How Urine Testing and Lax Oversight Helped Create an Empire of Fraud

How Urine Testing and Lax Oversight Cover Image

You’ve heard of Big Data and Big Pharma but you’ve probably never heard of Big Urine. People are getting rich off of urine testing and sometimes without even ever conducting any actual tests. Take the Ganongs of California for example. Pamela Ganong and her husband Phil have been charged by California authorities with masterminding a rehab and urine testing scam that milked insurance companies of millions of dollars for, among other things, urine tests that were never administered.

No Surprise to Some

The charges brought against the Ganongs came as no surprise to some who have been clamoring for reform to what they consider to be California’s broken rehab system. That system, intended to provide help, treatment and support to those with substance abuse issues, is in need of help and support itself. Critics point to the fact that in California:

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    ​The records of those who own, operate and staff such treatment centers and sober living facilities are often inaccessible to the public.
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    ​A criminal background check is not required for someone opening a sober living facility or treatment center. In theory, even someone convicted of drug trafficking could open a treatment center in California.
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    ​The quality of care provided by such facilities is not properly monitored by the state, nor have there been any efforts to reform the system.
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Lack of Accountability

As one might expect, trying to hold public officials accountable for the current mess - where an enormous urine testing fraud like that which the Ganongs are accused of perpetuating can go on undetected for years - is an exercise in futility. Buck passing is rampant with various state officials blaming each other and the legislature for the problem. Some agency chiefs say it’s not their responsibility while others claim their hands are tied by regulation.

Health Department spokesperson Carol Sloan says that, beyond checking to see if a treatment center owner has had a previous license to operate revoked or if they had been cited for failing to comply with local fire codes, no other type of screening is typically applied. Critics point to this laissez-faire attitude toward treatment centers as the primary reason why people like the Ganongs are able to open rehabs then use them as a basis to run insurance fraud schemes.

Negligence as a Way to Provide a Second Chance

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The entire rehab culture is based on the notion, first posited by the founders of Alcoholic Anonymous nearly a century ago, that alcoholism and drug addiction are diseases, not moral failings. As such, addicts and alcoholics have a right to receive fair and timely treatment for their illness and that includes being given that most American of things: a second chance to right their foundering ship.

Since many rehabs and sober living facilities are opened by people who have successfully transcended their disease, some public officials say that subjecting their past to intense scrutiny could interfere with their attempt to claim that second chance. Therefore, everyone's interests are best served when the state neglects its oversight responsibilities in such cases. It’s quite a theory.  Many, however, feel state officials are simply using it to justify not doing their jobs.

Nothing New Here

The Ganong case is not the first time a spotlight has been brought on the state of the recovery industry in California. Six years ago, a State Senate report concluded that rehab centers were not being properly monitored and that state agencies were not sharing information on operators of rehabs, treatment centers and sober living facilities. And others point out that the Ganongs are far from the first to try and cash in on things like non-existent urine tests and doctors’ appointments (although they are the most high-profile case to come along in quite some time).

The Economics of Urine

The foundation of the Ganong’s allegedly fraudulent rehab empire turns out to be the big business of urine testing. It is alleged that in 2011, Pamela Ganong created a company called “Ghostline Labs Inc.” for the express purpose of submitting urine test claims to various insurance companies. It is now alleged that many, if not most, of the urine test claims submitted during the first year by Ghostline either never occurred or were unnecessary. After discovering just how lucrative Big Pee could be, however, the Ganongs then embarked on a binge of rehab-related company creation. All without ever having to submit to a background check or any other type of regulatory oversight.

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Turning Addicts into Cash Cows

The Ganongs staffed their new testing facilities, rehabs, sober living homes, counseling centers and more with people who had come through their own rehab centers and made it a condition of their employment that they submit to regular urine testing. The Ganongs would then collect the pee, discard it and charge the staff member’s insurance company for a urine test that never happened. It’s not clear at this point whether the employees were aware of the scam, though it is believed many were active participants.

All in all, the Ganongs’ fake urine testing scheme netted some $15 million in insurance payouts for tests that never happened according to prosecutors. Each phony or non-existent test netted anywhere from $400 to $1,500. They even made urine testing a condition of their own employment and eventually submitted insurance claims of more than $1 million for having their own pee tested (at their labs of course).

So, Everything’s Been Fixed Now, Right?

coiurt justice trial

You would think that such a high-profile case would spur legislative action. But curiously, the loopholes in the system that the Ganongs exploited - the lack of oversight, the culture of urine testing that inculcated insurance companies into simply accepting that urine tests had taken place - are still there, waiting for the next group of scammers to come along and hold a sample cup under them.

For what it’s worth, the Ganongs and several of their family members also accused of participating in the scheme are scheduled to appear in court next February 13.

About the Author Anna Miller

Anna is a content writer, blogger, and entrepreneur. When she is not spending time managing and supervising her business, Lindsley's Lumber, Anna creates content for her synthetic urine website. Aside from being an entrepreneur and blogger, she is also a pet lover, loves to cook and maintain her home garden.

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