Menu Close

Three family members and two doctors were charged last week with felony insurance fraud related to what prosecutors described as “a $22 million urine test billing that operated through sober-living homes” in Southern California, the Orange County District Attorney’s Office said in a news release on Tuesday.

Another family member was charged along with the first five defendants with conspiracy to commit medical-insurance fraud.

The charges were revealed two days after publication of the Southern California News Group’s investigation into the region’s rehab industry, including the shady practices of some sober living homes and the excessive insurance charges some rack up for urine tests.

The investigation revealed, among other things, that fraudulent urine tests – often performed by labs owned by the owners of rehabs or sober living homes – were a main tool some in the industry used to bilk millions from insurance companies. “Chronic drug users …. are commodities, exploited by a growing world of drug and alcohol rehab operators who put profit ahead of patient care. Everything from the opioid epidemic and Obamacare to prison realignment and legal loopholes has created conditions in which unethical operators can flourish, using addicts to bilk insurance companies and the public out of hundreds of millions of dollars.”

Certainly not all rehab centers are fraudulent, but the explosive industry growth is remarkable. Malibu has 47 licensed rehab centers and a population of fewer than 13,000 people, making it the city with the highest per-capita concentration of rehab centers in California, according to state data. No. 2 is Costa Mesa, with 102 centers and a population of about 110,000. And those cities aren’t distant outliers; Pasadena, Murrieta, San Bernardino, Woodland Hills, Long Beach – all are among the dozens of communities in Southern California where 10 or more rehab centers have opened shop.

In all, the region is home to 1,117 licensed rehab centers, a number that doesn’t include thousands of unlicensed sober living homes where addicts live as families.

Prosecutors said Philip Ganong of Bakersfield and Pamela Ganong of La Jolla owned sober living homes in Orange County, Bakersfield, Los Angeles and San Diego and also formed a medical testing lab. They are accused of billing four insurance companies – Aetna, Anthem, Cigna and Health Care – a total of $22 million and collecting $15 million.

And prosecutors said the Ganongs hired the charged doctors – Carlos X. Montano of Newport Beach and Suzie Schuder of Corona del Mar – who wrote urine test prescriptions for first three and later seven times a week for the Ganongs’ employees.

The Ganongs and their son, William Ganong of Bakersfield, were charged with 13 counts of insurance fraud, and the elder Ganongs also face 26 counts of money laundering. The prosecutors’ release said the parents’ maximum sentence would be 47 years, eight months in state prison. William Ganong faces a maximum sentence of 36 years, eight months.

Pamela Ganong’s sister, Susan Stinson of Carlsbad, was charged with conspiracy to commit medical insurance fraud and was accused of dropping off paychecks at the sober living facilities and sending emails to the doctors requesting urine test prescriptions. Her maximum sentence would be three years in prison.

Montano was charged with three counts of insurance fraud and conspiracy to commit medical insurance fraud, and his maximum sentence would be 16 years, eight months. Schuder was charged with four counts of insurance fraud and conspiracy to commit insurance fraud. Her maximum sentence would be 17 years, eight months.