Four bills aiming to clean up California’s notoriously under-regulated addiction treatment industry landed on the governor’s desk last month — a meatier batch than had ever made it through the Sacramento sausage grinder before.

Suspense rose to a fever pitch over the weekend as the last sands slipped through the legislative hourglass — and then Gov. Gavin Newsom vetoed two of the bills and signed two others, triggering a combination of elation and disappointment in reformers.

The successful new laws will put some teeth into a ban on “body brokering” — the unsavory practice of paying for patients — and limit the ability of financially interested third parties to buy health insurance policies for patients.

One of the vetoed bills would have taken major steps to reform outpatient centers —  where the vast majority of addiction treatment happens in California — by requiring them to be licensed and meet minimum standards. The other would have prohibited rehabs and sober homes from false or misleading advertising, like telling people they’ll be “cured” in just 30 days.

Batting 500 on the treatment reform front was Assemblywoman Cottie Petrie-Norris, D-Laguna Beach, who authored the successful Assembly Bill 919 as well as the vetoed AB 920.

“I’m very pleased that we’re taking meaningful steps forward, and I’m disappointed, but not despondent, about the veto,” she said. “The governor noted in his veto message that he does support our intent — to license all substance use disorder treatment services — and we’re getting to work right now to address the concerns the administration raised.”

Newsom’s vetoes do not quibble with the big ideas behind the bills, but rather with the devilish details.

“There’s a clear pathway forward on mine,” said Sen. Pat Bates, R-Laguna Niguel, who wrote Senate Bill 589, which targeted false advertising. “We’re not giving up — we just have to thread the needle. There’s some good direction on that.”

On the books

Newsom signed AB 290, by Assemblyman Jim Wood, D-Santa Rosa, which reduces the financial incentive for treatment providers to lure people to California by promising “free” insurance coverage.

Primarily directed at kidney dialysis schemes, the proposal also reins in addiction treatment centers that lure patients from other states, sign them up for private health insurance policies and pay those premiums. That allowed the centers to bill insurers what was often hundreds of thousands of dollars, while paying a fraction of that in premiums.

“Consistent with our imperative to address rising health care costs, I am signing Assembly Bill 290,” Newsom said in a signing letter. “This bill removes financial incentives for providers to steer patients into specific health care coverage by providing that certain health providers, including dialysis clinics and substance use disorder treatment centers, be reimbursed at Medicare rates for services rendered to patients who receive premium assistance.”

Real charities will continue to help people who need help, Newsom wrote.

Petrie-Norris’s AB 919 promises to crack down on financial conflicts-of-interest among rehab operators by limiting how they offer housing and transportation as inducements to treatment. It will require that laboratories that test blood or urine for drugs, or outpatient treatment programs that offer housing to clients, have separate housing contracts specifically stating that payment for housing is the patient’s responsibility and rent should not be indirectly billed to health insurance. The practice has become common in the industry.

It also empowers the Department of Health Care Services to provide enforcement with seven new positions, costing $1.2 million the first year and $1.1 million after that.

Paths forward for vetoes

In his veto message on Bates’ SB 589, Newsom said, “While it is important to protect vulnerable patients and their families from unethical marketing practices, I am concerned that as crafted, this measure creates a false promise.

“The Department of Health Care Services has no jurisdiction or licensing oversight over recovery residences or third parties. As such, it cannot take enforcement against those entities for violations of advertisement requirements.”

Recovery residences is another term for sober living homes — just groups of recovering users who live together as families to support one another in sobriety. They are not licensed or regulated in any way, and are considered by many to be beyond the reach of government regulation because of protections afforded by the federal Americans with Disabilities Act. Addiction is considered a disability under the law.

In that distinction, Bates sees the way forward.

“They’re specifically staying away from the sober living homes,” she said. “They’re basically retreating from touching that particular area because they anticipate litigation. We have, and continue to have, litigation when anything relating to overseeing the sober living homes comes up.

“There’s a pathway on mine, dropping the specific reference to recovery homes,” she said.

Assembly Bill 920, by Petrie-Norris and Sen. Jerry Hill, D-San Mateo, would have ushered in the biggest change — requiring outpatient centers, which are now completely unsupervised by the state, to be licensed and regulated by the Department of Health Care Services. It was named to honor Wendy McEntyre ‘s son Jarrod, who died of an overdose in a sober living home in the San Fernando Valley in 2004.

Outpatient centers would have been required to adopt the American Society of Addiction Medicine’s treatment criteria as the minimum standard of care, steering the industry toward a more medical approach, rather than the 12-step social model that currently dominates and rarely succeeds. The bill was modeled after Hill’s SB 823, requiring the same rules of live-in treatment centers, which was signed into law by Gov. Jerry Brown last year.

In his veto message, Newsom said that “developing a new licensing schema is a significant undertaking, and would require a significant departure from the bill as enrolled.”

“We’re working to have something that is comprehensive and addresses all the details required to implement this,” Petrie-Norris said. “I feel like we’ve been caught in a bit of a Catch 22. Because this has been an area with no regulation and no oversight at all, it’s a yawning chasm. We’re not trying to tweak something on the margins — we’re trying to create something where nothing exists.”

This year’s crop of legislation was the most far-reaching to make it to the governor’s desk to date.The action comes in the wake of the Southern California News Group’s ongoing probe of death, sexual assault, drug abuse and paying for patients inside California’s addiction treatment industry.

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