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Arizona's 92% drop is the clearest FWA signal behavioral health operators have seen in a decade
What can behavioral health operators learn from Arizona’s Medicaid fraud crackdown? Arizona’s Arizona Health Care Cost Containment System (AHCCCS) and Attorney General Kris Mayes reported a roughly 92% drop in suspect behavioral health Medicaid billing after suspending hundreds of providers tied to a sober-living scheme that exploited the American Indian Health Program (AIHP) fee-for-service rates. Operators in any 1115-waiver state should respond by tightening patient-brokering controls, sober-living affiliation disclosures, credentialing files, and ASAM-level documentation before the AHCCCS model spreads.
The numbers are not soft. According to the Arizona Attorney General’s Office, AHCCCS recorded approximately $3.11 billion in behavioral health code billing in the American Indian Health Plan during 2021 to 2023, then watched that figure drop to roughly $229.9 million from 2024 to 2026, a 92% decline. Since 2023, the Attorney General’s office has indicted 140 people and businesses, secured convictions against 41 people or entities, and reported more than $139 million in cash and real estate recovered or seized.
Mayes did not soften the framing. “And billing to the programs targeted in this scheme has dropped by an astonishing 92% since we launched our fraud crackdown. We are not done. We will continue to pursue individuals and entity that participated in this fraud,” she said.
What actually triggered AHCCCS to act
The trigger was not a single bad actor. It was a billing pattern AHCCCS could not explain. Beginning in 2020, Arizona saw a dramatic surge in outpatient behavioral health billing to the American Indian Health Plan, and investigators found that criminal enterprises, many operating unlicensed sober living homes, were recruiting Native Americans from tribal communities across the Southwest, transporting them to Valley homes, and billing AHCCCS for services that were never rendered or were provided under exploitative, dangerous conditions. In May 2023, Governor Katie Hobbs and Attorney General Mayes announced coordinated state action, with AHCCCS suspending payments to approximately 100 Medicaid providers based on credible fraud allegations.
The mechanics matter for any compliance officer reading this. AIHP was the soft spot. Bad actors targeted the American Indian Health Program, a fee-for-service system with fewer guardrails, allowing scammers to bill the state for services they never provided. The AIHP Root Cause Analysis flagged two specific failures: members had their AHCCCS ID numbers confiscated by fraudulent sober living homes, and those bad actors then billed AHCCCS for services that were never provided, exploiting the fact that the homes were billed as behavioral residential health facilities. The report also called out the H0015 code (SUD intensive outpatient) as a per-diem vulnerability with no fixed rate cap.
The harm was not abstract. Investigations by the Arizona Center for Investigative Reporting and ProPublica found that at least 40 Indigenous residents of Phoenix-area sober living homes and treatment facilities died between 2022 and 2024 as state officials struggled to respond. Since May 2023, more than 30,000 calls were received through the 211, Press 7 helpline and over 10,000 members directly received support in the form of lodging, food, transportation, and other needs. That is the human ledger behind the billing chart.
How AHCCCS tightened the screws (and what your state will likely copy)
The corrective build-out is the part operators should study line by line. AHCCCS has suspended more than 300 providers, assisted over 10,000 individuals with the humanitarian response, and implemented more than 20 new initiatives to combat fraud, waste, and abuse. According to the agency, 304 providers have been suspended for credible allegations of fraud, 160 provider applications have been denied, and 79 providers have been terminated for quality-of-care failures.
The structural changes are what other 1115-waiver Medicaid agencies will adopt next. AHCCCS moved three behavioral health provider types to the high-risk enrollment category, which under 42 CFR Part 455 triggers on-site visits, fingerprinting, background checks, and additional disclosures. The agency also began linking Behavioral Health Professionals (BHPs) to the BH companies they work for, linking BHPs to the facilities they work at, and requiring medical records to define specialized services. AHCCCS officials say the vast majority of claims are paid without delay, and that less than 1% of claims have to go through the review process, but the prepayment review tool is now permanent infrastructure.
Here is the operator-level control matrix I now recommend at every behavioral health client, especially in 1115 SUD demonstration states:
- Credentialing file integrity. Every BHP linked to your facility should have a current license check, NPDB query, OIG/SAM exclusion check, and a signed disclosure of any other facility they supervise. The TUSA case showed why this matters: Anagho, a nurse practitioner, operated TUSA Integrated Clinic and served as the Behavioral Health Professional for as many as 10 to 15 other behavioral health facilities, many of which have since been suspended or terminated.
- Sober-living affiliation disclosure. If you accept referrals from a recovery residence, document the relationship, the certification (NARR affiliate where available), and any financial flow. Then assume an EKRA reviewer will read it.
- ASAM Criteria, 4th Edition justification. Every Level 2.5 PHP and Level 2.1 IOP admission needs documented multidimensional risk findings tied to the 4th Edition dimensions, not legacy ASAM 3rd Edition language. Auditors are reading for this now.
- Weekly hour reconciliation. Before a PHP or IOP claim drops, verify the patient actually met the level-of-care hour minimum that week. This is the single most common documentation gap I see.
- Attendance-to-billing reconciliation. If your scheduling system, attendance logs, and billing system are not talking to each other daily, you are one chart audit away from a recoupment.
EKRA, AKS, and why Arizona is not the only state about to act
The Arizona case is sitting on top of a national enforcement curve. The Eliminating Kickbacks in Recovery Act (EKRA), enacted in 2018 as part of the SUPPORT Act, established a criminal statute prohibiting payments for patient referrals related to recovery homes, clinical treatment facilities, and laboratories. EKRA mostly mirrors the Anti-Kickback Statute but extends its reach to commercial health insurance as well as federal programs like Medicare and Medicaid. EKRA has fewer safe harbors than the AKS and notably does not protect volume-based or commission-based compensation for employees or contractors, even if they are W-2 employees.
DOJ has already linked EKRA directly to the Arizona scheme. On June 11, 2025, Cle’Esther Davenport was charged by indictment with conspiracy to defraud the United States and receive and pay kickbacks in connection with a substance abuse treatment scheme; Davenport owned Davenport House LLC, which purportedly provided housing to individuals enrolled in AHCCCS-funded health plans, and she received approximately $739,000 in illegal kickbacks to refer individuals to Tusa Integrated Clinic, resulting in improper payments of approximately $1.58 million from AHCCCS to Tusa. That is the Anti-Kickback Statute, EKRA, and Medicaid program integrity all stacked on a single sober-living referral relationship.
Other states have been here before. Florida’s Patient Brokering Act, enforced by the Palm Beach County Sober Homes Task Force and the Florida AHCA, has been used aggressively for years against treatment-to-sober-living kickback arrangements. In related South Florida prosecutions, the U.S. Department of Justice documented approximately $112 million in medically unnecessary billing tied to illegal kickbacks. Pennsylvania DDAP licensure inspections and the New York OASAS oversight posture follow similar logic. If your operation is in a 1115 SUD demonstration state with growing managed-care or fee-for-service SUD spend, assume your Medicaid agency is reading the AHCCCS year-in-review and asking program integrity for a similar playbook.
Frequently asked questions
What specifically triggered AHCCCS’s payment suspensions in the AIHP sober-living fraud case?
A credible allegation of fraud (CAF) review under federal Medicaid program integrity rules. A CAF payment suspension means that both AHCCCS and law enforcement have reviewed a provider’s billing records and have determined that, based on the evidence available, it is likely that the provider has engaged in intentionally deceptive practices for their own gain. AHCCCS is required to stop paying a provider and to refer the case to law enforcement for a full investigation as soon as a CAF suspension is issued. Payment suspensions are temporary actions intended to protect public funds while a full investigation is ongoing.
Which billing codes and provider types are now under heightened AHCCCS scrutiny?
Outpatient SUD codes billed on a per-diem basis are the obvious targets. The H0015 billing code is required for intensive outpatient treatment services for substance use disorder based on an individualized treatment plan, and this code was billed on a per diem basis with no fixed rate, paying 58% of the provider’s set rate. Three behavioral health provider types have been moved to the high-risk enrollment category, and BHRFs that look operationally like unlicensed sober living are receiving extra scrutiny.
If my facility is in Florida or Pennsylvania, could this enforcement model spread to my state?
Yes, and the parallel infrastructure already exists. Florida’s Patient Brokering Act, the Palm Beach County Sober Homes Task Force, and federal EKRA prosecutions out of multiple districts show the same template. Throughout 2025, there have been several indictments involving EKRA focused on substance abuse facilities, brokers, and marketing for sober homes and substance abuse facilities. Operators should not wait for their state Medicaid agency to copy the AHCCCS press release.
What patient-brokering and EKRA controls should an SUD operator document right now?
Three artifacts at minimum. First, a written referral-source policy that prohibits volume- or value-based compensation for marketers, W-2 or 1099. Second, a referral-source log that tracks every sober-living, alumni, or marketing referral with the financial relationship attached. Third, a credentialing file structure that links each BHP to every facility they supervise, with disclosures updated quarterly. The Anagho case is the cautionary tale on the third point.
How should operators handle sober-living referral relationships to stay compliant with Medicaid and EKRA?
Treat the affiliation as a regulated relationship, not a marketing one. Use a written agreement, fair-market-value rent or services, no per-head payments, no free housing tied to staying enrolled in treatment, and a clear paper trail showing the patient’s choice of provider. Verify the home’s NARR affiliation where available, and document that verification in the chart at admission. If you cannot defend the arrangement on a whiteboard to an OIG agent, restructure it before AHCCCS-style enforcement lands in your state.
References
- Arizona Attorney General’s Office: Behavioral Health Fraud Sentence and 92% Billing Decline
- AHCCCS Sober Living Fraud Response and Year in Review
- AHCCCS Payment Suspensions Press Release (May 2023)
- Arizona Center for Investigative Reporting: Medicaid Fraud Targeting Indigenous Communities Continues
- U.S. Attorney’s Office, District of Arizona: AHCCCS Treatment Fraud
- Arizona Advisory Council on Indian Health Care: Root Cause Analysis on Fraudulent Providers and Sober Living Homes
- Morgan Lewis: Ninth Circuit Confirms EKRA’s Strength (Schena)
- 42 CFR Part 455: Medicaid Program Integrity Requirements