General News
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Reporting Highlights
- A Medicaid Crisis: A probe of substance treatment programs prompted Arizona authorities to end contracts with hundreds of clinics. This, in turn, left some patients without treatment.
- Unsheltered Patients: Data from a state hotline for displaced patients shows more than 575 callers ended up unsheltered, which further increased their chances of relapse or even death.
- Providers’ Struggles: Some clinics that were eventually cleared by the state tried to continue treating patients without compensation but said it pushed them to the brink financially.
These highlights were written by the reporters and editors who worked on this story.
Before her fifth birthday, Rainy had experienced a lifetime of trauma. As an infant, she witnessed violence at home before child welfare authorities intervened and her parents were incarcerated. Night terrors followed. Then, she endured the death of her great uncle who had taken on the role of dad.
She didn’t speak until she was nearly 5. Any separation from her great aunt-turned-adoptive mother, Lisa Enas, triggered panic attacks, and reminders of her great uncle’s death left her nearly inconsolable.
With counseling, however, Rainy, now age 7, with a long, thick braid and a bright smile, grew more joyful and independent. She could hold conversations and spend time away from Enas without panicking. She was selected for her school’s gifted and talented program. Home life on the Gila River Indian Community in Arizona, where her bedroom walls were lined with stuffed animals and family photos, steadied.
But that progress came to a halt last October, after a spiraling Medicaid scandal that targeted thousands of Native Americans exploded into public view.
Arizona officials announced they were investigating a massive fraud scheme in which people had been lured into fake substance abuse treatment programs, where providers exorbitantly billed Medicaid for treatments they did not deliver. Some were alleged to have kidnapped patients and held them against their will. The fraud has cost the state as much as $2.5 billion since 2019, state officials said.
In response, the Arizona Health Care Cost Containment System, or AHCCCS, terminated contracts with scores of facilities as authorities investigated them. The agency also swiftly suspended Medicaid reimbursements to hundreds of other providers that it accused mostly of overbilling or paperwork errors. Among those suspended was Desert Rain Behavioral Health Services, the Tempe provider that was treating Rainy and 260 other patients, all insured by the state Medicaid agency’s American Indian Health Program.
AHCCCS accused Desert Rain of overbilling and failing to have the license needed to treat children — allegations that the clinic would eventually resolve, but not before its ability to care for patients was disrupted.
When AHCCCS launched its investigation, officials said their top priority was the safety of patients like Rainy. Yet even as the agency says it considered whether people would lose behavioral health services before it took action, its efforts left hundreds without treatment or counseling, the Arizona Center for Investigative Reporting and ProPublica have found.
The agency told the very behavioral health providers it accused of fraud that it was their responsibility to ensure patients continued to receive treatment, despite halting their reimbursements. Some closed. Others scaled back services or paid out of their own pocket while they challenged the allegations against them.
For patients, the state established a hotline to connect them to treatment, housing or transportation back to their communities. But it too has fallen short in addressing the fallout from the crisis.
AHCCCS said it had no record of what happened to the majority of the hotline’s 11,400 callers, largely because after six months it stopped tracking outcomes for people who did not stay in a hotel at the state’s expense. Of 4,100 people who received temporary lodging after calling the hotline, the state said only about 150 requested referrals to behavioral health centers. According to call data obtained by the news organizations, more than 575 ended up unsheltered, increasing their chances of relapse or even death.
In an interview, Marcus Johnson, AHCCCS’ deputy director of community engagement and regulatory affairs, said AHCCCS conducted outreach to make sure patients knew about the hotline. Yet advocates say far more people were unaware of the hotline or could not call it because they did not have phones.
“There’s always opportunity for us as an agency to improve,” Johnson said. “But like I said, we’ve done a great amount of outreach to try to get the word out as much as possible, not only to victims and our members, but also to all of the providers.”
Enas, Rainy’s adoptive mother, said no one ever told her about it as she struggled to find counseling for her daughter. (AZCIR and ProPublica are identifying Rainy, who does not share a last name with Enas, by her nickname to protect her privacy.)
Enas braids Rainy’s hair at the family home on the Gila River Indian Community.
Thirty behavioral health providers that AHCCCS has accused of fraud since the spring of 2023 have been cleared to again receive Medicaid reimbursements, though the agency cautioned providers that it could pursue further actions against them amid ongoing investigations. Most reached settlement agreements or proposed corrective action plans, according to records provided to the news organizations by AHCCCS.
Desert Rain, however, was among a handful of providers that did not have to compensate the state or rectify their practice, according to documents. After a four-month suspension, Desert Rain was informed in a February letter that it could resume receiving payments from the state because it had addressed the accusations.
AZCIR and ProPublica spoke to six of the 30 facilities that had their suspensions lifted. The suspensions, delayed payments and enhanced billing requirements resulting from the state crackdown have jeopardized their ability to stay in business, they said. Almost everyone who operated behavioral health facilities and spoke to the news organizations asked to remain anonymous out of concern they would be targeted by AHCCCS for criticizing the agency.
AHCCCS has maintained that its actions were necessary and appropriate to ensure bad actors could no longer exploit Medicaid. It also told the news organizations that it is always willing to help patients find providers.
Desert Rain owner Alexis James said that since the clinic was cleared, the state has largely denied or not processed its claims for patients insured by the American Indian Health Program. As a result, she is unable to serve her former patients. She said she is concerned many people from the Gila River Indian Community — and other Indigenous communities — have gone months without treatment because so many facilities have shut down or are not accepting new American Indian Health Program patients due to financial uncertainty.
“There are no providers available to see these clients who are higher risk, who are suicidal, who are high trauma,” James said. “What makes me so angry is it’s not anyone but the Indigenous population.”
Enas said she recognizes the state had to stem the widespread fraud but regrets it came at such a high cost. Rainy regressed without counseling, while Enas unsuccessfully sought help from AHCCCS and the local hospital.
The grief Rainy was learning to manage now overwhelms her more frequently. On a recent afternoon, within a matter of minutes, Rainy turned from chattering happily about her school day to sobbing as she looked over a favorite photo collage of her late adoptive father.
Enas comforts Rainy.
“I miss him so much,” Rainy cried. “Why did he have to die when I was 3?”
Enas held Rainy until the wave of sadness eventually passed. When they sat down at the dinner table, where Rainy announced she was joining the school color guard, Enas looked on with a mixture of pride, exhaustion and worry.
“I need to know, who is gonna actually help me?” Enas said. “Who’s going to actually listen to me? Who’s going to help my child? Because I’m fighting for her.”
A Crisis Goes Undetected
As early as 2020, state data showed a spike in billings for behavioral health care covered by the American Indian Health Program.
AHCCCS’ contracts with managed care organizations, like Mercy Care and UnitedHealthcare, use fixed rates for Medicaid reimbursement. But the American Indian Health Program — available only to American Indians and Alaska Natives — was different. Federal requirements led AHCCCS to structure the program under a “fee-for-service” model, which allowed health clinics and other providers to set their own rates and directly bill the agency. It also broadened access in areas not served by the network of insurance companies for a population that has historically faced significant barriers to health care. But it left the program vulnerable to fraud, experts say, much like other fee-for-service plans offered at the federal level.
“It was a claims shop,” AHCCCS’ Johnson said, noting the plan lacked safeguards used by managed care organizations to prevent waste, fraud and abuse.
One behavioral health clinic collected more than $200,000 a day on average through the American Indian Health Program, according to an audit of AHCCCS. The flood of cash spurred predatory recruitment of new Native American patients from across the country just as the federal government’s COVID-19 public health emergency allowed Medicaid programs to relax enrollment and screening requirements.
Will Humble, a former director of the Arizona Department of Health Services, said AHCCCS’ failure to monitor its management of Medicaid billing and reimbursements allowed the American Indian Health Program to “completely detonate.”
A view of neighbors’ houses from Enas and Rainy’s family home on the Gila River Indian Community
Reva Stewart, a community advocate in Phoenix who is Navajo, was, in the fall of 2022, among the first to sound the alarm on social media about providers’ recruitment efforts in the city and on reservations. For months, she had observed white vans pull up to city parks in search of new patients. She learned fraudulent providers were also sending vans to reservations across Arizona, New Mexico and Montana in search of patients.
Newly elected Gov. Katie Hobbs announced an initial wave of provider suspensions in May 2023. As the agency continued reviewing billing records for irregularities, more followed. Community members, patients and employees of licensed behavioral health providers had alerted authorities to the suspected fraud, said AHCCCS Director Carmen Heredia.
When suspended providers ignored the agency’s calls to ensure ongoing care, the agency said it sent demand letters and threatened legal action. AHCCCS has not pursued any provider for failing to transition patients’ care, saying it hasn’t needed to take that step.
“When our legal office has reached out to providers in this situation, they have complied,” Johnson said. “They have worked with us to transition care for their members.”
Thousands Call Asking for Help
State housing officials warned AHCCCS leadership nearly a year before it began suspending providers that reforms could trigger a surge in homelessness, according to emails reviewed by AZCIR and ProPublica. Indeed, many people faced homelessness as the state suspended behavioral health payments because some unscrupulous providers had housed patients just so they could bill for them, advocates say.
Patients in the roughly 25 suspended facilities outside the Phoenix area had few options for assistance once AHCCCS took action; the state hotline’s offer of temporary housing was limited to three hotels in the metro area.
Stewart said the state’s response has been inadequate for such a massive crisis that has rendered people homeless.
