Battering rams at the door: An FBI raid from the other side

Aug. 07--Tonmoy Sharma has a huge job; chief executive of Sovereign Health, a mental health and addiction provider with a footprint throughout Southern California, several states and India.

Still, Sharma considers himself a man under siege, a David battling Goliaths.

He sits in the same San Clemente conference room where he says the FBI imprisoned his company's legal staff, as agents rifled through privileged documents. He says the raid was the latest example of big money manipulating the strong arm of government.

Other people look at Sharma differently. At least one insurer considers him a purveyor of fraud. One medical board -- in Great Britain -- considers him ethically challenged. The U.S. Dept. of Justice considers Sharma's health care empire part of a criminal probe.

Those forces, Sharma says, are trying to crush him. As evidence, he recounts the raid.

On what began as a regular Tuesday in June, dozens of law enforcement agents stormed Sovereign's offices and related centers waving guns, seizing computers, scaring workers and confusing already-fragile patients, he said. State licensing officials were there, too, handing out lists of alternate treatment providers to patients, even though Sovereign remains open -- what he calls state-sponsored patient-brokering. With incredulity -- and rage -- he notes that the FBI even hauled a battering ram to the door of a Sovereign-affiliated laboratory.

"Tell me. Why did you need a battering ram? Why did you need guns? " Sharma said in a recent interview. "Why? Why?"

Sharma is convinced he knows why: Last year, his company sued Health Net, one of the nation's largest insurers, for failing to pay $55 million for medical services rendered by Sovereign-related companies. Health Net "engaged in a disgraceful scheme to enrich themselves by backtracking on their insurance promises to recovering addicts and the mentally ill," Sovereign's complaint said, adding that Health Net's "misconduct is part of a sad pattern of prioritizing dollars over decency."

It's agonizingly clear to him: Law enforcement has become a tool for the big-money insurer. He blasted the raid as a Mickey-Mouse exercise executed by flack-jacketed, jack-booted thugs. The federal search warrant -- which remains under seal -- is identical to the counter-suit that Health Net filed against his company, Sharma said.

"We are the biggest ones and the first ones to take them to court," Sharma said of Health Net. "They're thinking, 'If we can take out these people, the rest will fall by the wayside.... How can we harm them? How can we finish them off?' "

'Massive fraud'

Health Net sees things a bit differently. The insurer declined to respond to Sharma's charges, but in a counter-suit filed in February, Health Net argued that Sharma and his companies are engaged in massive fraud that harms all consumers. What Health Net describes echoes a recent investigation of the industry by the Southern California News Group.

Sovereign-related companies -- and many other addiction-treatment providers -- "have abused the Affordable Care Act in a manner that threatens the ongoing viability of health insurers," Health Net's suit said. "This scheme, which involves fraudulently obtaining insurance policies and the submission of thousands of false and fraudulent claims, also raises the costs of healthcare coverage to consumers, who ultimately will have to pay higher insurance premiums."

Sovereign and its affiliates comprise one of the largest groups of fraudulent providers, Health Net charged. Within the span of a single year, Sovereign's companies went from billing Health Net less than $50,000 a month to more than $13 million a month, Health Net's counter-suit said.

The magnitude of fraud in the addiction treatment industry is staggering, Health Net said. In 2013 -- before Obamacare mandated coverage for addiction treatment -- it paid $251,000 to out-of-network treatment providers. In 2015, it paid them more than $190 million, "an almost 1000-fold increase in just two years," its suit said.

How can that happen? Many clinics -- including Sovereign's -- "have been engaged in a sophisticated fraud involving paying kick-backs to 'buy' hundreds of patients from teams of brokers, or 'cappers,' who find the patients in 12-step programs, AA meetings, homeless shelters and jails, often from outside California, and then 'sell' them for cash to the highest-bidding clinic," its suit said.

"Because the prospective patients typically would not be able to afford private health insurance or the cost-sharing obligations associated with receiving services from an out-of-network provider -- and who should therefore be enrolled in state-funded or subsidized health care programs such as Medicaid -- the providers, including (Sovereign), offer the patients financial kick-backs and inducements."

The primary inducement is the offer of free care, Health Net charged. Sovereign, and providers like it, obtain Preferred Provider insurance policies for patients. The providers -- not the patients -- pay the premiums. Then the providers either waive -- or pay -- the patients' out-of-pocket-responsibilities, such as deductibles and co-pays, which violates the policy terms. As an additional inducement, many clinics also pay the airfare to get patients to their facilities, Health Net said.

Since Health Net only offers coverage to people who permanently live in California, Sovereign-related companies listed the addresses of its California facilities as the patients' own, or made addresses up, Health Net charged. Many patients never physically travel to California at all; instead, they received treatment in other states such as Florida or Arizona, where Sovereign also has centers, the insurer said.

Sovereign and the others recoup their cash outlays by billing massive amounts -- often for services that were never rendered, were not medically necessary, or are not covered under Health Net's policies, the counter-suit said. Clinics frequently falsify chart notes and patient diagnoses to support their claims and "facilitate grossly excessive billing." When the treatment is concluded, the clinics either stop paying the patients' insurance premiums -- which ends their coverage -- or "sell" them to other providers, who pick up the monthly insurance premiums and co-pays.

"These are not typical insureds, who enroll for general healthcare coverage, pay their premiums when healthy... and who are incentivized to use the insurer's network of providers," the counter-suit said. "These are insureds who have private coverage bought for them by financially-interested providers for one purpose only: to obtain coverage for the limited time needed to rack up millions of dollars in substance abuse treatments."

Health Net pointedly noted that Sharma was a former physician in the United Kingdom, whose medical license was stripped in 2008 "for serious ethical violations." Unable to practice medicine in the United Kingdom, Health Net said, he came to the United States and founded his treatment empire.

David vs. Goliath

Sharma said that such horrendous practices may be common in the industry, but not at his facilities. Errors may have been made here or there -- anything subjected to such intense scrutiny is likely to reveal imperfections -- but there is no massive, systematic fraud, he said.

He was, in fact, a psychiatrist in the UK, until his license was revoked for conduct deemed dishonest, unprofessional and misleading, according to documents from the General Medical Council of the UK, which licenses physicians there.

Sharma was found to have launched research studies on patients without the required approval of an ethics panel, and to have submitted "incorrect and potentially misleading information to a number of ethics committees," according to documents from the GMC's proceedings against him. He employed titles that he did not possess -- "Ph.D." and "professor" among them -- and "fell significantly short of the standards to be expected of a medical practitioner undertaking medical research on human subjects," the documents say.

At the time, Sharma argued that he believed he had obtained proper ethics clearances when he did his research, and that his course of study was equivalent to a Ph.D. so he was justified in using the title. The GMC was not convinced, however, and his license was "erased" in 2008.

Now, Sharma sees that whole experience through much the same lens as he sees the FBI action -- David facing off against Goliath.

The research he was conducting in the UK examined the side-effects of anti-psychotic drugs, he said. The data was leading him to the conclusion that weight-gain was one of them.

"I had a big fight with pharma," he said. "If I published that, it would be a huge problem for them."

So, in much the same way that Health Net animated the FBI, the big pharmaceutical companies animated the UK's medical licensing board, he said. They found whatever they could to discredit him.

"Investigators followed me," Sharma said. "Big money. I know what big money does. They make your life hell."

Business has taken a hit. Prospective patients and their families searching the Internet see news coverage of the FBI raid. Because California provides no objective measures of a provider's track record, it's essentially Google or nothing.

And "body brokers" from other providers are in his parking lots trying to steal away his patients -- and their insurance coverage -- every day.

"Me and Ian and Giovanni wanna bounce out of this whack program," says a text message from one of Sovereign's recent patients, to someone in a competing program.

"I'll give you Jessica's info in the morning! She'll help place you! Don't tell anyone though," says the response from the patient at a different center.

One of the attractions of the other provider: "Way more freedom," according to photographs of the text exchange provided to the Southern California News Group. Another attraction: Jessica's anatomy. "She took me out to eat I was more fixated on her books then her words," the text says. The sender later replaced the "k" in "books" with a "b."

Sharma shakes his head. This is going on -- and law enforcement is targeting him. "This stinks to high heaven," he said.

The insurers have big problems of their own, he said, from a data breach at Health Net to state investigations of its reimbursement practices to a Securities and Exchange Commission penalty for violating federal securities laws (by denying benefits to departing employees if they filed whistle-blower claims).

While some have high praise for their experiences at Sovereign, others have harsh words. Former patients and their families have complained that promised treatments weren't delivered, that insurance was over-charged, that it was easy to get drugs. Former employees have complained that workloads were crushing, operations were disorganized and the pursuit of money trumped the needs of patients.

Sharma said such complaints are no surprise. Overcoming addiction can be an extremely unpleasant experience, and many patients will complain about everything, he said. Similarly, many employees are drawn from the ranks of the recovering, and if they use, they will find themselves without a job and then lash out, he said.

Crusade

Sharma started Sovereign the year after he lost his license in the UK with a singular passion, he said.

"I felt there wasn't anyone looking at the mental health aspect," he said. "It is important, from a scientific point of view, that you treat the underlying cause of addiction. People don't do any assessments -- I find it very strange. It's like if you went to the general practitioner and say 'I'm feeling dizzy' and he gives you blood pressure tablets without taking your blood pressure. How do you know what's wrong with you if there is no measurement of the blood pressure?

"You will find treatment centers in Orange County like Starbucks," he said. "Yesterday, a tire shop -- today, a treatment center. You don't require background checks. You don't require any skill to do this. That's the problem. No quality control."

Sharma set out to change that. One center with six beds grew to 17 centers with 743 beds. A giant map hanging on the conference room wall details another 851 beds in development across the nation, which would bring the total to 1,594 beds.

At Sovereign-affiliated centers, the 12 steps of Alcoholics Anonymous are a tool, not a treatment modality. About one-third of its patients have no addiction problems at all, but are treated for mental health issues such as bipolar disorder and schizophrenia. It earned accreditation from the Joint Commission, an independent organization that accredits and certifies health care organizations in the U.S. The Joint Commission's seal of approval reflects an organization's commitment to meeting performance standards, and research by McLean Hospital, the psychiatric affiliate of Harvard Medical School, has found that its outcomes greatly out-perform those of its peers.

"We are scientists," Sharma said. "We are driven by data. We need to make sure we are the agents of the change we seek."

That's what appealed Tony Mele to Sovereign when he joined the company in 2015. He is a psychologist and Sovereign's chief clinical officer -- but he also worked as a clinical director for United Healthcare, on the other side of the aisle.

"What attracted me to Sovereign when I was considering options was the emphasis on brain wellness," Mele said. "There aren't a lot of providers who understand what happens in the brain and how to help it heal. It's really good stuff. I have a great job."

A female patient from Atlanta, who has been at Sovereign since March, appreciates the approach as well.

"I was 60 pounds when I came here," she said in July, after more than three months clean. "Now I'm 118 pounds. Sovereign has been good to me. I wanted all my life to get where I am today. I don't have any complaints."

One of the ways it helped, she said, was by waiving her co-pays. "If you want to save your life in a sunny, beautiful place, come to California," she said.

While having a third party -- who is not one's mother -- cover a patient's co-pay is something that insurers say warps the system, Sovereign and many others argue that such "third-party payments" are vital in helping people without means to access quality care.

The patient offers herself as living proof. She hopes to find work in the treatment industry someday, but the FBI raid put her on edge, fearing she might lose her sanctuary of sobriety.

Sharma worries about that, too. The government is trying to put him out of business, he said. But he's not going without a fight.

"If we are the most advanced democracy and this is done to us, what remains, really?" Sharma asked. "If you have the money, you can do anything. You can use the government as your lackey. You can manipulate the media. You can destroy an organization."

A spokesman for the U.S. Department of Justice disputed Sharma's version of events and reiterated what he said in June: "Law enforcement officials executed a search warrant approved by a federal judge that authorized them to search the premises as part of an ongoing criminal investigation.The actions of the agents and officers involved in the search was in full compliance with the law."

DOJ spokesman Thom Mrozek also said that the search warrant remains under seal, making any conclusions about its resemblance to Health Net's counter-suit hard to support.

A white board lists clean-up chores at one of Sovereign's tidy residential facilities on a quiet, winding street in the hills of San Clemente -- dishes, trash, mopping, bathrooms. Cheerful art made by recent residents brightened glass shelves -- flowers, watering cans, hearts -- and inspirational quotes hung on walls. "Spiritual growth involves giving up the stories of your past so the universe can write a new one," said one. "Recovery is not just a program to get sober... it's a program to live your life successfully, to be happy when you get there, and to give others who still suffer what you have found," said another.

The house, with six beds, was empty.

"We don't have unlimited money," Sharma said. "We survive on a two-month cycle of cash. But we are pushing back, and pushing back hard."

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