente-based mental health and addiction treatment provider is closing its facility in El Paso; moving its women’s facility in Chandler, Arizona, to a new and larger facility in Beaumont in Riverside County; and closing part of its treatment facility in Culver City, officials said.
The Beaumont facility is expected to open by mid-year. The Culver City center will continue to offer detox services, officials said.
“These changes were made in order to streamline our portfolio and improve our financial performance by focusing on our top-performing facilities: San Clemente, Palm Desert and Fort Myers, Fla.,” said a statement from spokesman Ahmad.
The company’s financial problems can be tracked, at least in part, to the ongoing legal dispute with HealthNet, in which both sides accuse the other of wrongdoing.
At the D.A.’s hearing, Clark, the long-time rehab operator, said insurance companies are just as culpable for what’s happening in the industry as the crooked rehabs are.
“I talked to a dad yesterday. He has a policy out of Illinois,” Clark said. “It paid a program $180,000 for 90 days of treatment, and his son has been to nine programs, in nine different states. He is only 22.
“So it’s bad,” Clark said, surveying the crowd at Costa Mesa at the hearing.
Clark was in the dark about patient brokering and human trafficking in her industry until she started getting phone calls from people wanting to know how much her referral fee was, she said.
She was stunned to realize that they were demanding money in exchange for sending her a client.
“To the providers in this room I say, ‘You have to step up your game,” Clark said. “‘You have to stop feeling like everyone here is your enemy. And you really need to shape up.’”
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