PRESCOTT, Ariz. — It first dawned on Erin Burk that her town had become a haven for drug treatment soon after she noticed the fleet of white vans zooming through her neighborhood. The vans, she learned after tailing one, were ferrying addicts all over town to what amounted to halfway houses for those in recovery: sober living homes.

Nobody she asked seemed to know how many sober living homes were located in Prescott, so she decided to conduct an improvised census.

“I followed those vans around for three months,” said Ms. Burk, a young mother of five whose sleuthing identified dozens of sober living homes in her city — including 15 within a block of her house. “Then I cried for a long time.”

That was in 2010, the beginning of a boom here in the addiction treatment business that turned this city of just 42,500 people into one of the rehab capitals of the country. Today there are some 33 sober living homes in operation, down from a peak last year of 170. At the time, by some estimates, one in 30 people living in Prescott was in recovery.

In This Series

America’s opioid and heroin epidemic is sending more than 2 million people a year in search of help, making treatment a tragic necessity. Many clinics do excellent work, and countless former patients swear by the treatment they received, including plenty whose victory over addiction enabled them to go into business themselves — running their own rehab centers.

But what bothered Ms. Burk and others was the sense that “Everybody’s Hometown,” as Prescott has long billed itself, was changing for the worse and losing control of its future. There was more traffic, more noise. And one day, she said, her kids picked up a brown bag filled with Oxycodone from a lawn across the street.

Prodded by citizens like her, Prescott officials this year enacted a law — believed to be the first of its kind in the country — that regulates sober living homes by requiring licenses and setting standards for the training of their managers. It was difficult to do; zoning restrictions that were part of an earlier effort had run afoul of the Americans With Disabilities Act.

Prescott didn’t want to drive every addict away, a goal that might be impossible given the scope of the drug crisis. Rather, the town wanted to manage the growth of an industry that seemed to mushroom up out of nowhere, with few legal constraints.

Spending on addiction treatment in America has soared past $35 billion annually. But not all patients can afford, or have insurance that covers, the kind of inpatient rehab associated with celebrities, campuses in Malibu and 28-day stays.

To meet the demand, an armada of former addicts have become entrepreneurs, offering a new and cheaper version of rehab. That is what has swarmed Prescott — small, outpatient clinics that use an approach known as the Florida Model.

A New Method for Treatment

Named for state where it was pioneered, the Florida Model provides patients with counseling during the day — usually chair-circles of group therapy — in what is typically a residential building. At night, clients live in sober living homes, where they are responsible for covering their rent.

Often, the treatment facilities are owned by the same people who run the sober living homes. But by separating the two lines of businesses — treatment and housing — the Florida Model keeps costs lower for insurers.

To understand why, you need to know why classic, inpatient rehab centers are so expensive. They are essentially a cross between a hotel and a hospital. The price for a month of treatment — $30,000 and sometimes much more — covers a spacious room, excellent food, medical facilities and on-staff physicians and nurses.

That sort of rehab is designed for people who might need medical attention, often because they are suicidal. Comfort is another selling point, as is customized, one-on-one therapy.

The Florida Model is rehab without frills. Doctors, medical equipment and great meals aren’t included. Treatment costs about $9,000 a month, and the price goes down over time, as a client needs less therapy. Rent at a sober living home is usually around $400 a month — and not covered by insurance.

On paper, this approach has upsides, for both clients and insurers. Because the tab is much smaller, clients can stay longer, giving them more time to wean themselves off drugs. And when clients aren’t in treatment, or at 12-step meetings, they are encouraged to work, usually at hourly wage jobs, where they learn life and coping skills.

But as Prescott discovered when clinics and sober living homes started proliferating in 2010, the barriers to entry in this business are low. And for some clinic owners here, money became an end in itself.

“There was a time last year when a lot of the guys who owned clinics and sober living homes were driving a Cadillac Escalade, or a Mercedes-Benz,” said Daniel Sullivan, who managed a sober living home in Prescott called Square One Recovery. “I heard a few of them talking about how they were just $50,000 away from joining the high-roller program at the MGM in Vegas.”

Billing for ‘Equine Therapy’

Last year, at least one insurance company took action in Prescott. Health Net, which is based in Woodland Hills, Calif., and at the time served roughly six million members across the country, felt it was paying exorbitant reimbursement rates for people who had signed up for its Platinum plan.

A clampdown began after Health Net’s owner, Centene, sent a team of eight investigators to Prescott to examine billing practices.

What they found appalled them. At a public forum last year, a company representative, Daniel Kreitman, told a committee looking into sober living homes that some were charging $2,000 for daily urine tests and upward of $5,000 an hour for “equine therapy” — basically, recovering addicts spending time with horses. Some clients were in treatment for 15 months “with no end in sight,” as he put it.

While there are clinics and sober living homes in Prescott that clearly care about their clients, some have provided substandard treatment. And while Prescott has found a way to regulate the business, word of the profits made here has spread.

The Florida Model is the future of rehab, says Simon Karmarkar, who consults with entrepreneurs opening new centers. “That’s all I’m seeing right now, all over the country,” he said. “It’s lucrative, it doesn’t require the staffing or the licensure. It’s growing exponentially.”

A Cup of Coffee and a Sober Dance

Walking around Prescott, you would never guess that it is one of “The 10 Best Sober Living Cities,” according to The Fix, a website dedicated to recovery-related news. The city has cowboy roots, a quaint town square and a landscape sufficiently cinematic to serve as the setting for “Junior Bonner,” the 1972 rodeo movie starring Steve McQueen.

To find the recovery crowd, seek out a “sober dance.” They are often held on Saturday night at a strip mall not far from downtown. They look like any other party filled with college-age kids, except the parking lot is packed with the same kind of white vans that Ms. Burk tailed, there is no alcohol and the festivities start with an Alcoholics Anonymous meeting.

Or walk two blocks from the main square, to one of the cafes. For a time, so many young people in recovery idled at the Wild Iris Coffee House that the owner imposed anti-loitering rules and hired a bouncer. “If they didn’t order anything, he’d politely approach them and say, ‘You need to be a customer to sit here,’” said Julie Gorman, the owner of Wild Iris.

With an abundance of sun and pleasant weather year-round, Prescott first became a healing destination in the early 1900s, welcoming tuberculosis patients. Addiction treatment took off here after the passage of the 2008 Mental Health Parity and Addiction Equity Act, the law that put substance abuse treatment on the same footing as other medical benefits. In 2010, the Affordable Care Act mandated that plans on its exchanges offer substance abuse benefits.

Suddenly, millions of adults were insured and the population of people seeking treatment ballooned. Among the first to notice were the former addicts who had come to Prescott for treatment. Many of them stayed in town to start their own clinics, which produced more former patients with the same idea, repeating the cycle.

Among that cohort is Mo Michael, a former gambling addict. In 2015, she, her husband and his brother bought a clinic and renamed it Compass Recovery Center.

“I wanted a place where we could act completely within our own integrity,” said Ms. Michael, the program director, sitting in her office. “I didn’t like where things were going.”

Ms. Michael said it was too easy to open a Florida Model clinic. Under Arizona law, each treatment center needs just one licensed professional counselor, which requires a master’s degree in mental health services and is not to be confused with a physician. Therapists who work under that counselor are called behavioral health technicians but are not required to have specific training or certification.

“That’s super scary to me,” Ms. Michael said. “If you came to me and said, ‘I’d like to be a behavioral health tech,’ I could say, ‘Sure,’ and you could start work tomorrow.”

Arizona’s standards are not unusual, and are in fact higher than in other states. Sherry Daley of the California Consortium of Addiction Programs and Professionals said addiction clinics in her state are not required to have any state certification.

“If you want to hang a shingle here and start treating people the same day, you can,” she said.

From Client to Caregiver

The standards for managing a sober living home are even lower. Daniel Sullivan was just getting over his prescription pill addiction — he’d graduated from a Florida Model clinic two weeks earlier — when he landed a job as a manager at the Square One sober living home.

The work was exhausting and stressful. His day started at 7 a.m., when he would wake the more than dozen residents and hand out their medications. Then he became a chauffeur, driving residents in a van first to the clinic (for 8 a.m. group therapy), then to their jobs (typically at restaurants or retailers) and later in the evening to various A.A. meetings.

Curfew was midnight. He would take a final head count and go to bed at 1 a.m.

The real toll was mental, he said, not physical. In cases where residents violated house rules — say, using drugs or stealing — they could be kicked out for 72 hours. But for recovering heroin addicts, Mr. Sullivan said, that could be tantamount to a death sentence.

“There were a bunch of occasions when I had to ’72’ someone and I’d get a call soon after, saying the person had died,” Mr. Sullivan said. Typically, they had overdosed. “That happened six times during the 11 months I was managing.”

Seeking Sobriety, and Answers

There are many similar tales. Then again, there are also plenty of recovering addicts who say their journey to Prescott saved their lives.

John Lehman, the chairman of the Florida Association of Recovery Residences, a nonprofit promoting standards in the addiction industry, has been a critic of profiteering in the addiction field, vocal enough to end up the target of an ongoing lawsuit alleging defamation filed by a clinic owner. But he faulted the management of individual properties, rather than the Florida Model itself.

The Florida Model can work, he said, because it doesn’t use the classic rehab approach, which tries to educate and cure addicts in 28 days, then returns them to the setting where they had been abusing drugs, often with disastrous consequences. With the Florida Model, people learn from peer leaders — usually former addicts who are now sober — and then become peer leaders themselves.

“What happens is, recovery starts to seem exciting,” Mr. Lehman said. “You become committed to a positive norm.”

But there are few studies on the Florida Model’s effectiveness. Many clinics claim that 80 to 90 percent of their graduates stay sober, although those statistics are commonly based on surveys of graduates and considered unreliable by academics. The main concern is that people who have relapsed are either hard to find — in which case they are not counted — or may be motivated to lie out of embarrassment.

Even less is known about sober living homes. Clusters of them now operate in California, New England and the Midwest, but despite their prevalence, even basic information about these businesses is not publicly available.

In a letter last year to the federal Government Accountability Office, Senators Elizabeth Warren, Marco Rubio and Orrin Hatch worried that the homes had fallen into a “regulatory gap.”

A spokesman for the office said it is still working to answer the senators’ questions. Among them: “How many sober living homes are there in the United States?”

‘Like a License to Steal’

After Ms. Burk finished her census of sober living homes, she started attending town council meetings to complain about them.

But what she regarded as a disastrous change in the community, some of her former high-school classmates considered a lucky break. The real estate market was still recovering from the economic crisis of a few years earlier and many residents who’d purchased second homes during the bubble years started renting them out to rehab providers. A property with a $1,000-a-month mortgage payment could suddenly net $10,000 a month, or more.

“People were getting rich,” she said.

Josh German, who worked as a therapist at a treatment center in Prescott, said he knew people who had become millionaires.

“The Health Net payments were like a license to steal, and who was going to stop them?” he said, referring to the insurance company that became suspicious. “There was no regulation, no oversight.”

One of the people who prospered was Jimmy Rizzo, a former sanitation worker in New York City who arrived in Prescott in 2001 to kick his cocaine addiction. He wound up working at a clinic, became an expert in insurance billing and opened Billing Solutions, a company that now has dozens of employees. In March of last year, Mr. Rizzo sold an 80 percent stake in the company to Syncordia, a publicly traded Canadian company, for $8 million.

In an interview, Mr. Rizzo described how he suspected that clinics had figured out that the Platinum plan from Health Net was paying out like a slot machine stuck at triple 7s. He thought it happened sometime in 2015, by accident, and that word spread quickly.

“This is a very small community,” he said. “You saw the same thing in Florida. Somebody probably took a Cigna policy there and it came back ‘hot,’” he said, meaning it paid out generously. “That person told somebody, and that person told somebody. That’s the way it works.”

Cigna pulled out of Florida’s Obamacare exchanges in 2015, citing an “exponential increase” in fraud, particularly in substance abuse clinics and labs.

The Health Net plan was reimbursing between 75 percent and 85 percent of claims, Mr. Rizzo said — well above the norm. Eventually, about a quarter of all clients in Prescott were on Health Net’s Platinum plan, by Mr. Rizzo’s estimate.

Centene, which now owns Health Net, declined to comment.

A Struggle for Control

Between 2013 and 2015, Health Net’s annual spending on out-of-network claims from substance abuse providers skyrocketed by nearly 1,000 percent, to $190 million, according to a company filing in a lawsuit involving a treatment center in California. “The magnitude of this fraud is staggering,” the company’s lawyers wrote, referring to putative overbilling.

The outlays have affected the health care exchanges at the heart of the Affordable Care Act. Last summer, Centene announced that it would pull out of a “considerable amount” of the exchange business in Arizona, without giving specifics. Cigna has yet to return to Florida’s exchanges.

Prescott’s attempts at regulation of sober living homes initially stumbled. Zoning changes in 2012 aimed at taming the industry ran afoul of the Americans with Disabilities Act because addicts are classified as disabled. Officials from Housing and Urban Development said, for instance, that instead of requiring that new sober homes be built two blocks from existing ones, a single block should suffice.

The slow progress initially annoyed many locals, said George Worley, Prescott’s planning manager. Nobody understood the limits of the city’s power. People assumed, “we should be able to go close them down,” he said. “In fact we can’t, under federal law and under Supreme Court decisions.”

Tighter Rules That Turn Some Loose

In January, a city ordinance finally succeeded in regulating sober homes. Minimum staffing and maximum occupancy rules were imposed and safety inspections mandated. The one-two punch of the new rules, combined with Centene’s payment crackdown — for months, reimbursements to dozens of clinics simply ceased — financially devastated some clinics, which sued over what they called improperly withheld payments. Other companies simply folded.

One of those was Freedom Recovery, the clinic where Daniel Sullivan was treated for his pill addiction. In February, the management gathered their 30 or so clients and announced that the clinic and its affiliated sober living homes were closing.

For young people struggling with addiction, the news was traumatic. Tim Terry, a recovering heroin addict then living at a sober home owned by Freedom Recovery, said that about a week before the company closed, managers called the parents of residents asking for money to cover insurance deductibles. (More than a few clinics in Prescott paid insurance deductibles on behalf of their clients, several former clients said, to help encourage them to sign up.) He called it “a big cash-out opportunity.”

“This one girl, they called and hit up her parents for $15,000,” he said. But because he knew the place was about to close, he said, “I called my dad and I told him, ‘Do not give them any money.’”

Reached by phone, the former owner of the facility, Alex Halenka, said that any requests for money were to cover insurance costs that Freedom would have had to pay. He also said that, as a former addict himself, he cared too much about his clients to push anyone off the premises.

“We at Freedom followed through with our word to the families and clients,” he said, adding that the company had “always done everything by the book.”

Today, there are fewer white vans zooming through Prescott. What impact, if any, the business will see from the tax overhaul bill’s repeal of the Affordable Care Act individual mandate is not yet known, according to rehab clinic owners. At Compass Recovery, Ms. Michael said this week that revenue has actually been up recently because the company is now relying more on customers who pay cash, instead of those with insurance.

But the cat-and-mouse game continues throughout the industry. Mr. Karmarkar, the consultant to Florida Model clinics, said insurance billing experts are constantly probing for vulnerabilities in reimbursement programs — sending in insurance claims and waiting to see which ones come back “hot.”

“A lot of the people who run these clinics start off with great intentions,” Mr. Karmarkar said. “But at some point they begin making so much money that the money becomes the primary motive. Which is a shame. We’re supposed to be part of the solution.”