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LEAK: Scientology’s Rehab Went from $5,000 to $2.5 Million in Insurance Revenue in One Year

Gary Smith

Gary Smith

We can hardly keep up with the documents that former Narconon officials Luke Catton and Eric Tenorio have been making public. The most recent is a stunning e-mail that Catton released yesterday, showing how much Scientology’s flagship drug rehab facility, Narconon Arrowhead in Oklahoma, has turned to revenue from insurance companies to bolster its bottom line.

Catton gave us a copy of the e-mail, which he says he received from Narconon Arrowhead CEO Gary Smith early in 2010. Catton himself was once the president of Narconon Arrowhead, but he had left by this time and was operating numerous websites that directed new clients to Smith’s facility. It was important for Catton to be kept up on what was happening at the rehab center, he says, and Smith’s update was a crucial one.

In it, Smith explains that after Narconon Arrowhead had figured out ways to charge insurance companies for parts of its Scientology-based treatment program, revenue had gone through the roof.

Catton has told us previously that Narconon Arrowhead — the largest Narconon facility in the country and a model for the rest of the network — had been in decline after reaching peak business around 2005.

Luke Catton

Luke Catton

“From 2006 to 2008 Arrowhead was shrinking and getting desperate for money and clients. Gary figured he’d have to go after insurance money to keep the place alive, and he put together a team to decipher insurance billing codes to figure out how they could get money,” Catton says. “In 2009 they went all-in on the insurance run and started taking people in for whatever their estimated benefits would cover plus their co-pay.”

Until that time, and at most other facilities to this day, families are asked to pay up front for what is usually around $35,000 for three months of rehab. But now, Catton says, Narconon Arrowhead was becoming more willing to take in patients who could only pay part of that — as long as they could bill insurance for the rest.


The trick, according to Catton and Eric Tenorio — another former Narconon executive — was to come up with billing codes that insurance companies would accept.

“They would find ways to tweak their definitions,” Tenorio tells us. “For instance, a group of people in the sauna can count as group counseling.”

After figuring out how to bill Narconon services as insurance claims, revenue at the facility soared, Smith indicates in his e-mail to Catton. But one company, at least, wouldn’t play ball…

Date: Tuesday, January 12, 2010, 2:50 PM

Dear Luke,

God Damn how embarrassing… sorry for this incredible comm lag my friend… I had read this comm and with all the attention grabbing cycles that hit this place during the holidays I thought I had returned this comm and have just figured out that I didn’t. Thanks for the update on your activities. The online advocacy group is great PR strat for creating and accumulating new identities. Good job on that. I also appreciate the flow you have been giving us. Derry said he had a great time meeting with you when he was at Flag. I am very glad you guys are in good comm.

In my area I have been pretty much 110% into establishing and improving our insurance lines which has been quite a cycle but it is realy starting to pay off after a year and ½ of tweaking the lines and program and getting various insurance related PR actions and legal ruds in. Stats on it are… one year ago the annual insurance related income was just over $5g’s. This year the annual insurance GI was over $2.5 million. This line can produce three times this amount once we complete the rest the PR and legal handlings we are onto now. I have Rebecca now on this internal insurance post and she is smoking on it. Having her on board here has helped pick up the pace on the remaining handlings we need to get done to 3X the starts and income being produced on the insurance line. We are now in pretty good shape with all the major insurance companies accept Blue Cross Blue Shield. BCBS is a pretty fucked up group to deal with because they have been at the top of the insurance company pile for so long they just started making up their own rules on how and what they will pay for. Mike St. Amand, Sandy MacNabb and I have been working on a very in-depth PR and legal handling designed to get BCBS’s ethics in on covering result driven treatment like NN. This handling has led us down an old PR road that you traveled with us when you were here. This is the DMH and related legislative committees and elected officials. BCBS of OK is the only major insurance company in PT that does not acknowledge CARF’s residential Accreditation. They have been refusing payment on claims based on the fact that the OK DMH has not certified the NN program for residential or intensive out-patient. So we are working with the DMH to get these certifications for the program. Which as you know takes a bit of effort and skill to get the DMH decision makers on board with the program the way it is with no changes to our delivery and the tech. We are making some very good progress in this direction and DMH is working with us. Once these certifications are awarded by the state then we can hold BCBS’s feet to the fire legally and make them pay. BCBS does need to be handled because they are still the biggest provider in the U.S. and a lot of state and federal employee health insurance coverage is through BCBS. In todays economy getting BCBS to cover the NN program will open the door for a lot of new people to get into the program who cannot otherwise afford to pay for rehab. I know you have R on what it takes to pull this kind of stuff off. I remember you were very involved with us when we were getting that legislation through that gave NN a legal definition of educational program so we could get around all the heavy counselor certification requirements that were being put in at the time. Do you remember? I sure do. At any rate that’s the inside skinny on what I have been up to. Give my best to Erica and the little one and here’s to a new year full of flourishing and prospering for all of us on our dynamics. Stay in comm, I’ll make sure I tighten up my response time.

ML, Smith

As Smith indicates, Blue Cross Blue Shield didn’t like that Oklahoma’s Department of Mental Health had not certified the Narconon program. In the early 1990s, Narconon got around state regulators through approval of a private group, Commission for Accreditation of Rehabilitation Facilities (CARF). Blue Cross, at least, was paying attention that the state had reservations about the Scientology-based rehab program.

And that’s still the case. Just yesterday we reported that the Public Health Committee of the Oklahoma House passed a bill that may make it even tougher for Narconon to gain state certification. And that bill is directly a result of the trouble that Smith and Narconon Arrowhead find themselves in today. Three patient deaths over a nine-month period — the last in July, 2012 — have produced multiple state and local investigations and civil lawsuits. And last month, Smith’s own professional certification was permanently revoked by the National Association of Forensic Counselors.

We’ve made numerous attempts to talk with Smith, but he has never returned any of our calls. We’ve also put in calls with Narconon International, which oversees the individual Narconon centers. Narconon International is in turn licensed by the Association for Better Living and Education (ABLE), which is staffed only by Scientology “Sea Org” members. (And we’ve reported previously that three eyewitnesses say ABLE’s president, Rena Weinberg, has been held in the Church of Scientology’s bizarre California ecclesiastical prison for top executives since at least 2007.)

Narconon Arrowhead isn’t the only facility in hot water. The 2008 death of a patient at Narconon’s facility in the Atlanta area resulted in a wrongful-death lawsuit (now settled) that produced damning documents about how Narconon Georgia did business. As a result, the state of Georgia has begun a criminal investigation of insurance fraud — at least one patient had records to show that her insurer, United Healthcare, had been billed for more than $150,000 in services that never happened.

Gary Smith’s facility in Oklahoma has also been accused of billing irregularities in lawsuits recently filed by former patients or their families. In one case, a former patient alleges that Narconon Arrowhead employees took out credit cards in her name and without her knowledge, then charged tens of thousands for services.

Tax filings bear out Catton’s words about Narconon Arrowhead’s revenue. After a high of $13.1 million in program revenues in 2005, by 2008 that figure had fallen to $8.1 million. Then, after gradually climbing to $8.6 million in 2010, the facility saw an increase to $10.8 million in 2011.

Catton and Tenorio say that increasing that revenue was something Scientology executives hammered Smith about constantly. On Friday night, Catton and Tenorio will be featured on NBC’s Rock Center, and it will be fascinating to see these two whistleblowers on such a prominent platform. The two former employees now say that nearly every step of Narconon’s program was steeped in deception, and they add that those questionable practices are happening not only in Oklahoma and Georgia, but wherever the Scientology-based network operates. We’ll have more on that in coming days.


Posted by Tony Ortega on April 3, 2013 at 07:00


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