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How Arizona is Fighting Medicaid Fraud

Date Published
Jul 18, 2023

Arizona is taking a stand against a series of predatory Medicaid fraud schemes that have been targeting Indigenous people around the state. These illegitimate group homes claim to offer treatment for addiction and help with mental health issues, but instead prey upon tribal community members while draining down Arizona’s state Medicaid program, the Arizona Health Care Cost Containment System (AHCCCS).

Recent Arizona Medicaid Fraud Action

As of May 16, Arizona Governor Katie Hobbs and Attorney General Kris Mayes have reported that at least $75 million has been seized or recovered in conjunction with investigating the treatment center scheme. An additional millions of dollars is anticipated to be recovered as Arizona whistleblowers step up to report on bad actors in healthcare. Recovery may help return lost and stolen government funds as cases begin to be prosecuted by the state Attorney General.

So far, at least 45 indictments have been reported by the Attorney General’s office. More than 100 providers have seen their payments suspended under Credible Allegations of Fraud (CAF) suspensions. These actions are the first step when investigating Medicaid fraud under the AHCCCS guidelines.

Who Was Harmed in the Arizona Medicaid Fraud Scheme?

The #StolenPeopleStolenBenefits campaign was created to raise awareness about this ongoing Medicaid fraud issue that has for years targeted Indigenous people living in the state of Arizona. While on paper Medicaid fraud may seem like a simple white collar crime, for Indigenous families in Arizona it has had violent outcomes that have led some to label the situation a humanitarian crisis.

What Happened with the Arizona Treatment Center Fraud?

Group treatment facilities targeted tribal members, promising help with addiction issues and mental health concerns, and at times free food and housing. Tribal members were taken at times off the street in unmarked vans. Others were targeted based on their accommodations at sober home living facilities, or their residency on tribal lands. Once they were taken into custody, these facilities fraudulently billed AHCCCS for assorted treatments by gathering personal information from residents’ AHCCCS cards. These treatments, allegedly for addiction and other medical services, were never provided.

Instead, once recruited, Indigenous people were essentially held captive at these illegitimate treatment centers. At times, they were given drugs or alcohol at supposed rehabilitation or detox facilities. FBI investigation alleges that some tenants are asked to apply for food stamps to feed the residents. Advocates report individuals escaping out of windows in order to reach a phone to contact the world outside. Some families never heard from their loved ones again, and there have been reports of at least one resident who died from a shooting at one of these facilities.

False Billing and Patient Brokering: The Fuel Behind the Arizona Crisis

The Arizona case is a tragic example of false billing, patient brokering, and state Medicaid fraud run amok. Healthcare providers have an obligation to bill correctly for services rendered. When they fail to do so, or inflate expectations of care that they can offer, they can be prosecuted under both federal and state law. Addiction treatment centers and rehabilitation clinics are particularly at risk for false billing allegations, because their patients are often kept more isolated from the outside world. The Arizona treatment centers case is an extreme example of this kind of negligence. For instance, in one recent report, a Phoenix-based alcohol addiction center billed more than 13 hours a day of medical services to AHCCCS to treat a four-year-old. The child in question was thankfully not in one of the facilities, but their identity had been stolen and used to bill Arizona’s Medicaid.

Patient brokering is another kind of healthcare fraud involved in the Arizona enforcement action. Patient brokering involves promising incentives like free food, free rent, or even continued access to drugs and alcohol to prospective patients looking for rehabilitative care. Patient brokers target the most vulnerable among us at their darkest hours, and can lead to some of the worst kinds of abuse and captive conditions. In Arizona, patient brokers targeted Indigenous community members as a way of systematically draining down public funds and holding those struggling with mental health and addiction issues hostage.

How Arizona is Fighting Back Against Treatment Center Abuse

The rising financial cost of AHCCCS was one factor that finally blew the whistle on ongoing treatment center abuse. In 2019, AHCCCS was billed $53.5 million under the category of outpatient behavioral health clinic care. By 2020, however, billings under that same code more than doubled, reaching $132.6 million. Costs continued to rise exponentially, more quickly than sustainable growth could have taken place. For instance, by 2021, outpatient behavioral health clinic care bills at AHCCCS reached $291 million, and by 2022, taxpayers were funding a bill of up to $668 million in this one category alone.

This kind of wildfire growth raised red flags at the state level, and action was finally taken to investigate the illegitimate group homes that Indigenous advocates had spoken up about for years. The following are ways that Arizona is currently fighting back against treatment center abuse:

  • Third-party forensic audit: The state of Arizona has engaged a third-party auditor to examine any suspicious treatment facility, mental health care, or addiction provider claims since 2019.
  • CAF suspensions and indictments: Ongoing investigations are expected to turn up continuing suspensions of provider payments. While medical providers may continue to file claims once their practice has been flagged, payments will be halted pending investigation.
  • Re-examining existing fraud detection methods: Governor Katie Hobbs has pledged to overhaul the ways in which fraud can be reported in Arizona, and to commit government resources to investigating healthcare fraud claims.
  • Whistleblower action: While Arizona does not currently have a state qui tam law, whistleblowers may still file a claim under the federal False Claims Act if they suspect that federal funds were stolen. Unlike Arizona state law, whistleblowers under the federal False Claims Act may be eligible to share in a portion of recovered funds by reporting healthcare fraud and abuse. Furthermore, Arizona state law prohibits retaliation against employees who report false claims and violations of other state laws. Arizona employees who have been retaliated against because of their disclosure may be able to sue for lost wages as well as reinstatement to their previously held position.
  • FBI reporting: The FBI asks that victims of this kind of Phoenix-based fraud report the details of their situation.

If You Suspect Arizona Medicaid Fraud, Report It

Becoming a whistleblower can save lives as well as taxpayer dollars. In Arizona, Medicaid fraud was the fuel for the humanitarian crisis targeting Indigenous community members. Coming forward to report healthcare fraud is always the right thing to do. Even a seemingly simple case of overbilling or unbundling patient care codes may conceal a darker situation at its core.

In Arizona, the governor and Attorney General have committed significant resources to recovering stolen healthcare funds. Doing so will help restore public resources, and hopefully prevent more community members from being taken advantage of. Report predatory treatment centers today with the help of a qui tam attorney. The experts at Tycko & Zavareei LLP are ready to help with a complimentary and confidential legal consultation about the facts of your case.

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