When Lisa O’Donnell was desperate for a place to treat her 21-year-old son’s heroin addiction, she thought Community Recovery’s “sober-living home” on Arapahoe Street in Denver was a godsend.
The telemarketers she reached when she called the number on the website said her son would find the support he needed living with other struggling addicts in a beautiful Denver mansion. They promised state-of-the-art rehab services that would help him emerge sober and ready to take on life’s challenges.
But about three months after she checked her son into the program, he called her in a panic. He told her the owner was shuttering the center and five others in Colorado because insurers had started questioning billing practices. Within weeks, former clients dumped out onto the streets started relapsing and dying of overdoses.
Now, Community Recovery founder Christopher Bathum, the self-described “rehab mogul,” faces a sentence of up to 65 years in prison following his conviction last month for sexually assaulting or exploiting seven patients and offering them controlled substances. Additional criminal charges are pending against him in Los Angeles for an alleged $176 million insurance scam.
Bathum’s business, which operated at least 19 sober-living facilities in Colorado and California, and others like it represent yet another troubling development in the nation’s deadly opioid epidemic. All the addiction is fueling a surge in treatment facilities, with as many as 14,000 currently operating in the nation, generating $35 billion in profits annually, according to federal estimates. Critics contend the money is drawing in the unscrupulous like Bathum, who had been convicted in federal court in 2002 of felony wire fraud allegations.
The first funeral after Bathum shut down his Colorado operations was for Estelle “Scout” Watson, 33, who had come to Community Recovery from Florida. She received treatment and then became a staffer at Bathum’s sober-living home on Race Street in Denver.
But Watson’s world turned upside down when Community Recovery shut down with little warning, her family said. Watson, nicknamed for the character in “To Kill a Mockingbird,” overdosed on heroin and methamphetamines a few weeks later.
“The safety net was just cut below them, and they fell back into the cesspool,” recalled her aunt, Susan Rule. “She got the shaft all right. She died.”
Watson is one of five overdose deaths The Denver Post confirmed for former Colorado patients of Community Recovery. Two of those occurred before the closure.
Members of Congress are among those concerned lax state regulations aren’t doing enough to protect the public from corrupt profiteers in the industry.
“In Colorado, my home state, more people died from overdoses than from car wrecks last year, just to put this in some kind of context,” said U.S. Rep. Diana DeGette, a Democrat from Denver, during a hearing of a Congressional subcommittee investigating abuses in the drug rehabilitation industry. “And as people are seeking addiction treatment services for themselves and their loved ones, it really, really puts a punctuation point on the fact we need to make sure that they’re getting services that are useful and that are actually treating them and that we don’t have fly-by-night operations that are just taking advantage of families’ desperation.”
Multiple levels of care in the rehab industry create opportunities for profit. At the more intensive end, detoxification and in-patient treatment often form the first stage of recovery. Patients then can progress to outpatient treatment, which often is coupled with therapeutic residential recovery in what are called sober-living homes. Recovering addicts live in such homes and are supposed to hold one another accountable for sobriety.
In Colorado, much of the industry is unregulated. Colorado does not require a license for sober-living homes or for substance-abuse treatment facilities that don’t bill Medicaid or partner with the criminal justice system or administer replacement drugs like methadone. Those standards leave a big loophole since rehab operators can choose to bill only private insurers or have people dig into their own pockets to pay for care. Colorado officials say they have no idea how many unlicensed rehab facilities exist in Colorado. A lucrative industry is sprouting up in exclusive, wealthy suburban neighborhoods, often without the benefit of any state oversight or inspections.
“There is so much fraud in this industry and very little regulation,” O’Donnell said. “It’s frightening. I would not be comfortable trying to find another rehab facility for my son. I don’t trust anyone now.”
Other states have started cracking down. Florida last year outlawed the practice of patient brokering, in which drug rehab operators pay middlemen to entice patients to cross state lines by offering to fly them to live in sober-living facilities. The brokers promise a vacation-like recovery atmosphere, but law-enforcement authorities have found substandard or no actual care in fraudulent facilities with rampant drug use and abuse among patients and staff.
Colorado officials say they have heard of complaints about drug rehab patient brokering in the state, but the practice remains legal in Colorado. The state is powerless to regulate brokering since sober-living homes aren’t required to be licensed here.
“We can only regulate through the laws that are set by the legislature of Colorado,” said Cristen Bates, a director in the Office of Behavioral Health at the Colorado Department of Human Services. “We are in regular conversations at an increasing rate on what a behavioral health license means in Colorado.”
Community Recovery isn’t the only Colorado provider to generate controversy. Since early 2015, the state has received dozens of complaints against sober-living homes and outpatient therapy clinics run by Nathan Hardage of Colorado Springs. Colorado officials recently decided against renewing the state license for his CoreVision rehab operation that allows him to bill the state’s Medicaid program. Hardage, who is appealing his license renewal rejection, disputes allegations of misconduct.
A recent lawsuit Huerfano County filed against drug manufacturers and distributors also claims unscrupulous opioid rehab businesses in that county recruited addicts nationally with false and misleading promises. “Investigations revealed that many have provided substandard care including use of physicians who had their license revoked, operating staffs which do not actually supervise patients and facilities that do not operate programs for the addicts,” that lawsuit states.
The Affordable Care Act, which bars insurers from discriminating against the mentally ill and those struggling with drug addiction, has created a huge incentive for the recovery industry. Homeless addicts now are worth hundreds of thousands of dollars in insurance payments, generating reports of patient brokering, kickbacks, identity theft and human trafficking.
At the same time, anti-discrimination and fair-housing laws provide protections to sober-living homes and stymie efforts by cities to restrict them through zoning laws. Newport Beach, Calif., paid sober-living home operators $5.2 million to resolve a lawsuit, having spent $4 million in legal fees in a failed bid to shut them down.
Clashes between cities and sober-living homes are becoming more prevalent, said Brian Connolly, a Colorado land-use lawyer who has written a book on the topic. Municipal officials must ensure any restrictions on sober-living facilities also apply to single-family homes to avoid violating anti-discrimination and housing laws, Connolly said. For instance, if a city restricts the number of patients who can live in a facility, those density requirements must also apply to families living in the neighborhood. Most sober-living homes and addiction treatment centers in the state aren’t crooked, Connolly said.
“Unfortunately, highlighting these abuses can lead people to saying we should ban all these things,” Connolly said. “That’s not the right reaction. There are doctors that are abusive, but that doesn’t mean all doctors are bad.”
In Colorado, Community Recovery charged insurers $246,000 to treat O’Donnell’s son, according to billing information she compiled. Little in actual treatment occurred, she said. The bills included nonexistent family therapy and $2,400 for each urinalysis drug test, with as many as four drug tests a week. When she tracked down the address of the supposed lab, she found it was a small shack along a rural road in Florida.
O’Donnell’s son, Alex, was one of the lucky ones. O’Donnell lived in Colorado Springs, an hour drive away from the home Bathum closed. Many patients in Colorado were left with no nearby family as Community Recovery closed facilities in Parker and Denver.
The clients had been recruited and flown or bused in from areas across the nation, said Cynthia McKay, Community Recovery’s former Colorado director. The company paid brokers to go into Alcoholics Anonymous meetings to find patients, she said. They were further enticed with scholarships that paid for their initial treatment. Once these clients were brought in, Community Recovery signed them up for health insurance without their knowledge and had them sign over power of attorney and their financial rights, according to court documents.
Cliff Brodsky, a Los Angeles investor in Bathum’s enterprises who successfully sued him for fraud, said brokers told him Bathum paid them up to $2,000 per patient.
“They go to the AA meetings and act like they love you. They suck up to you,” said Brodsky, who saw Community Recovery brokers in action. “They give you a cigarette and take you out to lunch. But they are just hustling you.”
Insurance and law-enforcement investigators allege in court documents that Community Recovery patients remained in a never-ending cycle of treatment, addiction and fraud, which allowed Bathum to pocket fraudulent insurance claims. An investigator with Blue Cross Blue Shield said the operation relied on “sober slaves” whom Bathum promoted from treatment to become his interns and staffers, an investigative document claimed.
McKay quit Community Recovery when she saw insurance bills for clients who already had been discharged from treatment, along with other red flags.
When Bathum traveled to Colorado from California to check on his facilities and patients, he had female clients pick him up at Denver International Airport, she said. One of those clients told McKay she needed a credit card to pay for a room at a hotel in Cherry Creek for Bathum and her.
“I said, ‘Absolutely not. What would make you think that is appropriate?’ ” McKay said she told the client. “She told me Bathum had booked it and wanted it taken care of.”
Another employee who had been a client confided to her that Bathum had paid her to have sex with him, she said.
“They called themselves Bathum’s girls, and they would chauffeur him around,” McKay said.
Dr. Robert Doolan, hired to be Community Recovery’s medical director in Colorado, started showing up on insurance claims as the physician of the company’s patients in California even though he wasn’t licensed to provide care there.
“It came to my attention that there was an unbelievable amount of billing under my name in California,” Doolan said. “That was not anything that I had submitted. He took advantage of the situation.”
As the facilities in Colorado closed, said McKay, former patients “were dropping off left and right. They were on the streets, and they were using heroin. People died.”
Some of the mayhem played out in rolling, tree-lined exclusive neighborhoods in the suburbs of Denver.
In 2014, John Allen rented his luxury home in Parker to Bathum’s business. The lease called for Community Recovery to move in five recovering addicts. Instead Bathum jammed in 28 patients, who over the course of a year caused hundreds of thousands of dollars in damages, court records show.
Allen spent significant legal fees to evict Community Recovery. When he took possession, it had been stripped of furniture, and the doors to the home had been left wide open, he said.
“I can tell you some things were left behind that would make you physically ill,” Allen said. “The house was trashed.”
He sold the house at a discount.
“I’m kind of one of these guys who feels there are a lot of things private enterprise can do better than government,” Allen said. “But here is a particular situation where government has to be regulating these sober-living home situations. The government has to be involved or it’s absolutely going to be a disaster.”