Editor’s Corner: A fraud scheme in a league of its own

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Christopher Bathum allegedly billed insurers for drug treatment services beyond what was provided.
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Evan Sweeney
Editor's Corner

Earlier this month, authorities arrested Christopher Bathum, the self-described “rehab mogul” and founder of more than two dozen sober homes and outpatient drug treatment facilities in California and Colorado. Bathum was charged with fraudulently billing four different insurance companies more than $176 million.

According to a release by California Insurance Commissioner Dave Jones, Bathum, the CEO of Community Recovery of Los Angeles (CRLA), and Kirsten Wallace, the company’s CFO, lured drug addicts to CRLA facilities, stole patient information in order to purchase health insurance policies without their consent, and then billed insurers for drug treatment services beyond what was provided.

Anthem Blue Cross Blue Shield, Cigna, Health Net and Humana paid the company $44 million before discovering the scheme. Bathum profited handsomely.

But the 50-count fraud complaint (PDF) against Bathum paled in comparison to the allegations contained in a separate lawsuit filed by the Los Angeles County District Attorney’s Office. In that suit, Bathum was charged with sexually assaulting and raping female patients between 2013 and 2016, even going as far as to coerce recovering addicts with drugs.

The allegations against Bathum—who has pleaded not guilty to all charges—are a culmination of nearly a year’s worth of negative press for the rehab mogul. In December, LA Weekly wrote a lengthy feature on Bathum that included allegations from one former patient claiming Bathum sexually assaulted her. At that point, Bathum was also being investigated by city and state law enforcement agencies, along with “nearly every large insurance company in California,” according to LA Weekly.  

Three more women have come forward since then, filing civil lawsuits accusing Bathum of sexual assault. In June, Bathum was the target of an hourlong 20/20 investigation that focused primarily on his relationship with several female patients. One woman described how Bathum sexually assaulted her in a cramped sweat lodge at a Malibu sober home. Another said Bathum took her to a seedy Malibu hotel where he overdosed on meth and heroin.

In both the LA Weekly story and the 20/20 special, Bathum repeatedly and categorically denied all of the allegations against him, including any insinuation that he had sexually assaulted female patients or used drugs. He blamed identity theft for the ambulance records linking him to an overdose. At one point he filed a libel lawsuit against LA Weekly’s parent company, which he later withdrew.

“It was less of a fraud case a more of a crime against humanity.” 

- Jeff Schroder, Plunkett Cooney

His denial has done little to stop the evidence mounting up against him. The unique and disturbing addendum to this fraud case goes well beyond the $176 million he allegedly billed to various insurance companies.

If a court determines the sexual assault charges against him are true, he will have irreparably altered the lives of addicts and their families during a time when they were most vulnerable. He could also spend the rest of his life behind bars.

Recently, I spoke with Jeff Schroder, an attorney with Plunkett Cooney and the former Assistant Attorney General for Michigan’s healthcare fraud division, for a story about how an ACA repeal could change antifraud efforts. During our conversation, he mentioned that he had worked on a case against Farid Fata, the Detroit oncologist that was sentenced to 45 years in prison for falsely diagnosing patients with cancer and treating them with chemotherapy. In his quest for more wealth, Fata left a slew of patients and families in his wake—some of whom died as a result of the unnecessary treatments.

For a few minutes, we chatted about the recklessness of that case. Schroder still has the email he sent Michigan’s Medicaid Fraud Control Unit director when they first received a tip about the Fata case: If this is true, it could be the worst fraud case we’ll ever see, he wrote.

“It was less of a fraud case a more of a crime against humanity,” Schroder told me, trying to find the right words to describe such a heinous scheme.

Bathum’s case, if true, belongs in the same category. The fraudulent billing, although harmful, appears to be entangled with much more nefarious and deviant crimes that go well beyond a quest for wealth. Deb Herzog, a former federal prosecutor and investigator for Anthem who spent a year investigating Bathum, told LA weekly that Bathum is “one of the most despicable criminals I have ever come across.”

We often measure fraud schemes in the form of dollars and cents—myself included. It is, by its very nature, a financial crime. But human elements inevitably manage to seep into the crevices of these cases, leaving a much more devastating impact. This is particularly true in the addiction treatment industry that serves a downtrodden and defenseless patient population.

There’s one more unfortunate postscript to Bathum’s case: The whole thing could have been fairly easily avoided with just a small amount of oversight. Residential sober living homes in California are not required to be licensed. If they were, it’s possible that Bathum the “rehab mogul” never would have existed.

For those looking for ways to rein in the largely unregulated addiction treatment industry, that might be a good place to start. - Evan Sweeney, @fiercehealth

Watch the 20/20 episode: