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The short answer, up front
Behavioral health operators should tighten patient-brokering controls, sober-living affiliation disclosures, credentialing files, and ASAM level-of-care documentation now, because their state Medicaid agency is already reading the AHCCCS year-in-review. On May 14, 2026, Arizona Attorney General Kris Mayes and the Arizona Health Care Cost Containment System (AHCCCS) reported a 92% drop in suspect behavioral health Medicaid billing tied to a sober-living scheme that exploited the American Indian Health Program (AIHP) fee-for-service rates.
Per the Arizona Attorney General’s Office, AHCCCS recorded approximately $3,114,163,966 in behavioral health code billing in the American Indian Health Plan during 2021 to 2023, then watched that figure drop to approximately $229,942,919 from 2024 to 2026, a 92% decline. Statewide, Mayes reports 140 indictments, 41 convictions, and more than $139 million in cash and real estate recovered or seized since 2023.
Mayes did not soften the framing. She said her office “made it a top priority to hunt down and prosecute the criminals who stole from Arizona’s Medicaid program while exploiting some of our most vulnerable residents.” Operators in any 1115-waiver state should assume the same enforcement template is being drafted right now.
What actually triggered AHCCCS to act
The trigger was not a single bad actor. It was a billing pattern the state could not explain. Beginning in 2020, Arizona saw a dramatic surge in billing for outpatient behavioral health services to the American Indian Health Plan (AIHP) under AHCCCS, the state’s Medicaid program. Arizona reimbursed certain AIHP services at rates far above the standard managed care fee schedule, with no cap, until AHCCCS revised the policy. That is the vulnerability the criminal enterprises priced.
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. Recruiters worked reservations across Arizona, Utah, New Mexico, Montana, and the Dakotas.
In May 2023, Governor Katie Hobbs and Attorney General Mayes announced coordinated state action. AHCCCS suspended payments to approximately 100 Medicaid providers alongside the Arizona AG’s Healthcare Fraud and Abuse Section, the FBI, HHS-OIG, the U.S. Attorney’s Office, and the IRS.
The human ledger behind the billing chart is what indicts the delay. Since 2021, investigators have uncovered about $2.8 billion in fraudulent billing to AHCCCS for bogus sober living home treatment services, with roughly 200 investigations still open at the AG’s office.
How AHCCCS tightened the screws (and what your state will likely copy)
Operators should study the corrective build-out line by line. Under federal Medicaid program integrity rules, AHCCCS must suspend all payments to a provider once it determines a credible allegation of fraud exists. That authority is what enabled the May 2023 mass suspension.
Here is the operator-level control matrix I now recommend at every behavioral health client operating in a 1115 SUD demonstration state:
- Credentialing file integrity. Every Behavioral Health Professional linked to your facility should have a current license check, NPDB query, OIG/SAM exclusion check, and a signed disclosure of every other facility they supervise. The TUSA case showed why. Nurse practitioner Rita Anagho 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. Anagho was sentenced to 3.5 years in prison and has been ordered to pay $55 million in restitution in the separate federal case.
- 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 intensive outpatient and partial hospitalization admission needs documented multidimensional risk findings tied to the 4th Edition dimensions, not legacy 3rd Edition language. PHP and IOP are outpatient levels of care. Surveyors are focused on this now.
- Weekly hour reconciliation. Before a PHP or IOP claim drops, your billing team verifies 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, your operation is 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. EKRA, enacted in late 2018 as part of the SUPPORT Act and codified at 18 U.S.C. Section 220, prohibits accepting or paying kickbacks for referrals to recovery homes, clinical treatment facilities, or laboratories. EKRA has fewer safe harbors than the AKS and applies to any healthcare benefit program, including private insurance and cash-pay patients, not only federal healthcare programs.
On July 11, 2025, the Ninth Circuit issued its first appellate interpretation of EKRA in United States v. Schena. Judge Daniel A. Bress wrote for the court: “[W]e hold that 18 U.S.C. § 220(a)(2)(A) covers those who interface with those who do the referrals.” Read that twice if you have marketers on any variable comp plan. The court also clarified that percentage-based compensation paid to marketing employees, without more, does not violate section (a)(2)(A) of EKRA, but becomes unlawful when marketers are paid to unduly influence doctors’ referrals through false or fraudulent representations about the covered medical services.
DOJ has tied EKRA-style conduct directly to Arizona. Per the U.S. Attorney’s Office for the District of Arizona, Farrukh Jarar Ali, 41, of Pakistan, was charged by indictment with conspiracy to commit health care fraud and wire fraud, three counts of wire fraud, and money laundering in connection with an alleged $650 million scheme involving at least 41 substance abuse treatment clinics in Arizona. Ali owned ProMD Solutions, a Pakistan-based company that provided credentialing, enrollment, medical coding, and billing services for outpatient treatment centers, and enrolled multiple clinics with AHCCCS, but these clinics did not provide legitimate care to patients, many of whom were recruited from the homeless population or Native American reservations. Ali submitted approximately $650 million in false claims, and AHCCCS paid approximately $564 million on those claims. Ali personally received approximately $24.5 million, and $2.9 million of that went to a home on a golf estate in Dubai.
Other states have been here before. Florida’s Patient Brokering Act, enforced by the Palm Beach County Sober Homes Task Force and the Florida Agency for Health Care Administration (AHCA), has been used aggressively for years against treatment-to-sober-living kickback arrangements. Pennsylvania DDAP licensure inspections follow similar logic. If you operate in a 1115 SUD demonstration state with growing managed-care or fee-for-service SUD spend, assume your Medicaid agency is reading the AHCCCS press release.
The operator takeaway
Compliance officers who wait for a subpoena to reorganize their credentialing files are already late. The scale of what federal enforcers are willing to charge should settle the question of whether to act.
Per the U.S. Department of Justice, the 2025 National Health Care Fraud Takedown resulted in criminal charges against 324 defendants, including 96 doctors, nurse practitioners, pharmacists, and other licensed medical professionals, in 50 federal districts and 12 State Attorneys General’s Offices, for their alleged participation in health care fraud schemes involving over $14.6 billion in intended loss. The government seized over $245 million in cash, luxury vehicles, cryptocurrency, and other assets. CMS also prevented more than $4 billion from being paid and suspended or revoked the billing privileges of 205 providers in the months leading up to the 2025 Takedown.
Attorney General Pamela Bondi framed the takedown this way: “This record-setting Health Care Fraud Takedown delivers justice to criminal actors who prey upon our most vulnerable citizens and steal from hardworking American taxpayers.”
If you run a treatment center in Arizona, Florida, Ohio, or Pennsylvania, do three things this quarter:
- Rebuild your credentialing files so every Behavioral Health Professional is linked to every facility they supervise.
- Rewrite your marketing and referral contracts against EKRA, not just AKS.
- Put a real attendance-to-billing reconciliation on the calendar every Friday.
The AHCCCS playbook is public. Use it before your Medicaid agency does.
Frequently asked questions
What specifically triggered AHCCCS’s payment suspensions in the AIHP sober-living fraud case?
A Credible Allegation of Fraud review under federal Medicaid program integrity rules. In May 2023, AHCCCS suspended payments to approximately 100 registered behavioral health providers in coordination with the Arizona AG’s Healthcare Fraud and Abuse Section, the FBI, HHS-OIG, the U.S. Attorney’s Office, and the IRS. By May 2026, AG Mayes reported that behavioral health code billing under the American Indian Health Plan had dropped from roughly $3.11 billion (2021-2023) to about $229.9 million (2024-2026), a 92% decline.
How much fraudulent billing has DOJ tied to the Arizona AHCCCS scheme so far?
In the 2025 National Health Care Fraud Takedown, the U.S. Attorney’s Office for the District of Arizona charged Farrukh Jarar Ali, 41, of Pakistan, in an alleged $650 million scheme involving at least 41 substance abuse treatment clinics that billed AHCCCS through his Pakistan-based billing company, ProMD Solutions. Prosecutors allege AHCCCS paid approximately $564 million on those false claims, and Ali personally received approximately $24.5 million. Rita Anagho, the nurse practitioner behind TUSA Integrated Clinic, has been ordered to pay $55 million in restitution and was sentenced to 3.5 years in prison in her state case. Statewide, AG Mayes reports 140 indictments, 41 convictions, and more than $139 million in cash and real estate recovered or seized since 2023.
How did the Ninth Circuit’s Schena decision change EKRA exposure for behavioral health marketers?
On July 11, 2025, in United States v. Schena, the Ninth Circuit held that 18 U.S.C. § 220(a)(2)(A) covers marketing intermediaries who interface with those who do the referrals, and that there is no requirement that payments be made to a person who interfaces directly with patients. The court also held that percentage-based compensation is not per se illegal, but becomes unlawful when tied to undue influence, such as false or misleading marketing that steers referrals. Because EKRA has fewer safe harbors than the AKS and applies to any health care benefit program including private insurance, treatment centers should rewrite marketing and business-development compensation against EKRA rather than only AKS.
If my treatment center is in Florida or Pennsylvania, could this enforcement model spread to my state?
Yes. Florida’s Patient Brokering Act, the Palm Beach County Sober Homes Task Force, and federal EKRA prosecutions in the Southern District of Florida already apply a similar template to treatment-to-sober-living kickback arrangements. The Ninth Circuit’s July 11, 2025 ruling in United States v. Schena expanded EKRA to reach marketing intermediaries who interface with referring providers. Pennsylvania DDAP licensure inspections follow similar logic, and any 1115 SUD demonstration state with growing fee-for-service SUD spend should be assumed to be reading the AHCCCS playbook.
References
- Arizona Attorney General’s Office. Attorney General Mayes Announces Behavioral Health Fraud Sentence, Reveals Dramatic Decrease in Behavioral Health Code Billing (May 14, 2026)
- U.S. Attorney’s Office, District of Arizona. District of Arizona Charges 7 Defendants as Part of National Health Care Fraud Takedown
- U.S. Department of Justice. National Health Care Fraud Takedown Results in 324 Defendants Charged in Connection with Over $14.6 Billion in Alleged Fraud (June 30, 2025)
- Epstein Becker Green (Health Law Advisor). Ninth Circuit Applies EKRA to Marketing Intermediaries in Lab Operator’s Allergy Testing Scheme (United States v. Schena)
- Mintz. Ninth Circuit Court of Appeals Affirms EKRA Conviction for Lab Operator (July 17, 2025)
- Morgan Lewis Health Law Scan. Ninth Circuit Ruling Confirms Strength of the Eliminating Kickbacks in Recovery Act (August 2025)
- Axios Phoenix. Arizona AG still investigating 200 sober living home Medicaid fraud cases (June 9, 2026)