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According to federal health and census data, addiction treatment was a $21 billion business in 2003. By 2020, it is expected to double to $42 billion. The opioid crisis has fueled the growth of the industry by increasing the demand for residential drug treatment programs. Astronomical growth of an industry, however, often invites bad actors.

Bad actors have swarmed the residential drug treatment industry. One category of bad actors includes patient brokers, who recruit drug addicts with health insurance to residential drug treatment centers for sizeable kickbacks. Another category of bad actors are the owners and operators of treatment centers who are more interested in profit than helping patients achieve sobriety. The treatment centers provide little to no care to patients, but excessively drug test patients for an array of substances to increase reimbursements from insurance companies. After treatment, patients stay in sober living homes where they expect to receive support in their quest to maintain sobriety. Instead, they are sometimes offered drugs to ensure relapse and the start the treatment, or rather billing, cycle all over again. In short, unethical treatment centers are using the opioid epidemic as a means of exploitation for financial gain. Addiction treatment has become a multi-billion-dollar industry chiefly fueled by pee in a cup – Liquid Gold.

This Article surveys the fraudulent practices in the residential drug treatment industry and the conditions that permit them to flourish. It argues that the combination of federally mandated expansions in coverage for drug treatment along with low barriers to entry (i.e. very few regulations) permitted unethical providers to swarm the industry. The Article critiques the standard of care at drug rehabilitation facilities as outdated because facilities rely upon abstinence and the 12-step program rather than evidence-based treatments. It argues that the drug rehabilitation industry’s reliance on drug counselors who are in recovery rather than professionals who have sufficient education and training in evidence-based treatment practices does a disservice to patients seeking help with substance use disorder. The Article employs an economic analysis to examine the difficulties that patients face when seeking treatment for substance use disorder. Specifically, it argues that patients are unable to obtain reliable information on the quality of treatment centers due to severe informational asymmetries in the market and the unique position of residential drug treatment centers as partially in and partially out of the medical field.

This Article examines three proposals to end the corruption in the residential drug treatment market. First, it analyzes the recently passed federal opioid legislation that prohibits patient brokering. Second, it examines a proposal to abandon fee-for-service billing in the residential drug treatment market and replace it with outcome-based reimbursement that could properly account for the quality of the residential drug treatment center. Third, it sets forth the author’s proposal to adopt mandatory federal accreditation and licensing requirements for residential drug treatment centers and sober living homes. This Article argues that mandatory federal accreditation of facilities and licensing of providers is necessary to ensure quality care and provide needed information to consumers. Federal accreditation standards should require that treatment centers provide evidence-based treatment and adhere to minimum standards of care. Licensing requirements must require specialized training in addiction medicine to enable counselors to utilize evidence-based treatment. Federal accreditation will promote transparency into the quality of residential drug treatment centers and sober living homes nationwide. Further, it will make it easier to keep disreputable residential drug treatment centers and sober living homes out of the market. This Article concludes that federal intervention through mandatory accreditation and licensing is the most effective way to solve the severe informational asymmetry in the market and ensure quality care.