Key information about alcohol and drug abuse treatment facility law

In September 2018, Gov. Jerry Brown signed into law new legislation to combat patient brokering in the substance use disorder treatment industry. Effective Jan. 1, 2019, the Substance Use Disorder Patient Protection Act (Senate Bill 1228) prohibits alcoholism or drug abuse recovery and treatment facilities that are licensed or certified by the California Department of Health Care Services (DHCS) from giving or receiving remuneration or anything of value for the referral of a person who is seeking alcoholism or drug abuse recovery and treatment services. This law also extends to employees or other workers of such facilities, and all owners, partners, officers, directors or shareholders who hold an interest of at least 10 percent in such a licensed or certified treatment facility.

SB 1228 is intended to curtail patient brokering, a practice which has led to patients being referred to treatment centers based on financial incentives as opposed to the best interests of the patients. As indicated in the legislation, "[d]esperation is fueling a surge in patient brokering or patient trafficking, where unscrupulous services refer people with substance use disorders to programs that are inappropriate for their needs in order to gain access to insurance payments." The legislation notes that drug and opioid overdoses are in the top 20 causes of death in the state, with approximately 1,925 lives lost due to drug overdoses in California in 2016.

Similar considerations have inspired a separate federal anti-patient brokering statute that was included in the federal SUPPORT Act that was enacted in October 2018. Unlike the federal anti-brokering law, SB 1228 does not currently contain statutory exceptions (for example, for discounts or certain payments to employees) to its broad prohibition. The DHCS is authorized to enforce and implement the new law through the issuance of provider bulletins, written guidelines and similar instructions until implementing regulations are adopted.

SB 1228 authorizes DHCS to enforce the law through a variety of means. First and foremost, DHCS is empowered to investigate and impose penalties for violations of the statute. DHCS may also revoke or suspend the license of substance use disorder treatment facilities and the registration or certification of counsellors that are found to have violated the law. Other professionals who have been found to be in violation may face DHCS-recommend disciplinary action, including termination of employment at a program and suspension and revocation of licensure by the respective licensing board.

In light of the new law, licensed or certified alcoholism or drug abuse recovery and treatment facilities should review their compensation plans with employees and independent contractors, as well as their marketing practices and policies, to ensure compliance with the new statute. Pending clarification and guidance from DHCS, it is possible that common marketing compensation and other arrangements that many regarded as no or relatively low risk from a compliance standpoint may present more elevated levels of compliance risk now. Licensed or certified alcoholism or drug abuse recovery and treatment facilities should be sure to monitor any provider bulletins or other guidelines issued by DHCS that may provide additional interpretive guidance regarding the new law.