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Fraud in Addiction Treatment Centers

Updated: Aug 29, 2023

Editor’s Note: Today’s post comes from guest blogger Nicole Allen. Nicole is a freelance writer and educator based in the Michigan and believes that her writing is an extension of her career as a tutor since they both encourage learning and discussing new things. When she isn’t writing, you might find Nicole running, hiking, or swimming. She’s participated in several 10K races and hopes to compete in a marathon one day.

It seems to be these days that whenever there’s money involved, there’s always a sure case of fraud. Although fraud is not new in business transactions, it can be surprising that some people are finding devious ways to trick insurance companies into paying for the rehabilitation process. Much like watching crime and investigation documentaries about insurance fraud, individuals can also “fake” their way into claiming a benefit from a company, without using it for the actual cause.

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As seen in a Roman epigram: A case of fraud?

Surprisingly, insurance fraud is not a new thing–in fact, it may even be as old as the stone statues built by the previous civilization. As seen in an epigram by the Roman poet Martial, there is a clear evidence that insurance fraud dates back to the old ages of the Roman Empire:

“Tongilianus, you paid two hundred for your house;An accident too common in this city destroyed it.You collected ten times more. Doesn’t it seem, I pray,That you set fire to your own house, Tongilianus?”Source: Book III, No. 52, Martial

What about fraud in addiction centers?

Although the schemes are different, the crimes are identical. Now, many “treatment centers” are under the fire after reports of issues on patient brokerage. Susceptible individuals who have insurance polices may be encouraged by fake treatment centers to seek their rehab services, often receiving nothing in return. These fraudulent centers collect the money from the insurances of their patients, giving nothing of service to their supposed clients.

In 2013, Coalition Against Insurance Fraud (CAIF) reported fake California treatment centers such as Able Family Support lured over 179 total of patients with Medicaid insurance into availing services. Over the course of time, the clinical director Alexander Ferdman embezzled a total of $ 2 million worth of taxpayers money.

Just in February 2018, Sober Home owner Kenneth Chatman was sentenced to 27 years in prison after luring drug rehab patients to his clinics to make money off their insurance claims. In Florida, Chatman built several “Sober Homes” under the guise of his wife’s name to bring in more patients and profits. Sadly, these people never got the treatment they needed, resulting in an over a $24 million loss in insurance claims. In July 2017, vulnerable opioid users with Blue Cross Health Insurance were also lured into enrolling in a cross-state fraud treatment center with shoddy services. These patient brokers target susceptible patients with premium benefits to maximize the profits in their deceptive tactics.

These are but a few examples of the many illegal operations that happen in the drug rehabilitation industry. Sadly, the cost of these crimes is two-fold–it doesn’t just affect insurance companies, but it is also detrimental to the health and wellness of the patients who didn’t have the chance to recover.

Government crackdown on rehabilitation insurance fraud

In 2017, the US House Committee on Energy and Commerce held a meeting regarding substance abuse patient brokerage. The meeting was aimed to stop the profit-focused status of many rehabilitation centers and bring awareness to insurance fraud. According to CEO and President of Caron Treatment Centers Douglas Teiman, he was “deeply troubled by the unethical practices in the drug rehabilitation industry”.

The government is now finding ways to investigate these treatment centers, not only to help insurance companies, but also to aid patients in need of quality care. Some steps being taken are: 1.) Ensuring that loopholes are resolved in insurance policies, 2.) Regulating and inspecting treatment centers in every state, and 3.) Promoting awareness in signs of fraud towards potential rehabilitation clients.

The rehabilitation insurance scam has an all-too-familiar process–patients are lured into thinking that they will get quality services after talking to a patient broker. They are asked information about their insurance company, and the amount of claim they can get. Afterwards, these victims are provided with information about a fake center they can go for the recovery process. Due to lack of awareness, most patients think that the service is the best they can get. They finish the alleged rehabilitation service as penniless, unmotivated, and rarely feeling better.

Understanding the signs of fraudulent treatment centers

With the increased offense toward insurance fraud in the drug rehabilitation business, CAIF and other non-profit organizations are partnering with each other to promote awareness among patients considering treatment.

Some of the most common signs to look out for suspicious rehab centers are:

  1. Unsolicited messages in text or social media by recruiters

  2. A promise of fee coverage for transportation and accommodation for an out-of-state center

  3. Asking for personal information (social security number, bank details, address, insurance details) using insecure platforms such as messaging, social media, or e-mail

One way to stop insurance fraud is by killing it from the source. When patients are less vulnerable with these recruitment scams, the less will it be likely for fake treatment centers to flourish.


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