Rehab industry plagued by abuse, state investigators say

While most new businesses take up to two years to become profitable and a quarter fail their first year, Nicholas DeSimone has largely bucked these trends.

The Mullica Hill businessman made $15 million in three years after opening his first drug treatment center, according to the New Jersey State Board of Inquiry.

DeSimone’s success didn’t come from hard work or because his pocket of Gloucester County had more people struggling with addiction than anywhere else, investigators said.

Instead, DeSimone took advantage of a largely unregulated system to make a fortune in the drug recovery industry — and skirted the law so far that commission officials asked prosecutors to act on their claims. findings, according to testimony at a public hearing Tuesday in Trenton.

Like DeSimone, many recovery center operators exploit vulnerable people and trap them into addiction to ensure their hefty health insurance payments continue, investigators said.

Officers detailed illegal business practices such as double billing, charging for services not provided, and tampering with urine tests to indicate a relapse, thereby extending patients’ stays.

Many entice clients with free food, gifts, transportation and lodging, while others accept or pay money outright for referrals from patients with generous private insurance coverage – a practice illegal known as “body brokerage”. State lawmakers specifically criminalized patient brokering last year, but commission investigators said Tuesday they were not aware of any charges under the law.

Many operators then use their profits for personal gain. DeSimone and his wife, Michelle, skirted federal financial reporting requirements to dodge taxes and divert millions from their business — called Kingsway Recovery Center — into financial investments, credit card purchases and cash purchases cars and a house, said Laura Mercandetti, a forensic scientist. accountant to the commission.

“Nicholas DeSimone’s main motivation was to make money from insurance companies,” Mercandetti said.

The commission subpoenaed DeSimone to testify on Tuesday, but he failed to appear, prompting commission attorney Lisa Cialino to say she would file a contempt motion against him. DeSimone did not respond to The New Jersey Monitor’s request for comment after the hearing.

Investigators have referred the DeSimones for possible prosecution for money laundering, health care fraud and tax evasion, Mercandetti said. A spokesperson for the Gloucester County Attorney’s Office said he had no information on what, if anything, they were doing about DeSimone.

A widespread problem

The DeSimones may have been the commission’s primary target on Tuesday, but investigators say they are far from unique.

An outpatient treatment center called The Sanctuary in Cherry Hill brought in $6 million in insurance payments over 18 months, Mercandetti said.

“They spent it on food, clothes, car payments, vacations and personal entertainment, other household expenses and cash withdrawals from ATMs,” she said.

The center closed because it could not cover employee salaries or business expenses, she added.

Even nonprofit healthcare providers acted unscrupulous, accepting donations in exchange for referrals, investigators said.

Recovery Advocates of America, a Hamilton-based nonprofit, accepted more than $600,000 from 2017 to 2020 from about 35 treatment centers, with the biggest wins coming from two Florida-based providers, Eric Rennert said. , a special agent of the commission.

Reached by phone after the hearing, Stacey Ross, executive director of Recovery Advocates, posed questions to the association’s lawyer, who did not respond to a request for comment.

Commission Chair Tiffany Williams Brewer said the investigators expect to release a report on their findings in the coming months and will recommend to policymakers to tackle abuses in the industry.

An ingrained problem, a growing industry

The opioid epidemic may have faded from daily headlines, but it continues its murderous rampage in New Jersey, Brewer said.

More than 3,100 people died of drug overdoses last year, and another 2,237 so far this year, according to state data. Another 75,000 people have been saved in New Jersey since 2017 thanks to naloxone, a drug that reverses overdoses, the data shows.

“Many more remain trapped in the cycle of addiction, desperately seeking help to break their addiction to pills, alcohol, and other illegal substances,” Brewer said. “But too often drug addicts and their families fall victim to the very system that is supposed to help them recover and rebuild their lives.”

The rehab industry is a $42 billion growing business, Brewer said. When providers let their financial interests — instead of a recovering patient’s needs — dictate their treatment placement, patients don’t receive the specialized care best suited to their needs, Brewer added.

Nicole DiMaria testifies before the State Commission of Inquiry on October 11, 2022, about the loss of her sister to addiction. (Photo courtesy of the National Commission of Inquiry)

Nicole DiMaria lost her sister to addiction last year, saying she tried – and failed – to navigate a system whose lack of transparency ensures many never get the life-saving help they need .

Georgine DiMaria represented New Jersey in the 2007 Miss America Pageant. She later became addicted to prescription drugs and struggled with alcoholism, leaving an inpatient treatment program halfway through a planned stay in month, in part because of confusion over coverage and insurance costs, her sister testified. She died aged 37 from addiction-related liver disease and organ failure in August 2021.

Nicole DiMaria urged the commission to recommend changes that would require providers and insurers to reveal costs so families can make informed decisions about care.

“I’m a health care lawyer and I research this space for a living, and I’ve found it so hard to find information,” Nicole DiMaria said.

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