Calif. rehab clinics recruit group home residents to pad client lists

Pat Thomas has lunch in Grandview Retirement Home’s dining facility. She says she believes God made five of her. One of them is Beyoncé. She is also actress Brooke Shields, former Elvis Presley girlfriend Ann-Margret and singer Etta James.

Credit: Richard Hartog/The Center for Investigative Reporting

LOS ANGELES – Pat Thomas believes God made five of her.

One of them is Beyoncé. She is also actress Brooke Shields, former Elvis Presley girlfriend Ann-Margret and singer Etta James – not actually dead, she says.

And then there is “the first one,” as she calls herself: Pat Thomas, a woman with no teeth who sits alone in a wheelchair in the dreary courtyard of a Los Angeles board-and-care home, smoking cigarettes and battling nightmarish visions.

“The other ones go places,” Thomas, who’s in her early 60s, said of her other identities. “The first one don’t go nowhere.”

That’s why Thomas cherished the days when vans would pull up to take her and other residents to drug and alcohol rehab.

Thomas didn’t go for the therapy. She said she’s been drug-free for a couple of years. She went, she said, for a temporary escape and perks like cigarettes and cash doled out by the clinics.

A recent investigative series by The Center for Investigative Reporting and CNN uncovered rampant overbilling in California’s publicly funded drug rehabilitation system for the poor. It prompted a state crackdown that has cut funding to 177 Drug Medi-Cal clinic sites so far and opened dozens of Department of Justice probes.

Clinics bused in teens from foster care homes who didn’t have addictions, the Rehab Racket investigation found. They conjured up “ghost clients” by fabricating signatures and therapy notes. They billed for counseling held at times when counselors were not working.

And the clinics sent brigades of vans to group living facilities around the Los Angeles Basin. Even as clinics are shut down, others are filling in, picking up some of the same mentally impaired residents for counseling they may not need or understand.

Dilapidated sober living houses and bed bug-plagued homes for the elderly and mentally disabled offer one-stop shopping for clients like Thomas – willing to come along for the ride whether they have addictions or not.

Each warm body is a renewable resource, representing about $27 in government funding for a group counseling session and $64 for a one-on-one appointment. It adds up.

Clinics employing the tactic have collected tens of millions of dollars a year, a CIR review found. Last year, Los Angeles County auditors accused one Huntington Park clinic of filling most of its seats with board-and-care residents, many lacking drug problems. The recent state enforcement sweep froze that clinic’s nearly $1 million annual funding.

The demand for Medi-Cal-eligible clients has created a competitive marketplace in which clinics bribe residents to attend counseling and pay kickbacks to home operators, according to government records and interviews with former clinic staffers.

The practice is one of a variety of schemes targeting board-and-care residents on public assistance, said Molly Davies, coordinator of elder abuse prevention and long-term care ombudsman programs in Los Angeles.

“It’s exploiting them,” Davies said. “It’s a little bit like Hansel and Gretel, luring them in with something that they want so that you can take advantage of them and make them, in some respects, part of the fraud.”

Michael Farkas-Jones used to pick up Thomas and fellow residents of Grandview Retirement Home, a 216-person complex for the elderly across the street from MacArthur Park.

Changing Steps and Clean & Free are two drug rehabilitation clinics run by the same person out of the same building in South Los Angeles. Both were suspended in a statewide fraud sweep in July.

Credit: Google Street View

Farkas-Jones was a van driver and counselor for Changing Steps and Clean & Free – two clinics run by the same person out of the same squat building in South Los Angeles. He remembered that Thomas was brought to both programs for years, even though she didn’t belong there. Farkas-Jones said his bosses told him to make up counseling notes about how she and others were benefiting from treatment.

Although Thomas talked about being Beyoncé, she was one of the more highly functioning clients, according to Farkas-Jones. Some didn’t even know where they were, he said.

“A very small percentage are drug addicts and are there looking for help,” Farkas-Jones said. A former meth addict, he worked for the clinics from 2009 to 2012, when he said he was fired for damaging a clinic van while parking.

The board-and-care residents were “pieces on a board,” he said. “They’re just being shuffled around.”

Michael Farkas-Jones was a van driver and counselor for Changing Steps and Clean & Free drug rehab clinics. He says he used to pick up residents of Grandview Retirement Home and give each a pack of cigarettes. After the counseling sessions, the clients got cash, he said.

Credit: Richard Hartog/The Center for Investigative Reporting

Grandview’s administrator, Yeni Flores, said she can’t stop residents from going to clinics or drivers from pulling up their vans outside on a public street.

The $2 million in combined annual funding for Changing Steps and Clean & Free was suspended in the statewide fraud sweep in July spurred by the CIR/CNN investigation. The suspension letters said some clients didn’t qualify for rehab, according to the president of the two clinics, Belinda Baker. But she disputes that.

“If you can’t comprehend ... and you don’t have a problem, we didn’t intake you,” she said.

Baker, a former crack addict-turned-entrepreneur, said she’s aware that other clinic operators pay kickbacks to board-and-care homes. But Baker said she gave out cigarettes for clients to smoke only on breaks during counseling and gave $2 of her own money to clients who needed bus fare.

“I didn’t bribe nobody to come nowhere,” she said.

Farkas-Jones describes a different scenario. He said he would give each of Baker’s clients a pack of low-quality cigarettes before he or she got out of the van – to hide the transaction from government auditors who might be on-site. After the counseling sessions, the clients got cash, he said – up to $4 for Grandview residents, $5 for those who came from a different home. If auditors were there reviewing files, the money was handed out behind their backs, sometimes during therapy sessions.

Thomas liked listening to group discussions, she said, but was clear on her favorite part.

“They give you money and then they give you a pack of cigarettes,” she said in her raspy croak of a voice. “I loved that one.”

Noticing ‘a new trend’

Long before the recent state crackdown, a 2005 California Department of Alcohol and Drug Programs memo noted “a new trend of bussing clients in from Board and Care homes for treatment by certain providers that see this population as (a) new source of income.”

In 2009, a rival clinic operator complained to the agency that Changing Steps was handing money and cigarettes to Grandview residents and noted a “pay to play” relationship between clinics and residential facilities. An official responded in an email that the state Department of Health Care Services was interested in his information because the board-and-care issue was “rising to become an area of concern for all of us.”

In spite of that email and other internal memos detailing concerns, state officials didn’t address the problem, said JoAnn Coughlin, a former analyst with the drug and alcohol department. “Nothing came out of it,” she said.

At Grandview Retirement Home, a 216-person complex for the elderly in Los Angeles, the administrator says she can’t stop residents from going to drug rehab clinics or drivers from pulling up their vans outside on a public street.

Credit: Richard Hartog/The Center for Investigative Reporting

So the practice continued.

No official, up-to-date tally appears to exist. But CIR compiled a partial list, through government audits and interviews, of Los Angeles County clinics that have drawn some of their clients from board-and-care and sober living homes. Those 21 clinics collectively reaped $25 million last fiscal year. Most of them have been cited for questionable billing or signs of fraud.

The Department of Health Care Services, which took direct control of Drug Medi-Cal in 2012 and recently apologized for previous lapses, is “concerned about allegations of providers targeting board and care clients,” according to a statement the agency provided to CIR.

“We are working on numerous levels,” it said, “to ensure that (Drug Medi-Cal) services are provided only to those who qualify for treatment.”

Over the years, L.A. County monitoring reports have turned up variations on the theme. A 2009 audit found that the rehab clients of one clinic operator were mentally challenged” residents of a board-and-care facility that he also ran. Many had been attending counseling year after year without any documented progress or required treatment plans, it said. That clinic was suspended in this year’s state offensive stemming from CIR and CNN’s reporting.

Past prosecutions also turned up evidence of board-and-care homes on the take.

At Immaculate Care Center in Los Angeles’ Koreatown, investigators found a scribbled “ ‘pay and owe’ sheet that identifies the amount paid or due for the referral of patients” to the clinic, according to court records. At New Beginnings Recovery Treatment Center, with locations throughout L.A. County, an intake coordinator told investigators that the clinic paid various homes “for each client they provided.”

Curtis Williams worked at both clinics and a few others over the past decade. He said rehab centers routinely paid kickbacks to group living facilities for the privilege of picking up their residents at a rate of about $10 a head – ranging from $200 a month for 20 residents to $500 a month for 50.

Williams knows this because he paid kickbacks himself. “I hand-delivered the money,” he said.

He kept thinking about what his pastor told him, that he was no better than a drug dealer.

He would ply communal home operators with money as an incentive for them to get their residents up, dressed and ready for the vans to pick them up, he said. Other residence operators would hear about the kickbacks and want in, he said. Some, approached by multiple clinics, could pick the highest bidder.

Now, he said, “every facility knows that people are paying, so why are they going to give you access to their clients for free?” he said.

Clinic owners disguised the scheme by paying themselves excessive salaries and peeling off the extra cash for the payoffs, Williams said. They also padded the payroll with relatives who didn’t work there, he said, using the money to buy black-market cigarettes for down-and-out clients.

“We’re dealing with clients that come from Skid Row that have nowhere else to go, that have no family, that have no support system,” he said. “Little things like cigarettes are huge things to them.”

Kickbacks and fraud

At New Beginnings, Williams worked as program director but left before his boss was charged with fraud and grand theft in 2010. She pleaded guilty, but the charges later were reduced to misdemeanors and dismissed after she completed 100 hours of community service and paid a $50,000 fine, according to court filings.

Prosecutors said the clinic fabricated as much as 60 percent of the $11 million it billed the government over four years.

One client, identified by prosecutors as Cynthia M., sat quietly in group counseling with a blank stare on her face, according to court records.

At the time, she lived at a sober living home called Serenity House, where New Beginnings staff would collect her and other residents for rehab sessions. Cynthia wasn’t an addict – just “messed up” mentally, the house manager told investigators. She had schizophrenia and hallucinations, according to her mother.

Her doctor told investigators that she was not a proper candidate for counseling because “she barely comprehends what is going on.” A state Department of Justice special agent ended an interview with Cynthia after she “appeared to have a momentary lapse of reality.”

Over nine months, New Beginnings billed the government $5,700 for 170 counseling services in Cynthia M.’s name, all of them fraudulent, prosecutors alleged.

Willie Hinton ran the Inland Empire sober living house where she lived and several others throughout Los Angeles. Such communal residences for recovering addicts don’t face the licensing requirements of board-and-care homes, which must provide supervision for those unable to live independently.

Williams remembers delivering cash kickbacks to Hinton for letting his residents go to rehab. Sometimes, Williams said he would lobby Hinton to get more residents into the vans.

“I would say, ‘Willie, I know for a fact you have 50 clients in these two houses, and only 20 of them are getting on the bus,’ ” he recounted. “I need you to help me get more of them on the van, or we’re going to have to lower your pay.”

Hinton didn’t return calls from CIR. His business partner, Denise Parham, said they didn’t receive any kickbacks. Other operators did, she said, but “people have learned their lesson” after the New Beginnings prosecution.

“That wouldn’t be enough money for me to do something stupid like that anyway,” she said.

Parham and Hinton still run a sober living apartment complex in Central Los Angeles, where Williams said he used to meet Hinton. The Serenity House residences now are called Turning Point. A resident sitting on a beat-up couch outside told a reporter last month that she liked it there and was eager to attend a new drug rehab program that afternoon.

Not meeting requirements

A van for VIP Outpatient Treatment Center parks in front of the Faith Manor board-and-care home for the mentally disabled in Los Angeles. On a recent day, a few residents got in for an hour’s ride in traffic to the suburb of Northridge. There, they collected steak-and-cheese burritos and coffee as they signed in for group sessions.

Credit: Richard Hartog/The Center for Investigative Reporting

On a recent Thursday morning, a van emblazoned with the logo of VIP Outpatient Treatment Center stopped outside Faith Manor, a board-and-care home for the mentally disabled in Central Los Angeles. A few residents got in for an hour’s ride in traffic to the San Fernando Valley suburb of Northridge.

They used to go to another clinic. But after it was shut down this year, VIP moved in.

There, in the back of a parking lot, they sat in plastic chairs next to a dumpster and collected steak-and-cheese burritos and coffee as they signed in for group sessions. Then they crammed into the small counseling rooms of VIP Outpatient.

Asked about the situation, VIP Executive Director Tigran Sargsyan said he was providing an “important service for society. … These people need the services.”

Sargsyan said that while the coffee and burritos are an incentive, his clients come because they want therapy.

Don’t believe the ones who say they haven’t used drugs, he said, adding: “You ask any prisoner, they’ll say, ‘I’m innocent.’ ” But he also acknowledged that some have been clean for many years.

“There are some of them they haven’t used let’s say for 10 years, but they are potential to get relapse,” he said. “Everybody, even after 20 years, can go back and start using.”

But that doesn’t meet the requirements of Drug Medi-Cal. Each patient must have an addiction diagnosis based on using drugs or alcohol in the past 12 months, according to the Department of Health Care Services. Those sober for years shouldn’t make the cut.

“They don’t need those very important Medi-Cal dollars, which should be (available) to people who are really trapped by drugs,” said Jeffery Wilkins, past president of the California Society of Addiction Medicine.

Even when clients are supposed to get counseling, some are used for their signatures on attendance sheets – which allow clinics to bill for sessions whether they happened or not.

Amanda Gray, a formerly homeless crystal meth addict, had to attend a rehab program as a condition of her probation for smuggling drugs into a prison, she said. At first, Circle of Friends Outpatient Services came to pick her up at Scandia Guest Lodge, a Long Beach board-and-care home.

But later on, she said, the driver simply would ask her and other clients for three signatures each, dole out of packs of cheap filtered cigars and leave.

“I think it was bogus,” Gray said. “They’re not helping people that needed help.”

Calls to Circle of Friends, which was suspended in the state sweep, were not returned.

Looking to get away

Pat Thomas sits in the courtyard at Grandview Retirement Home in Los Angeles. She says she’s been drug-free for a couple of years but likes to go to rehab for a temporary escape and perks like cigarettes and cash doled out by the clinics.

Credit: Richard Hartog/The Center for Investigative Reporting

The broken sign outside calls Grandview an “active retirement residence.” But inside, most residents are far from active.

Pat Thomas sits alone at her usual post in the corner of an internal courtyard, smoking her way through the day or sipping a plastic foam cup of coffee sweetened with four packets of sugar. She has a rattling cough and wears a jacket and blanket in warm weather.

Other residents talk to themselves or stare into space. Thomas thinks a couple of them are versions of God. Others she calls mentally ill.

She gets scared in her room, she said, so scared she wants to die. The night before, she said, God was coming through the walls and putting animals inside of her.

She’d like to get out of Grandview for good.

“I’d love to be in a house and cook and have a computer and sewing machine,” she said. “And write some more records.”

But she’ll settle for a temporary getaway.

When Clean & Free and Changing Steps stopped coming, Thomas went to another clinic for a while, she said. But that one, Ultimate Lifestyle Center, also got suspended this year. She hopes the vans return.

“Tell ’em to come get us,” she said.

This story was edited by Amy Pyle and copy edited by Nikki Frick and Christine Lee.

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