Bill seeking background checks for rehab clinic owners advances

Alexander Ferdman ran a taxpayer-funded drug rehabilitation clinic in California’s San Fernando Valley for years, despite a felony conviction for organized crime.

State officials didn’t seem to know his criminal background until an investigation by The Center for Investigative Reporting and CNN revealed it, prompting a government crackdown that closed Ferdman’s clinic and dozens of others last year.

Now, California lawmakers want to make sure everyone knows the score from the start. A bill to require background checks for clinic owners advanced in the state Legislature today, clearing the Senate Health Committee with unanimous support.

“We felt that something needed to be done,” the bill’s author, Sen. Anthony Cannella, R-Modesto, said in an interview. “We have people who truly need these services, and we have people gaming the system.”

But SB 1339 wouldn’t necessarily prevent government funding from going to an ex-convict. Cannella said he intended to leave the decision to state or county officials, so as not to exclude rehab providers who may be rehabilitated. Many former addicts, some of whom served time in jail, are attracted to the profession.

New language in the bill bars government officials from denying a contract based solely on the operator’s criminal record. Some felons, however, already would be excluded under existing law.

Only clinic owners and medical directors would be subjected to background checks. So the screening wouldn’t catch people like George Ilouno, who co-founded a Long Beach clinic in 2006 with his wife, Benedicta. At the time, Benedicta Ilouno indicated she was the sole owner with a clean record, even though George Ilouno had been convicted of fraud and ran the clinic’s day-to-day operations.

Cannella originally wanted checks for top clinic staff as well but stripped that language at the behest of the Health Committee. He called the bill “a modest first step.”

Another bill making its way through the Legislature takes a different approach to the same problem. It would classify all Drug Medi-Cal clinics as “high risk” – automatically subjecting them to stricter screening, fingerprinting and background checks by state officials. That would put rehab clinics in the same category as those who provide power wheelchairs and other medical equipment through Medicare, a source of significant fraud in the past.

The bill’s author, Assemblyman Jose Medina, D-Riverside, said he saw the Rehab Racket investigation last year and “that led us to act.”

“We wanted to weed out the bad actors and keep the integrity of the program that is needed in the state of California,” he said.

Medina’s legislation, AB 1644, is in the Assembly Committee on Appropriations after passing the Health Committee.

Legal Services for Prisoners with Children, a San Francisco organization, wrote a letter to the Health Committee opposing increased background checks.

“Unfortunately, background checks often rely on inaccurate records and make it difficult for formerly incarcerated people to lead productive and successful lives,” it said.

Separately, Assemblyman Richard Pan, a Sacramento Democrat, has introduced legislation to improve coordination between the state agency that certifies rehab centers and the counties that contract directly with the clinics. AB 1967 would require the state Department of Health Care Services to notify counties when it opens or closes an investigation into a rehab provider.

The Rehab Racket series, and a subsequent oversight hearing led by Pan, highlighted the poor communication between state and county officials that allowed fraud to thrive. The health care services department and Los Angeles County have initiated reforms to boost collaboration.

Pan’s bill also passed the Assembly Health Committee and now is before the Appropriations Committee.

Reporter Christina Jewett contributed to this story. It was edited by Amy Pyle and copy edited by Nikki Frick.

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