Almost half of private facilities in California are suspected of shoddy
practices, overbilling government programs. Operators call rules bewildering,
inconsistent.

In a massive probe of clinics that distribute methadone to
California heroin addicts, government investigators have
uncovered what they believe to be a pattern of shoddy management
and rampant overbilling that has siphoned millions of dollars from
state health insurance programs for the poor.
Over the last two years, almost half of the 117 privately owned
methadone clinics in the state have come under scrutiny by the
California Department of Justice or the U.S. Drug Enforcement
Administration.
A key player in one chain of clinics targeted by authorities is the
president of the California Organization of Methadone Providers.
Another chain is owned by the former director of the National
Football League's drugtesting program.
The operators of both methadone networks say they have
engaged in no wrongdoing and are victims of bewildering and
unevenly enforced regulations.
Although many methadone clinics are run properly, the breadth
of the state and federal inquiries suggests that a substantial portion
of the industry may be rife with serious problems, including
unaccounted for methadone, poorquality treatment and
questionable, if not fraudulent, billings to the government.
In fact, the state Department of Justice has initiated a preliminary
investigation into the billing practices of yet a third chain of
methadone facilities, but officials declined to reveal any details.
So far, state authorities have concentrated on clinics owned by a
small partnership that includes Robert B. Kahn, president of the
statewide trade association of methadone providers. The clinics
allegedly have overcharged two government health insurance
programsMediCal and Drug MediCalalmost $10 million for
treating indigent heroin addicts.
To date, agents from the state MediCal fraud unit have raided
19 Southern California methadone clinics and business offices
owned jointly or individually by Kahn, Joyce Howerton Ray and
Galen E. Rogers. A treatment center in Oakland partially owned by
Kahn also was searched. Thousands of patient charts and billing
records were seized.
Although documents in the case have been sealed, the presiding
justice of the state Court of Appeal in San Diego made public a
portion of the legal filings at The Times' request.
In one of those documents, Deputy Atty. Gen. Annie
Featherman, a prosecutor in the MediCal fraud unit, summarized
the severity of the alleged wrongdoing. "The owners of the
methadone clinics," she said, "have engaged in a massive fraud
scheme, including doublebilling and triplebilling of government
health care programs for methadone treatment services."

Vitamin Packs for $13 Each
Among other things, the state is examining $800,000 that a
single San Diego clinic owned by Kahn charged MediCal for
dispensing vitamins. The small vitamin packs cost no more than 45
cents apiece, authorities say, but the clinic billed the state
$13more than many addicts pay for their daily dose of
methadone.
Through their attorney, Kahn and his partners dismissed many of
the state's allegations as honest differences in interpretations of what
can be billed to the taxsupported health programs.
"I disagree completely with the attorney general," said San Diego
lawyer Michael Lipman. "There is no fraudulent scheme here at all."
Meanwhile, on the federal front, DEA investigators have focused
on the vast network of methadone clinics owned by Dr. Forest S.
Tennant Jr. of West Covina, the NFL's former director of drug
testing, who is often relied upon by law enforcement and businesses
for his expertise in drug treatment.
Tennant, a Republican activist in Southern California, owns
Community Health Projects Inc., which operates 29 methadone
facilitiesthe largest chain in the state.
In an outofcourt agreement with the U.S. attorney's office in
March, Tennant and his chain paid $625,000 to settle government
allegations that many of his clinics violated recordkeeping
requirements, including those designed to deter the sale of
methadone on the black market. Authorities say the civil penalty is
the largest ever leveled against a methadone clinic operator.
Since the March settlement, Tennant's facilities have been
closely monitored by DEA officials, who have conducted at least
five inspections to make sure the chain is moving toward
compliance with federal law.
Tennant declined to comment on the case. But Jeff Schenkel, a
spokesman for the methadone chain, blamed the controversy on a
maze of federal rules that Tennant considers vague, inconsistent and
contradictory to state law.
"Dr. Tennant feels it's blatantly unfair that, as the largest chain in
the industry, he is expected to follow regulations that no one else
can follow," Schenkel said. "Other clinics would turn out to be just
as bad if they were given the same level of scrutiny."

Treatment Advocates Fear Backlash
Although government officials have remained publicly silent
about their investigations, some drugtreatment advocates have
expressed concerns that the allegations will provide ammunition to
critics of methadone treatment, who believe that the drug merely
substitutes one addiction for another.
"This is a terrible shame because patients are going to suffer in
the long run just as they always have," said Diane FluerySeaman,
executive director of Methadone as a Legitimate Treatment
Alternative, a patient rights organization in California. "The drug is
not the problem with the industry. It is a lot of the clinics."
When properly administered, methadone is generally regarded
as one of the most effective weapons against heroin addiction and
the diseases associated with intravenous drug use, such as AIDS
and hepatitis.
It was first developed as a painkiller in Germany during World
War II. In the 1960s, researchers in New York City discovered
that the powerful analgesic, which acts like an opiate in the human
body, could block an addict's craving for heroin without producing
euphoria.
Most patients report daily to a designated clinic where, under
the watchful eye of a dispensing nurse, they drink a mixture of liquid
methadone and fruit juice from a paper cup.
Today, treatment facilities in California can accommodate about
32,000 people. Patients either pay for care with their own money or
rely on government funding through MediCal and Drug MediCal,
a separate program created in 1995 for indigent methadone
recipients.
At the heart of the twoyear state investigation of Kahn, Rogers
and Ray is whetherand by how muchtheir clinics have
excessively tapped into the pool of government funding.
Although no criminal charges have been filed, court documents
reveal that the clinics are suspected of improperly billing the state at
least $9.9 million between 1991 and 1995.
Among other things, authorities contend that the chain charged
MediCal for services already paid by the clients or by Drug
MediCal.
Investigators say that $3.3 million of the questionable billings
came from Kahn's San Diego Reference Laboratory, which does
medical and drug testing for the clinics. That figure amounted to
70% of the lab's total billings at the time, according to court
documents.
Another $1.1 million in alleged overbillings was found by
auditors from the state Department of Health Services, who
examined operations at one of Kahn's clinics for an 18month
period ending in January 1996.
"This is a lot of money to be in dispute at one clinic," said
Stephan J. Edwards, chief of the medical review unit at the state
health department. "We believe there are a large number of services
that were not necessary and that you cannot bill for."
Auditors say they discovered that C Street Community Clinic in
San Diego collected payments twice for some servicesincluding
the taking of vital signs, office visits and electrocardiograms.
It was during the audit, they say, that the $800,000 billed to
MediCal for daily vitamins was also uncovered. Besides the huge
markup, the MediCal program may not even allow reimbursements
for vitamins, no matter what the cost, authorities say.
Speaking on behalf of the clinics and their owners, attorney
Lipman blamed the state for much of the controversy involving the
billings.
Lipman said, for example, that Kahn's staff was told by state
officials that it could charge MediCal for vitamins. He said clinic
employees even wrote "vitamins" on the bills they submitted.
"Now they say we should not be doing this," Lipman said. "The
billings for the vitamins indicated precisely what the state was being
charged for. Why did the state pay the bills for so long if there was
a problem?"
As for the other alleged improper billings by the clinic chain,
Lipman said the state's methadone reimbursement rules are so
confusing that they invite misinterpretation. He declined, however,
to provide specific examples.

Overbilling Alleged
From 1991 to 1995the years central to the state
investigationmany counties limited or denied MediCal benefits to
indigent addicts seeking methadone, forcing them to pay for
treatment on their own. Under state regulations, the fee they paid
was supposed to cover methadone doses, routine medical care,
treatment plans and counseling.
The state alleges that Kahn and his partners improperly billed
MediCal for the services already covered by the addicts' fees. But
Lipman said the clinics only sought reimbursement for treatment that
"went above and beyond" that coverage.
Lipman also blamed the billing dispute on what he called the
"hastily conceived" Drug MediCal program." While again providing
no specifics, he said the new methadone funding is filled with
confusing reimbursement rules.
In the end, Lipman predicted, a significant portion of the alleged
$10 million in excessive charges will be deemed justified.
"There might be some service that got billed improperly,"
Lipman said, "but it is minimal."
Even if the government concludes there is sufficient evidence to
press charges, the prospect of a trial could be in doubt.
In September, an appeals court ruled that state authorities
violated laws protecting the confidentiality of methadone recipients
when they seized records from the 14th Street Clinic in Oakland,
including almost 6,600 client charts. The court ordered that the
records be returned.
Because medical files were involved, the court said, investigators
needed a judicial officer called a special master to oversee the raid.
One was never sought, the state argued, because the records were
under the control of the clinic owners, not the medical director.
Ultimately, the state dropped 14th Street Clinic from its ongoing
criminal investigation after the owners paid $20,000 to settle a
handful of disputed MediCal payments.
Lawyers for the clinics still under investigation have not pursued
similar legal challenges. But The Times has learned that settlement
talks have been initiated for those facilities too.

RecordKeeping Called Poor
In the investigation of Forest Tennant's methadone clinics,
federal authorities pursued one of the oldest and most visible
drugtreatment providers in California.
He has worked as a substance abuse consultant for the state
Department of Justice, the California Highway Patrol and hundreds
of private companies, such as Texaco and Southern Pacific
Railroad.
He also has served as a councilman and mayor of West Covina.
Despite Tennant's professional and political standing, he has
been dogged by controversy for years.
In 1990, he resigned from the NFL's drugtesting program after
former employees and players claimed that the work at his lab was
shoddy and that test results were inaccurate. Similar accusations
would later drive him from his position with NASCAR, the national
stock car racing association. In both cases, he denied any
improprieties.
His serious involvement with methadone clinics began in 1972
when he took over UCLA's program. Building on that experience,
he struck out on his own, creating the nonprofit Community Health
Projects.
Over the years, his methadone clinics have been repeatedly cited
by the state and federal government for serious and continuous
deficiencies.
Among other things, state inspections have uncovered
inadequate counseling, shortages of medical services and poor
recordkeeping. In some cases, treatment records appeared to
have been falsified by stating that clients had received counseling
when in fact they had not, state reports show.
Federal prosecutors say it was the long history of uncorrected
violations that forced Tennant and his chain to pay the U.S.
government $625,000 and avoid a civil lawsuit involving at least 14
clinics. The amount was half of what the government could have
collected if it had prevailed on all 50 counts it was prepared to file
in court.

Missing Doses of Drug
Assistant U.S. Atty. Lori Richardson Pelliccioni, who handled
the case, said recordkeeping was so poor at the clinics that
methadone supplies could not be tracked adequately. In many
cases, the required documentation was either incomplete, inaccurate
or missing, she said.
During their investigation, DEA officials discovered that at least
95,000 milligrams of methadone, the equivalent of 1,580
60milligram doses, were unaccounted for. Authorities say they
have been unable to determine if any was sold illegally.
Although not as popular as many illegal drugs, a typical dose can
command $50 to $60 on the street, DEA officials say.
Heroin addicts buy black market methadone to stop withdrawal
symptoms when they cannot get their usual fix. For those who do
not use opiates, the drug can produce a powerful, but potentially
lethal, high.
The settlement agreement ordered Tennant and his clinics to
work directly with the DEA to develop a compliance plan. His
spokesman, Schenkel, said the chain produced a threevolume set
of guidelines to fulfill that obligation.
Apart from the settlement, Schenkel said, Tennant is advocating
that state legislation be passed to clarify methadone regulations and
eliminate problems he insists contributed to the federal case against
his organization.
"We have continued to do everything in our power to make sure
there are accurate records and adequate training on the front end
and maximum compliance on the other end," Schenkel said.
Tennant "wants his clinics to represent the standard in the industry."

* * *

Facts About Methadone
* THE DRUG: Methadone is a powerful analgesic that blocks
an addict's craving for heroin without producing euphoria.
* THE TREATMENT: Patients receive a single daily dose of
methadone, taken orally. About 32,000 people can be
accommodated at facilities throughout California.
* THE CONTROVERSY: Critics believe that the drug merely
substitutes one addiction for another. Supporters say methadone is
relatively cheap and, because it is taken orally, avoids risk of
disease caused by using needles.

Copyright Los Angeles Times