By Jocelyn Wiener and Byrhonda Lyons, CalMatters
This story was originally published by CalMatters. Sign up for their newsletters.
The letter from Anthem landed on Bernadette Cattaneo’s desk on a sunny day in June 2023.
Beginning later that summer, it said, the addiction treatment facility she ran in the rural Sierra foothills would no longer be included in several of the insurance company’s networks.
Confused, she read it again.
The move could bankrupt The Lakes, one of few facilities of its kind serving a region struggling under a national addiction epidemic.
Anthem didn’t provide much explanation in its initial letter, simply calling the decision “necessary to sustain Anthem’s ability to offer these network products.”
But Cattaneo had her own hypothesis.
Over the previous year, she’d engaged in a relentless quest to get Anthem to pay for care she deemed medically necessary for her clients.
She repeatedly helped her clients appeal to California regulators after the company rejected their claims.
The Lakes’ clients won 49 of their 54 appeals that year, according to court records, compelling Anthem to pay hundreds of thousands of dollars for alcohol and drug treatment.
Cattaneo emailed state regulators, saying it didn’t seem coincidental that The Lakes was removed from Anthem’s network after so many successful appeals.
“The Lakes works tirelessly to provide stellar treatment and this was literally a slap in the face,” she said.
The conflict between one of the state’s biggest health insurers and The Lakes, tucked away in the tiny town of Copperopolis in Calaveras County, reflects a struggle quietly playing out around California with potentially significant consequences for substance use treatment.
Treatment centers say Anthem — and other major health insurers — employ a variety of tactics that threaten their ability to stay in business, even as California faces a shortage of providers. More than a dozen facility leaders, in lawsuits, state regulatory filings and interviews say insurers are denying their patients’ claims for medically necessary coverage and using punitive measures that prevent treatment centers from getting paid in full.
As a result, facilities say they get strong-armed into accepting lower reimbursements, go long stretches without receiving payment, or end up not being repaid at all.
Patients attempting to recover from serious addiction often struggle to find providers who accept their insurance. In some cases, they can face the prospect of having treatment yanked away, or wind up saddled with medical bills their insurance companies won’t fully cover.
Public records obtained by CalMatters show the CEO of one LA County-based treatment center sent letters to state regulators in 2022 imploring them to investigate Anthem for not paying claims promptly, saying his center had been “financially devastated.” Another organization with locations around the state sent a letter to regulators in 2024 complaining that Anthem owed them $1.7 million.
In September 2023, Cattaneo sued Anthem, alleging the health insurer was punishing The Lakes because of how often staff there appealed coverage denials on behalf of patients.
Cattaneo believes facilities like hers — family-owned, with no backing from big companies — are “very much taken advantage of.”
“What we’re hoping is that our fight becomes a fight for the whole industry,” she said.
CalMatters made more than half a dozen requests for interviews or comments from Anthem leaders, but company spokesperson Michael Bowman declined, instead sending an emailed statement.
“Anthem is committed to ensuring our provider partners and those delivering care to our members are reimbursed properly and in a timely manner,” he wrote.
In a 2024 letter obtained by CalMatters through the Public Records Act, Anthem’s attorney, Kenneth Smersfelt, wrote to one of Cattaneo’s attorneys that the insurer “remains concerned about The Lakes’ continued failure to comply with the policies and procedures set forth in the Facility Manual.”
He also said the treatment center was taking “an adversarial approach to its relationship with Anthem” that was “inconsistent with a productive and efficient contract relationship.”
Mary Ellen Grant, spokesperson for the California Association of Health Plans, an insurance industry association, told CalMatters that the measures health insurers take are necessary to prevent fraud, a longstanding problem that is “putting patients at risk and driving up the cost of care.” Taking a second look at a requested authorization, she said, ensures services are “safe and appropriate for the patient.”
Facilities say their payment challenges aren’t limited to Anthem. But as the state’s second biggest health plan, with almost 6 million enrollees, it stands out.
Among California’s largest health insurers, Anthem’s denials for all forms of health care were most likely to be overturned, according to a CalMatters analysis of data from the Department of Managed Health Care.
When patients appealed to the department, state regulators reversed Anthem’s denials about two-thirds of the time, compared to reversing about half of all insurers’ denials overall.
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Since 2021, California has required plans to pay for all medically necessary mental health care — including the services provided by residential facilities like The Lakes. These treatment centers can play a critical role at a life-or-death juncture for many patients. But a lengthy residential stay comes with a high price tag – The Lakes, for example, can be paid about $800 a day per patient, a court exhibit shows.
After a treatment facility admits a patient for detox or other care, insurance companies normally determine within 24 or 48 hours whether to approve the patient’s stay, facility leaders told CalMatters. Given the cost of residential care, the plans then periodically review a patient’s eligibility — sometimes changing their opinion after just a few days.
The Department of Managed Health Care is investigating providers’ concerns about Anthem’s reimbursement practices, said spokesperson Kevin Durawa.
Durawa declined to provide details, citing the investigation, and also declined repeated requests for an interview.
Treatment centers told CalMatters these payment issues have worsened in recent years.
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Meiram Bendat, an attorney representing The Lakes, wants to see more leadership from the state, including more aggressive monitoring and oversight of health plans. He said the department should keep better track of patients’ ability to receive timely care and should completely revamp how it handles provider complaints, a system he describes as “a disgrace.”
“They’re not really stepping up to ensure that providers aren’t terminated for improper reasons,” he said.
What happened at The Lakes
Bernadette Cattaneo is trim and tan with shoulder-length brown hair and intense green eyes. At 64, she is disarmingly chatty and has a wicked sense of humor – a framed family photo in her office includes a cut-out of Brad Pitt’s face.
Cattaneo started vacationing in Copperopolis in the 1980s with her now ex-husband and three young sons. They sometimes stayed at a rustic, palm tree-studded resort alongside Lake Tulloch. Years later, after adding a daughter to the mix, Cattaneo moved her family to Copperopolis full-time.
Nestled in the rolling foothills of Calaveras County, the former copper mining town has about 4,600 residents. Many work in logging or at the nearby prison, although the region also receives its fair share of retirees, vacation homeowners and remote workers. Median household income in the county is about $16,000 a year less than the state average.
The county is federally recognized as having a serious shortage of mental health providers. In Calaveras County, Anthem has three in-network substance use treatment facilities, including The Lakes, state regulators told CalMatters. Drug and alcohol use represent a top concern for many residents. Excessive drinking has been a growing problem in the area since the pandemic, Cattaneo said.
When the aging lakeside resort came on the market around 2004, Cattaneo, a former realtor, saw its investment potential. Her plan: gather investors, knock the whole thing down, build townhouses.
Then the bottom dropped out of the housing market. Around that time, several people close to her suffered injuries or other personal tragedies and eventually developed dependencies on painkillers or alcohol.
As Cattaneo weighed options for the property, one came into focus.
In March 2015, The Lakes opened its doors as a substance use treatment center.
Licensed for 76 people, it offers detox, therapy, psychiatry and medical care, as well as volleyball, kayaking, wakeboarding and the opportunity to gaze at the lake from one of the gazebos lining the property’s edge.
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“Things that can make them realize there’s a good life beyond using,” Cattaneo said.
Her youngest son, Travis Wilson, was one of its first patients.
Now 10 years sober, he is in charge of admissions.
In 2017, Cattaneo signed paperwork to go in-network with Anthem, essentially contracting with the insurer.
Before long, more than three-quarters of The Lakes’ patients were insured by Anthem, court records show.
California requires all health insurers to maintain networks of providers. Health insurers extensively vet these providers before bringing them “in network.” In theory, this should lead to a simpler and more affordable patient experience compared with facilities that are not in the insurance company’s network.
“When you’re in-network,” Cattaneo said, the process “should be easy peasy mac and cheesy, right?”
In the early years, the facility’s relationship with the health insurer was great, Cattaneo said. But over time, she started noticing Anthem denying care, claiming treatments weren’t medically necessary.
In 2019, she and her staff started submitting appeals on behalf of their patients to the Department of Managed Health Care whenever they felt insurance companies had wrongly denied coverage.
In 2022, The Lakes appealed to the state 17 times, according to documents her attorneys later filed in Calaveras County Superior Court. In the first five months of 2023, that number nearly tripled to 49. Almost all involved Anthem members insured through Covered California; The Lakes’ patients prevailed more than 90% of the time.
Records on the department’s website offer thumbnail sketches of the patients making those appeals: A bartender drinking a half pint of whiskey and hard seltzer every day. A man using fentanyl daily for years. A woman with cirrhosis relapsing after her pets passed away.
All were originally denied coverage by their health plans.
The Lakes won each of them on appeal.
The weight of denial
Bradley Tungseth recalls being “a complete wreck” when he first arrived at The Lakes last July. He told CalMatters he had spent some 30 years in the clutches of meth, alcohol, and other drugs. He had gone through a “complete mental breakdown” and landed in the hospital. Despite that, he’d never been in treatment before.
“I needed help,” he said.
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Tungseth’s friend worked at The Lakes as a counselor. Tungseth decided he was ready to try treatment for the first — and, he hoped, the last — time.
A month into his stay at The Lakes, he said, Anthem determined he was done. The health plan never spoke with him directly, he said.
“They were saying I didn’t need the treatment,” said Tungseth, who lives in nearby Jamestown. He said Anthem determined he didn’t require long-term 24-hour care because he was coming off of meth, and had minimal withdrawal symptoms. Tungseth felt certain he’d use again if he left The Lakes.
After coverage is denied, a patient can appeal to their insurer. If that doesn’t work, they have the right to appeal to the state or federal government, depending on which agency regulates their health plans.
But studies show most patients never appeal.
In California, consumers and state regulators remain largely in the dark about how often insurers are denying coverage. In an effort to hold them more accountable, legislators are pushing a bill that would require health plans to report data to the state about denials.
“It will be very impactful to officially look under the hood and see what’s happening with these denials,” said Scott Wiener, the Democratic state senator from San Francisco who also authored the 2021 law that expanded mental health coverage.
Another bill would put limits on how frequently insurers can reassess patients’ eligibility for coverage.
In the absence of public data on denials, private data from one billing company offers a rare window into how often doctors overturn initial medical necessity denials when patients appeal to their health insurers.
The company, which works with treatment centers around the country, provided CalMatters with four years of data capturing more than 2,000 appeals by patients requesting mental health treatment. CalMatters agreed not to name the company in exchange for the data, which otherwise wouldn’t be publicly accessible.
The data showed health plan reviewers denied the majority of those appeals. Three doctors who reviewed such appeals on behalf of Anthem rarely overrode an initial coverage denial, CalMatters found.
They ranked among the top 10 in the national data set in upholding initial denials, with rates ranging from 73% to 87%.
Such denials can put facilities in a complicated position. If they disagree with the denials, they must choose between discharging their patient against providers’ better judgment or treating a patient with the possibility that they might not get reimbursed.
The Lakes, Cattaneo said, chooses the latter.
“We’re in the business to help people,” she said.
After Tungseth’s coverage was denied, he said The Lakes helped him appeal. He won. A month later, Anthem denied his coverage again. He appealed and won again. Once Tungseth was discharged after 90 days, he said, he still needed support. The Lakes kept him on as a volunteer, then offered him a job doing maintenance work.
Almost a year later, he credits the treatment center with helping him save his own life.
“I put myself in their hands,” he said. His voice grew quiet, and he paused. Without them, “I wouldn’t be here.”
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How plans punish providers
A year before The Lakes received the initial letter from Anthem, another facility was also complaining to state regulators about the insurer. In 2022, Jeffrey Schwartz, the CEO of Harmony Place, a Los Angeles County treatment center, asked the state to investigate Anthem, saying that the insurer owed the company more than $860,000.
Anthem had flagged Harmony Place for additional scrutiny, a process known as prepayment review, he said. The treatment center had been in-network with Anthem for seven years; until the prior year, he told state regulators, 80% of Harmony Place’s revenue came from patients who had Anthem insurance.
Under prepayment review, insurers require facilities that have had errors in the past to provide them with significant documentation before they get paid. Harmony Place said they had quickly corrected billing errors once they became aware of them.
But facility leaders told state officials that Anthem kept losing records they submitted; when staff members tried to call to clear things up, the customer service agents they reached were largely unable to help.
Insurers say policies like prepayment review offer important safeguards to catch and prevent fraud.
In his statement, Bowman, the Anthem spokesperson, said that the health insurer strives to “process and pay claims quickly and efficiently and in accordance with state and federal laws as well as the contractual agreements we have with our provider partners.”
But facilities say they frequently find themselves in Catch-22s, unable to free themselves from prepayment review for several months or longer due to uneven and subjective standards, along with frequent mistakes and poor communication by the health plans.
In January 2024, Kelly Priegnitz, the chief legal and compliance officer of Pinnacle Treatment Centers, sent a letter to state regulators alleging Anthem owed the company about $1.7 million in outstanding payments.
Referring to what she described as Anthem’s “brazen denial of payment without explanation or remedy,” she said that her company would no longer remain in Anthem’s network and would begin transitioning patients out.
About five years ago, Stampp Corbin, the president and founder of the Addiction Treatment Advocacy Coalition, had his organization survey more than 100 substance use treatment facilities, most of them in California. The coalition found that, in the prior three years, Anthem had placed more than half of detox, residential and partial hospitalization facilities on prepayment review. That was about eight times more likely than non-substance use providers the organization surveyed.
In the case of Harmony Place, the CEO told the state the lack of payment caused “tremendous financial strain,” and temporarily led the treatment provider to close a facility and lay off 15 employees and to pause accepting Anthem members.
“It’s really designed to keep you trapped in this endless nightmare,” Rebecca Abel, Harmony Place’s regulatory affairs and compliance coordinator, told CalMatters.
For help, Harmony Place turned to Samuel Blackmar, an attorney who had previously worked in substance use billing – and found the experience so upsetting he enrolled in Georgetown Law School to take on the industry.
He calls the burden that prepayment review puts on facilities “insane.”
With the help of Blackmar and the Department of Managed Health Care, Harmony Place was able to exit prepayment review status and eventually get its claims reimbursed. It once again accepts Anthem members.
The future of The Lakes
After The Lakes pushed back against Anthem, the insurer withdrew its initial notifications of termination. But, according to court documents, Anthem still continued to reduce or withhold payments. Anthem later attributed that to an administrative error, according to a court declaration.
The insurer later sent over a new notification that the contract would be canceled — just at a later date.
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Over the years, state regulators have occasionally dinged the treatment center for deficiencies, such as an instance of failing to perform daily vital assessments, according to state public records. But the Lakes has never lost its license or been suspended.
By January 2024, The Lakes laid off several employees and cut the hours of remaining staff by 20%, according to a declaration by Cattaneo filed with Calaveras County Superior Court. By then, the treatment center estimated that the insurer owed them more than $400,000.
A few months later, Cattaneo reached out to the Department of Managed Health Care requesting “urgent regulatory intervention.”
The department, she wrote, cannot “turn a blind eye to Anthem’s brazen betrayal of the health care system.”
This fall, The Lakes and Anthem head into arbitration, a process by which legal disputes are handled outside of court. Bendat, the attorney for The Lakes, is critical of the fact that the Department of Managed Health Care allows insurers to insist on arbitration. He says the confidentiality clauses in those agreements remove “the entire process out of the regulator’s eye.”
Cattaneo points to The Lakes’ success with appeals to the department as evidence that their patients’ claims are valid.
If their appeals were spurious, she said, why would the department overturn so many denials?
CalMatters data reporter Erica Yee contributed to this story.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
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