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‘Failure of Government’: AZ Moves to End Predatory Medicaid Fraud Targeting Indigenous People

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by Shondiin Silversmith, Arizona Mirror
May 18, 2023

Over the past year, tribal advocates, leaders, and community members have been raising the alarm about unmarked vans cruising the streets of tribal nations to pick up Indigenous people so they could be transported down to the Phoenix area, where they are promised shelter, food, and rehabilitation help.

The predatory tactics of individuals claiming to be legitimate healthcare providers but who were instead allegedly billing the state’s Medicaid system for rehabilitation services that were never provided have had an immense human cost. Many Indigenous families filed missing person reports for their loved ones, while others grappled with the death of their family member.

This scheme has resulted in what state officials are now calling a “humanitarian crisis” and a “stunning failure of government” since the issues were identified years ago and nothing was done to stop the predatory behavior.

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Reva Stewart and Coleen Chatter have been at the forefront of the issue for more than a year and are the advocates behind the #StolenPeopleStolenBenefits campaign. 

Stewart said the announcement was a step in the right direction, but she wishes state leaders had listened before it got as bad as it did. She wants to see accountability for all the Indigenous people who have died because of the scam and for the state to provide some more relief to the Indigenous people still being impacted across the Valley. 

The steps the state is taking don’t help “right now,” Stewart said, and through her work, she is still working with Indigenous people every day who are trying to get home. 

The duo has been working together to assist the Indigenous people across the Valley who have fallen victim to the predatory tactics of these rehabilitation homes. Both of them got involved with this issue after they had family members recruited into those homes.

Stewart said through their work, they want to be a voice for the Indigenous people impacted by these homes, especially those who have lost their lives. 

“We worked hard, and we’re still working as we speak to help our relatives out because more people are reaching out to us,” Stewart said. She said she averages that the pair have helped at least four people a day, but sometimes as many as 10.

Most recently, they got one individual into a motel until they found a way to get them home to Havasupai. She said they are always working to help another individual get back to Montana and another home to the Navajo Nation.

All of these efforts are funded directly by Stewart and Chatter. They do have a GoFundMe page set up to help and accept donations, but for the most part, they have borne the costs personally. They buy motel rooms and bus tickets or provide gas money to help get these individuals home, and Chatter works to reach those who want legitimate rehabilitation services to get placed in a good home.

“We’re really busy,” Stewart said, and even though there is a sense of relief knowing that the State is making adjustments to help, she won’t stop advocating for those impacted daily. 

Stewart said she is hopeful and looks forward to seeing what will change from the actions the State is introducing, including the intended hotline, which she said would be helpful, but its effectiveness will depend on how accessible it is for people impacted.

“I strongly believe that, if they continue to move forward and eliminate the bad actors, we may see a difference,” Stewart said.

Indigenous Advocate Reva Stewart has been looking into the predatory tactics of fraudulent rehabilitation homes for over a year, and in that time, she’s helped Indigenous people who have fallen victim to these homes in multiple ways, including providing them a way to return home or helping them get into legitimate treatment. Stewart and fellow advocate Coleen Chatter operate the #StolenPeopleStolenBenefits campaign to raise awareness about these rehab schemes. Photo by Shondiin Silversmith | Arizona Mirror

Shutting down a predatory scam

On May 16, Gov. Katie Hobbs and Attorney General Kris Mayes announced that over 100 healthcare providers for behavioral health, residential, and outpatient treatment services have been shut down after investigators found evidence that they defrauded the state’s Medicaid program of hundreds of millions of dollars.

Provider payment suspensions, known as Credible Allegations of Fraud (CAF) suspensions, are the first step of required action when Medicaid payment fraud is identified and the beginning of multi-agency investigations, according to Arizona Health Care Cost Containment System (AHCCCS), the state’s Medicaid agency. 

Hobbs, Mayes and AHCCCS Director Carmen Heredia also announced their plans to address the issue impacting Arizona’s tribal nations.

Indigenous people have been picked up off the street and dropped into a home in the Phoenix area where there was no treatment available, Hobbs said, and she’s heard the stories of people escaping out of windows or jumping over fences in the middle of the night just to access a phone to reach the outside world. 

These fraudulent healthcare providers took advantage of Indigenous people struggling with addiction, Hobbs said, by offering them food, housing, and treatment at a group living home or rehab facility.

But rather than getting the help they needed, they were allowed — and sometimes encouraged — to continue using drugs and alcohol, Hobbs said. At the same time, providers fraudulently billed AHCCCS for addiction treatment and other health care services.

“My heart is broken by the pain that you have been forced to endure,” Hobbs said. “The state of Arizona believes you.”

Hobbs instructed AHCCCS to make several operational changes, including a third-party forensic audit of all claims since 2019, an examination of Arizona Department of Health Services licensing measures, new reporting systems for claims that cause concern and additional fraud prevention measures.

Hobbs said the investigation found no reason to believe that AHCCCS members are involved in this fraud, and her office will not entertain any policies that will make it harder for people to participate in the Medicaid program.

Through these changes, Hobbs said her administration would prosecute existing bad actors, ensure that wraparound services are delivered to the people affected by provider closures and enact systemic reforms in the AHCCCS billing system to root out this fraudulent billing.

“This is just the first step in the process of eradicating this abuse,” Hobbs said. “It will be a fight, but one that my administration and I are fully committed to.”

The reality of what has transpired against Indigenous people across Arizona and the millions of dollars lost due to the exploitation of the AHCCCS program by fraudulent healthcare providers, Mayes said, is nothing short of a “stunning failure of government.” 

“There is no other way to say it, but it ends now,” Mayes said, adding that her office is working with AHCCCS to investigate all credible allegations of fraud, including more than 100 current cases. 

“These cases are complex and require extensive investigation, prosecutorial work, and resources,” Mayes said. “But make no mistake, we are conducting thorough criminal investigations, and we will aggressively prosecute these cases as we move forward.”

What is happening

The scheme targeted Indigenous people because there was a loophole in the AHCCCS American Indian Health Program that allowed individuals to pose as legitimate healthcare providers for behavioral health services. 

“This crisis is a direct result of the predatory practices of many behavioral health facilities that have targeted our tribal members that are most in need,” Salt River Pima-Maricopa Indian Community President Martin Harvier said. “Many of these predatorial behavioral health facilities have and continue to take advantage of populations that are at risk only to enrich themselves.”

Mayes said the scheme began with providers setting up fraudulent treatment facilities that focused on recruiting Indigenous people, typically people residing within tribal nations or who were part of the urban homeless population in the Phoenix area.

Mayes said that the Indigenous people targeted may have been in crisis and were extremely vulnerable. They were lured into these fraudulent treatment homes with offers like free food, cash incentives or rent. 

Once the recruited patients arrived at or were taken to the supposed treatment facilities, Mayes said, the providers obtained personal information or the individual’s AHCCCS card.

If a potential patient was not enrolled in benefits, that did not stop the fraudulent behavioral health facilities. Mayes said the facilities would contact AHCCCS by phone to obtain eligibility based on the unchallenged claim that the patient was eligible for the plan simply by being Native American.

“The bad actors used these people to egregiously overbill AHCCCS for treatment services,” Mayes said. 

In one case, Mayes said investigators discovered that AHCCCS had been billed more than 13 hours daily for alcohol rehabilitation services for a four-year-old. 

“This poor child was not in one of the facilities and did not need alcohol rehabilitation,” Mayes said, but the child’s AHCCCS ID card was used to “rip off taxpayers.”

Mayes estimated that hundreds of millions of dollars have been lost to these fraudulent schemes, though she conceded the total amount could be a lot higher.

But more than that, she said, is the heartbreaking human cost. 

“I don’t think it is too much to say that this is … one of the biggest scandals in the history of the state of Arizona when it comes to our government,” Mayes said, noting that there is no other state in the country where this level of Medicaid fraud occurred in an American Indian fee-for-service program.

Mayes provided a breakdown of the amount of money charged to AHCCCS since 2019, involving the American Indian fee-for-service program using the outpatient behavioral health clinic code, one of the principal codes the individual utilized to bill AHCCCS. 

In 2019, Mayes said, AHCCCS was billed $53.5 million under the outpatient behavioral health clinic code. By 2020, those billings more than doubled to $132.6 million and continued to increase. By 2021, it hit $291 million; by 2022, it had skyrocketed to $668 million.

“That is exponential growth in this program,” she said. “It is unusual, it is suspicious, and it’s why we indicted more than 40 people over the last three years.”

A failure of government

Mayes said the administration of former Gov. Doug Ducey was aware of the fraudulent tactics targeting Indigenous communities for years but did not make meaningful or lasting efforts to address them.

“The Ducey administration was, at best, negligent,” Mayes said, claiming that the administration allowed scam artists and fraudsters to take advantage of the antiquated, outdated systems.

Due to what she characterized as the incompetent management of AHCCCS, and in the wake of their ineffectiveness, Mayes said some of the most vulnerable people in Arizona were harmed — and taxpayers paid for it.

“This never should have been allowed to happen,” she said. “The previous administrations were asleep at the wheel.”

For three years, Mayes said, AG’s investigators, the AHCCCS Office of Inspector General and federal law enforcement partners have been investigating, indicting and pursuing financial remedies.

But it has been like a game of “Whac-A-Mole,” Mayes said, because of the inability and unwillingness of the prior administrations to address the structural vulnerabilities ingrained in the fee-for-service billing model of the American Indian Health plan for AHCCCS. 

To date, Mayes said there have been 45 indictments, resulting in $75 million seized or recovered.

“For years, these providers have allegedly defrauded the state of millions of dollars while creating a large-scale humanitarian crisis that disproportionately affects Arizona’s tribal communities,” Hobbs said. 

“The fraud we have identified has been ingrained in the system for years without proper action being taken,” Hobbs said, adding that the exact scope of the problem remains unclear.

Hobbs said that the previous administration only investigated on a case-by-case basis and never implemented the systemic overhauls necessary to resolve this problem, failing to deliver proper accountability. 

“Unfortunately, this approach led to pro-fraudulent providers continuing to exploit tribal communities for their own financial gain,” she said. 

Mayes said AHCCCS leadership was told by investigators that something needed to be done to shut down the money or the issue could not be solved. 

“You can’t prosecute your way out of this problem,” Mayes said. What happened repeatedly is that one bad actor would be stopped, but they would end up opening a new LLC and start billing AHCCCS under that new LLC. 

“AHCCCS, for three years, refused to do anything about it,” she said. “This is what you get when you have a governor who doesn’t care about government.”

Even with the AHCCCS Office of the Inspector General raising alarms, it went nowhere, Mayes said, and the director of AHCCCS under former Gov. Ducey “did nothing to stop the money flow.”

There have been reports and testimonies from victims that Indigenous people have died as a result of these homes.

If they can gather evidence where individuals or individual operators of these facilities are negligent for people dying, Mayes said they would prosecute people to the fullest extent of the law.

“What has happened is tragic and outrageous,” Mayes said. “I believe the state of Arizona owes our tribal nations an apology.”

State resources available

Heredia, the current AHCCCS director, said that the activities targeting tribal communities are appalling and atrocious, and AHCCCS is taking swift action to stop the bad actors from exploiting people and abusing the Medicaid system.

“This is a complex, resource-intensive issue,” she said, adding that AHCCCS is working in cooperation with the AG and law enforcement.

“Health care fraud is often billed as a victimless crime, but that couldn’t be further from the truth in this case,” said Akil Davis, special agent in charge of the FBI’s Phoenix field office. 

“This scheme we are investigating negatively affects some of the most vulnerable in our society who rely on these services,” Davis added. “The FBI and our law enforcement partners will continue to aggressively pursue all those who seek to unlawfully enrich themselves by manipulating the system with nothing but greed as their motivation.”

The FBI is seeking victims who may have been recruited to live in and receive services in group homes and are asking victims to complete a form at https://forms.fbi.gov/phoenixgrouphomes/.

AHCCCS is setting up a dedicated member hotline at 211 (option 7) for members impacted by the closure of a sober living home or residential facility. They can also visit a new website dedicated to providing resources at www.211Arizona.org/MMIP. There are also mobile crisis teams ready to deploy when members need hands-on, immediate behavioral health services, transportation, or care coordination, according to the department. 

Resources will be available to coordinate immediate housing, transportation, and health services related to a provider closure.

In addition to other planned operational changes, Heredia said AHCCCS is enacting a holistic system-wide strategy to find and eliminate fraudulent billing claims. This includes recommendations from the Attorney General’s Office, like moving certain provider types to high-risk categories for new applicants and re-validating providers, which requires onsite visits, fingerprinting background checks or registration fees, and additional disclosures.

Heredia said they would also conduct a comprehensive forensic audit of AHCCCS’ whole system going back to 2019.

“We need to take a closer look at what happened and get some answers,” she said, noting the agency will focus on the fee-for-service program, where these fraudulent claims have been directed as part of the American Indian Health program. 

AHCCCS shut down the bill codes that allowed the abuse to continue happening, Mayes said, which means that the money supply is no longer there for these providers. 

Mayes said one of her biggest concerns is that once these fraudulent providers realize they can not bill AHCCCS anymore and run out of money, they’ll abandon the home, resulting in people being left in these homes. 

Tribal leaders hopeful

State officials acknowledged that their work would not have come as far without Indigenous grassroots advocates and tribal leaders coming forward to raise awareness about the issue.

Mayes thanked the Indigenous advocacy groups for reporting the crimes, sending in referrals and voicing their concern until legitimate action could have been taken. 

Tribal leaders applauded the state’s move to create change in addressing the issue and look forward to implementing ways for their communities to help with these changes.

The Navajo Nation is taking steps to address the issue. Navajo Nation Attorney General Ethel Branch said the action plan includes launching Operation Rainbow Bridge, which involves opening an onsite emergency operations center in the Phoenix area. 

“We anticipate large numbers of the impacted individuals are Navajo tribal members,” Branch said, and opening up a local operations center allows them to help. 

“We’ll be here to receive our relatives and make sure that they are smoothly transitioned into licensed facilities where they’ll actually receive the services they believe that they would be receiving when they enter these vehicles and were transported south to the valley,” Branch said. They’ll also provide them the resources to return to the Navajo Nation. 

On the White Mountain Apache Nation, Vice Chairman Jerome Kasey III said they have seen increased deaths within their community related to the predatory treatment centers.

Kasey said the tribe is taking action, and they launched a door-to-door campaign within their community that focuses on providing information to their Tribal citizens about what is happening with these fraudulent providers and homes. 

Kasey said they visited over 3,400 homes last week, handing out information, including the 211 hotline.

“Our tribal members are not for sale, and they are human beings, and they’re precious,” Kasey said. “We’ll do everything we can to see everybody come home.”

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Arizona Mirror is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Arizona Mirror maintains editorial independence. Contact Editor Jim Small for questions: info@azmirror.com. Follow Arizona Mirror on Facebook and Twitter.