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Patients, advocates describe ‘pure chaos’ in state response to AHCCCS fraud

Photo of AHCCCS fraud victim

Editor’s note: This article is published as part of the Mental Health Parity Collaborative, a national partnership between AZCIR and The Carter Center’s Rosalynn Carter Fellowships for Mental Health Journalism and other newsrooms throughout the U.S.

By Hannah Bassett and Maria Polletta | Arizona Center for Investigative Reporting

On May 16, as cameras flashed and tribal leaders looked on, Arizona’s governor and attorney general announced a statewide crackdown on behavioral health providers suspected of defrauding the state’s Medicaid program out of hundreds of millions of taxpayer dollars.

Officials revealed the Arizona Health Care Cost Containment System (AHCCCS) had suspended payments to more than 100 providers to tamp down widespread fraud. The state had developed extensive safeguards to help prevent new, unscrupulous operators from cropping up, they said, and had begun rolling out a comprehensive plan to assist and protect the vulnerable, largely Indigenous patients victimized by the scandal. 

“It will be a fight, but one that my administration and I are fully committed to,” Gov. Katie Hobbs told reporters. “We will take the actions necessary to bring an end not just to the fraudulent activity, but also to the humanitarian crisis that it has created.”

In the five months since the announcement, the state has fallen short on both fronts, according to patients, advocates and behavioral health providers interviewed by AZCIR. They described last-minute notifications of relevant tribal authorities, a chaotic rollout of a dedicated crisis response line, insufficient vetting of providers meant to fill gaps in housing and treatment, and a lack of oversight that has allowed people affiliated with suspended facilities to quickly reopen new businesses.  

The state’s failure to adequately anticipate the impact of widespread suspensions among behavioral health providers has put members of an already susceptible population at further risk of relapse, abuse, homelessness and even death as operators shut down, AZCIR has found. Advocates—and the providers left standing—are struggling to meet the increasingly urgent need for services among displaced tribal members and other victims, from transportation and housing to legitimate addiction treatment.

When pressed repeatedly about the scope of the scandal in September, AHCCCS officials still couldn’t say how many of its patients had been affected. 

Hobbs’ office, for its part, said the governor is in “constant communication with stakeholders, tribal leaders, law enforcement and other impacted communities to continue refining our approach and mitigate the humanitarian impacts of the shutdowns” when questioned about the complaints.

“As a social worker, my number one priority is always caring for Arizonans who need help,” Hobbs said in an emailed statement.

Those on the ground remain skeptical. 

“How have they taken care of our people?” said Reva Stewart, an organizer with grassroots advocacy group Stolen People, Stolen Benefits, said of the state. “We’re still having deaths in these (sober living) homes. We’re still having people getting recruited. We’re still having people who are missing to this day.” 

A view of the great seal of the state of Arizona 1912 at the Arizona State Capitol in downtown Phoenix. (File Photos/DigitalFreePress)

In announcing the results of the state’s investigation in May, Hobbs, a democrat who’d taken office in January, said she’d inherited a Medicaid system riddled with fraud.

Attorney General Kris Mayes described the state’s probe as “a game of whack-a-mole,” specifically highlighting “vulnerabilities inherent in the fee-for-service billing model.”

Most of AHCCCS’s plans follow a managed care model, with contractors like Mercy Care and UnitedHealthcare processing billing claims at fixed rates. Fee-for-service plans, on the other hand, allow providers to determine their own rates and submit claims directly to AHCCCS for reimbursement.

The American Indian Health Plan (AIHP) follows the fee-for-service model, making Indigenous patients particularly attractive targets for scammers and traffickers, according to state officials. The state reimbursed behavioral health providers for certain services covered by the AIHP at about 59% of the amount billed—with no cap—until early May, when AHCCCS revised its policy to establish a set reimbursement rate for intensive outpatient treatment. 

Reports had emerged of vans traveling to reservations, enticing tribal members with promises of free housing, and taking them back to fraudulent facilities that would bill AHCCCS for services never provided. In some cases, facility staff would confiscate patients’ phones and identification. Others said they were prevented from leaving.

Between 2019 and 2022, payouts for AIHP outpatient behavioral health claims ballooned from $53 million to $668 million. The AHCCCS Office of Inspector General eventually connected irregular billing to allegations of criminal activity affecting between 5,000 and 7,000 tribal members.

“At the beginning, it was chaos.
It was just pure chaos.”

Jeri long | stolen people, stolen benefits

Though AHCCCS had been investigating fraud allegations for months leading up to the May news conference, state officials did not inform certain tribal leaders of their findings until the week before, according to Navajo Nation Attorney General Ethel Branch. 

“It was not a lot of coordination and notice,” said Branch, who oversees Operation Rainbow Bridge, a Navajo-led team established to assist displaced tribal members in response to the crisis. While communication between state and tribal leaders has improved in the months since, she said, “getting that information from AHCCCS or the state would have been very helpful early on.”

Branch and others also identified problems with the rollout of the state’s crisis hotline option for those affected by the crackdown—a centerpiece of AHCCCS’ “comprehensive member impact plan.” 

Adding a new 211 crisis line option for those affected by the suspensions was meant to help displaced patients find temporary housing, transportation home or addiction treatment from trusted medical providers. But many of the victims didn’t have access to phones, and those who did manage to call reported discouragingly long wait times early on. 

“At the beginning, it was chaos,” said Jeri Long, a Native advocate with Stolen People, Stolen Benefits. “It was just pure chaos.”

When callers did get through, there was no guarantee they would be referred to emergency resources nearby. According to Veronica Boone, wellness director with the Tucson Indian Center, Tucson-area callers seeking temporary lodging were told they would need to relocate to Phoenix, more than 100 miles away. 

That’s if temporary or permanent housing options were available at all. The state’s widespread affordable housing deficit and clearance of Phoenix’s homeless encampments left displaced people trying to access shelter during weeks of extreme heat, according to Walter Murillo, chief executive officer of Native Health.

“It was a horrible, horrible mess,” Murillo said. 

A pictursque view of Tucson at sunset. (File Photos/DigitalFreePress)

Stolen People, Stolen Benefits is one of a handful of grassroots organizers that stepped in to fill gaps in the state’s response efforts. Its volunteers gather regularly in the Phoenix area to search for missing persons, distribute food and water, and offer aid to Native individuals evicted by facilities that shuttered after the state froze payments to providers.

That aid includes helping displaced patients find reputable treatment, shelter or—in about 70% of cases—transportation home. The group uses donations to pay for bus and plane tickets, and coordinates directly with tribes to arrange group transports when possible. 

Stewart said she has noticed a spike in the need for services this fall, with “so many more new faces” appearing during recent outreach. That’s at odds with the declining number of inquiries to the 211 hotline, according to aggregated caller data AZCIR obtained from the state.  

The discrepancy could mean the number of patients in need is stabilizing. Or, it could mean displaced individuals are turning elsewhere for help. At one transport arranged by Stolen People, Stolen Benefits in late September, none of the six members of the White Mountain Apache Tribe assembled at the group’s makeshift headquarters had tried calling 211 for assistance. 

The group’s volunteers encourage people to use state resources, but Stewart said she’s found that 211 can be selective in determining who qualifies for aid. Stewart claimed the hotline would not help individuals evicted by unlicensed sober living homes, for example, even if those homes had been getting kickbacks from a provider AHCCCS had suspended. She also said 211 had rejected people who had previously received assistance through the hotline, though AHCCCS spokeswoman Heidi Capriotti said the state has no such policy.

According to Capriotti, 211 has “responded to thousands of callers and helped AHCCCS members get out of exploitative situations to be able to continue their recovery journeys” since the dedicated option went live. Operators have connected nearly 6,000 people with everything from foster placements for pets to transportation, meals and treatment, state officials said. 

The state also has provided more than 24,000 nights of temporary hotel lodging through the hotline, according to the Hobbs administration, with individuals staying about 13 nights on average as discharge plans were developed to meet their specific needs. Capriotti said Solari Crisis and Human Services, the hotline operator contracted with AHCCCS, transitioned many displaced individuals to “permanent locations that include other housing, staying with friends, or returning to their communities.”

That assistance never came for Alyson Hodge and Christopher Olivera. Hodge, 47, and Olivera, 42, tried to get help through the state’s dedicated hotline when their sober living home in Tucson gave residents one day’s notice to leave in mid-September. 

Hodge said she called 211 hoping to get the temporary housing AHCCCS claimed would be available. But the only option presented was a local homeless shelter, which would require Hodge to separate from Olivera and leave many of her belongings behind. Olivera’s dealbreaker was not being able to bring his dogs. He said the lack of viable resources offered by 211 was similar to his past interactions with the hotline. 

“I’ve dealt with them for plenty of years, and it’s all the same crap,” said Olivera. “‘Oh, yeah, we got this place, and this space, and this space’ and in reality you ain’t got shit for me, except a bunch of numbers to call and a bunch of people to tell me ‘Oh, no, we don’t.’”

Hodge and Olivera are now living in a motel, but they said it is getting harder to pay for the room with each day that passes. 


To avoid disruptions in care, AHCCCS policy requires providers who close or otherwise halt services to help patients find treatment elsewhere or risk a court injunction, according to Capriotti. She said every provider AHCCCS reminded of this requirement in the wake of the scandal has complied.

Yet those interacting with displaced individuals day to day tell a different story. If suspended providers were facilitating a seamless transition to trusted facilities for patients, they say, groups like Operation Rainbow Bridge and Stolen People, Stolen Benefits wouldn’t need to intervene. 

Branch, the Navajo Nation attorney general, said Operation Rainbow Bridge continues to encounter roadblocks as it works to find safe, legitimate care for patients—particularly as the number of AHCCCS providers suspended since May has climbed to more than 250. That’s about 20% of the AHCCCS-registered behavioral health facilities the state considers most susceptible to fraud. 

“We’re just kind of hoping we are transitioning people to the right providers,” Branch said. “But we don’t really know, because there’s not a thorough vetting system in place.”

AHCCCS has made what it describes as “holistic, system-wide improvements to the Medicaid payment system,” from forensic auditing and new billing thresholds to provider site visits and background checks. It also implemented new rules to “exclude providers affiliated with bad actors” as investigations unfold.

But even the agency acknowledges it’s a challenge to stop scammers who “continue to adapt their attempts to defraud the State.” 

Boone, with the Tucson Indian Center, said it seems dishonest providers are facing “very little consequences” despite the crackdown. The center has created an internal list of facilities it doesn’t trust, she said, particularly as individuals affiliated with suspended providers begin to establish new companies.

“We’re just kind of hoping we are transitioning people to the right providers. But we don’t really know, because there’s not a thorough vetting system in place.”

Ethel Branch, Navajo Nation Attorney General

In July, for example, AHCCCS froze payments to Phoenix-area addiction treatment provider Sunrise Native Recovery, which faced eight allegations of fraud involving double-billing, paying for patient referrals and recruiting patients from across state lines. 

By the time Sunrise announced its closure two months later, one of its senior administrators had already opened a new, Native-focused behavioral health company, Whispering Creek Health.

So far, the new company has not appeared among AHCCCS’ registered providers. But that hasn’t stopped it from advertising to vulnerable Arizonans. 

“It’s just never-ending,” Stewart, the organizer for Stolen People, Stolen Benefits, said of the human fallout. “I’m exhausted.”

This article is published as part of the Mental Health Parity Collaborative, a national partnership between AZCIR and The Carter Center’s Rosalynn Carter Fellowships for Mental Health Journalism and other newsrooms throughout the U.S.

RESOURCES:

Recovery from addiction is possible. Although addiction is a chronic disease, evidence-based treatments are proven and effective. 

Features that all prospective patients should look for in providers include: board-certified addiction physicians on staff, availability of FDA-approved medication, evidence-based treatment protocols, and data on patient outcomes. Finding a provider that is a right fit can also involve considering cultural relevance. Traditional healing practices, for example, can be an important component of care when deployed in tandem with evidence-based treatment. AHCCCS has released a four-step guide to help prospective patients review provider credibility in Arizona.

For help, call the free and confidential treatment referral hotline (1-800-662-HELP), or visit findtreatment.gov.

This article first appeared on Arizona Center for Investigative Reporting and is republished here under a Creative Commons license.

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