Blue Cross Blue Shield of Oklahoma has filed yet another lawsuit against addiction treatment providers in California — while reformers complain that California officials simply watch the show with their thumbs stuck in their mouths.
The alleged playbook is, yet again, exactly what California outlawed in the wake of the Southern California News Group’s reporting on this troubled sector (with a few cherries on top): paying for patients, using false information to sign people up for health insurance they aren’t actually eligible for, billing insurers for treatment that was never provided, refusing to let people leave when they complained and targeting vulnerable members of Native American tribes, according to the suit.
Named are Asana Recovery and Beachfront Sober Living in Costa Mesa; owners Mark and Adam Shandrow; medical director Dr. Christian Small; executive director Jonathan Hagen; and Asana Buy Sell LLC, the Shandrow company that owned sober living homes where Blue Cross members lived (which provided “free housing to induce patients to receive their ‘outpatient’ treatments with Asana so insurance payments could continue to come in,” the suit said).
They billed the insurer for some $71 million and collected more than $10 million, according to court documents. The insurer is suing them for fraud, negligent misrepresentation, intentional interference with contractual relationships, violations of business and professional codes and unjust enrichment.
“Mark Shandrow is no stranger to body brokering and kickbacks,” the suit said. “After spending approximately 16 years in real estate, Mark Shandrow co-founded Solid Landings Behavioral Health, a California (substance use disorder) enterprise. … Under Mr. Shandrow’s watch, Solid Landings ended up in bankruptcy after an investigation from the California Department of Insurance and the cessation of insurance payments due to suspicions of kickbacks and body brokering.”
Small, the doctor, “actually provided very little, if any, actual services. In reality, he and Asana abused his license to create the appearance that qualified professionals were providing services at Asana,” the suit said.
‘Flabbergasted’
Attorney Matt Lavin said the folks at Asana are flabbergasted by the “irresponsible, demonstrably false, defamatory” allegations in the suit.
“It’s wild — we’re still trying to wrap our heads around it,” he said.
Asana has been in a reimbursement dispute with Blue Cross Blue Shield of Oklahoma over the insurer’s refusal to pay for services rendered for years, Lavin said, “and it looks like they’re turning it on its head, trying to get out of reimbursement by filing this suit.”
The allegations read like a carbon copy of the suit Blue Cross Blue Shield of Oklahoma recently filed against other Orange County rehabs, including South Coast Behavioral Health and Rad Life Recovery of Costa Mesa, he said.
Asana is accredited by professional organizations and in-network “with every single major payer in the country,” Lavin said. “They’re shocked about this. It seems like this is some kind of reaction to feed into a popular narrative in Orange County of being full of unscrupulous treatment centers. As someone who has worked around health care and behavioral health care, it was an issue, but not Asana. I would send my child there.”
Asana will defend itself — and bring counterclaims for the money that’s been withheld, he said. Asana has worked closely to help Native American tribes in Oklahoma — some of whom have written to officials in Oklahoma seeking to break the payment impasse.
“Starting September 2023, BCBS OK ceased the majority of payments authorized for services provided by Asana Recovery,” wrote Reggie Wassana, governor of the Cheyenne and Arapaho Tribes. “Asana Recovery plays a vital role in providing substance abuse treatment for our Tribal members, particularly when local beds are unavailable. Additionally, the effectiveness of out-of-state treatment for our members has significantly contributed to their recovery and our community’s well-being.”
In Oklahoma, 1 in 5 residents has some kind of substance use disorder, attorney Lavin said, and many of them are Native American. Asana has developed an expertise in working with and treating this population, he said.
Data from the federal Substance Abuse and Mental Health Services Administration shows that Oklahoma had about 165 addiction treatment facilities treating some 29,000 people in 2023, with about 730 residential beds. That’s about one bed for every 5,600 residents.
California, meanwhile, had about 1,500 addiction treatment facilities treating some 90,000 clients, with about 11,100 residential beds, according to the data. That’s about one bed for every 3,600 residents. It’s worth noting, though, that many in California’s addiction treatment system are from out of state.
Fraud ‘permeates every level’
The Blue Cross Blue Shield suit said vulnerable members of an Oklahoma-based Native American tribe with addiction issues were targeted.
One person, identified only as “JC,” was contacted on social media by another tribe member, KB, who was working for Asana as a “body broker,” the suit said.
“KB had previously been a patient at Asana and now was paid kickbacks to track down potential patients and traffic them to California for ‘treatment’ at Asana,” it said. “Trusting KB and in need of treatment, JC agreed to enroll in Asana and was flown out to California at no charge. Upon arrival at Asana, she was forced to strip off her clothes, hand over her cell phone and all other belongings, and confronted with an agreement to stay at Asana for 90 days, far longer than the maximum 30-days she had been told prior to arrival.
“Over the next 10 days, JC discovered the treatment and experience she had been promised was a lie. She received one short virtual session with an unknown individual, was provided unknown medication from what appeared to be a fellow patient, and had one ‘treatment session’ that entailed going for a hike.
“After Asana ignored her repeated requests to see an actual therapist and receive real treatment, JC attempted to call her family and leave. Asana refused to let her use her phone. When she then sought to leave, Asana refused to return her phone or belongings and prohibited her from going outside. Eventually, when Asana staff were not watching, JC put what she could in a laundry basket and escaped out the front door.”
Lavin, Asana’s attorney, said it’s standard practice in the industry to hold a patient’s belongings if they try to leave against medical advice. “The brain is telling them to run away,” he said. “Every single treatment center has policy of holding things for 48 hours, trying to get people to return so they don’t overdose on the street.”
During JC’s short stay, Asana submitted claims seeking $4,500 in payments for every day of the stay, “representing that they were providing 24-hour supervised detox treatment,” the suit said. “This was obviously false.”
The insurer said Asana paid kickbacks to body brokers; paid active patients for phone numbers and “leads” for potential patients; targeted those potential patients with false sales pitches about the quality of treatment, perks such as private chefs and the false claim that Asana had “reached an agreement with the state of Oklahoma to provide treatment” even though no such agreement existed; and paid patients to leave positive online reviews “to cover-up the deluge of negative reviews that were flooding online resources,” the suit said. One patient was promised $10,000 if he enrolled in a Blue Cross Blue Shield of Oklahoma plan and attended Asana for a certain length of time, it said.
Asana’s attorney, Lavin, said that the only people doing outreach are full-time employees. “They don’t have relationships with body brokers,” he said.
If people didn’t have good insurance, Asana endeavored to fraudulently enroll them in the Blue Cross Blue Shield of Oklahoma plans, the suit said. Asana also waived the patients’ out-of-pocket costs, which are meant to ensure they have skin in the game and are motivated to seek out the most cost-effective treatment and make the most of any treatment they do receive, it said.
Once enrolled, Asana provided minimal or non-existent treatment, often overseen by other patients or people who weren’t licensed or qualified, it said. “Like JC, many patients desired to leave when they realized treatment was not forthcoming. Because this would thwart the ability to bill insurance, Asana went to appalling lengths to stop patient departures, such as: cutting off phone access, refusing to return patient belongings, and – worst of all – refusing to provide patients their needed medications.
“For other patients, Asana induced them to stay through ’employment,’ during which Asana often continued to bill for insurance, thereby obtaining free labor through insurance payments,” it said. “Once a patient completed detox treatment, Asana – in conjunction with Beachfront and Asana Buy Sell – provided free housing to induce patients to receive their ‘outpatient’ treatments with Asana so insurance payments could continue to come in.”
Health insurance pays for outpatient treatment, but is not supposed to pay rent or housing costs.
Asana’s modus operandi is not only fraudulent, but life-threatening, the suit said. “(T)reatment was just a cover for their ultimate prize: money. And they got a lot of it: over $10 million in ill-gotten gains from (Blue Cross Blue Shield of Oklahoma) alone,” the suit said. Fraud “permeates every level of the treatment cycle and covers a staggering array of overlapping conduct, including: body brokering, false advertising, fraudulent enrollment, cost-share waivers, fraudulent billing and illegal kickbacks.” The insurer seeks punitive and exemplary damages in an amount sufficient to punish Asana — and deter others from engaging in similar conduct.
Asana’s attorney said this portrait is fictional. Asana never used body brokers, he said. It doesn’t have marijuana-friendly sober homes. It never provided free housing or transportation. It never paid people to come to treatment. It never enrolled anybody in insurance. There have been issues in the industry, he said, but Asana is one of the good ones.
Critics aren’t surprised
Some reformers, however, have been asking California regulators to move on Asana for years.
“I have grave concerns regarding Asana Recovery in Costa Mesa … where serious safety violations continue to put lives at risk,” said a 12-page complaint from Wendy McEntyre of Jarrod’s Law to the California Department of Health Care Services, which licenses and regulates non-medical addiction treatment facilities like Asana.
“For over two years, investigations have revealed deeply troubling patterns of abuse, negligence and regulatory violations that continue to this day, while the facility inexplicably remains operational. The necessity for this exhaustive documentation stems from DHCS’s continued pattern of inadequate oversight and apparent willful ignorance of systematic violations…. This institutional failure to acknowledge and act … demonstrates a concerning departure from DHCS’s regulatory responsibilities.”
McEntyre points to the case of John Jacob McLister, who had an extremely high blood alcohol level when he checked into Asana the morning of April 3, 2021, according to records. He was exhibiting symptoms of acute withdrawal: tremors, nausea, abdominal pain, anxiety, depression, irritability, loss of appetite, headache and restlessness, as well as recent seizure disorder, according to a lawsuit filed in 2023.
Security video shows McLister fidgeting as others played a dice game just a few feet away. He sprawled out on a nearby sofa and soon began to twitch and shake. No one took much notice. Soon, the twitching stopped.
Some seven hours after arriving, McLister was dead, the suit said. Asana failed to properly assess his condition and realize he required a higher level of care; failed to provide medication to ease the symptoms of acute alcohol withdrawal; and failed to adequately monitor him, the suit charged.
Asana denied the allegations and said McLister’s death was his own fault, and/or “caused by the natural course of a disease.” Nonetheless, the parties settled last year, according to court documents.
The state found nothing to question in its death investigation and has not yet responded to McEntyre’s complaint. We asked to see if it had anything to say about the lawsuit: “DHCS is unable to comment on active litigation and does not comment on open, ongoing investigations,” a spokesman said.
Separately, former healthcare technician Keisha Monique Simon filed suit against Asana last year, charging it with “a scheme of wage abuse” and multiple violations of labor law. Asana denied “each and every allegation” in court paperwork.
Lavin, Asana’s attorney, said California’s licensing system has room for improvement but there’s clearly a need for good substance use disorder treatment in this country. “It has affected my family — it affects everybody’s family,” he said. “The big hospital systems – they don’t do it. Where are you supposed to go?
“In my experience, people who’ve had cancer generally aren’t opening oncology clinics. But the only population that seems interested in treating this population are a lot of people in recovery.”
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