Louisa Drug rehab company agrees to $16M judgment over Medicaid fraud allegations

ASHLAND, Ky. (WYMT) – Addiction Recovery Care, LLC, and its affiliates have agreed to a civil judgment of more than $16 million dollars in favor of the United States to resolve allegations that they defrauded the Kentucky Medicaid program, the U.S. Attorney’s Office and the Kentucky Attorney General’s Office announced Monday.

ARC, headquartered in Louisa, Kentucky, operates residential and outpatient drug rehabilitation facilities throughout the state. Along with affiliates Pioneer Health Group, LLC and Science Hill Family Care, LLC, ARC offers behavioral healthcare and medical services to patients at its rehabilitation facilities.

False Claims Act allegations

The judgment is part of a civil settlement resolving allegations that ARC and its affiliates violated the False Claims Act, a federal statute that prohibits the submission of false claims for payment to government programs, including Medicaid.

In April 2023, current and former ARC employees filed a qui tam complaint alleging the company defrauded the Kentucky Medicaid program by submitting fraudulent claims for behavioral health services. Under the qui tam provisions of the False Claims Act, a private citizen can file a civil action on behalf of the United States. During the government’s subsequent investigation, ARC self-disclosed that it should not have billed for some of its services, including services identified by the whistleblowers.

According to the settlement agreement, the government alleged that from January 2018 to March 2024, ARC falsely represented the qualifications of some of its clinicians on claims to Kentucky Medicaid in order to receive higher reimbursements. Behavioral health services — including psychotherapy, psychiatric evaluations, and mental health assessments — were allegedly provided by lower-level healthcare workers but billed as if performed by employees with higher-level licenses.

The government also alleged that from July 2019 to mid-June 2021, ARC falsely represented that it provided individual therapy sessions, which Kentucky Medicaid reimburses at a higher rate, when ARC in fact provided less expensive group therapy sessions. These practices are commonly referred to as “upcoding.”

In addition, the government alleged that from January 2019 to December 2024, ARC’s affiliates billed duplicate office visits to Kentucky Medicaid and billed for office visits already reimbursed under an inclusive per diem rate. One affiliate also allegedly charged for care management services that did not meet Kentucky Medicaid’s coverage requirements, including services performed by employees who lacked the necessary credentials.

Settlement terms

The civil judgment and settlement resolve the qui tam case captioned United States ex rel. Rikki Pope, et al. v. Addiction Recovery Care, LLC, Case No. 0:23-cv-51-DLB, which was recently unsealed by the court. The judgment amount will be paid over several years and was reduced due to the defendants’ financial condition and prospects for ongoing operations. The individuals who filed the qui tam complaint are eligible to receive a portion of the settlement proceeds.

The matter was investigated by the Affirmative Civil Enforcement section of the U.S. Attorney’s Office, with assistance from the U.S. Department of Health and Human Services Office of Inspector General, the Kentucky Office of Attorney General’s Office of Medicaid Fraud and Abuse Control, and the Federal Bureau of Investigation. Assistant U.S. Attorney Meghan Stubblebine and former Assistant U.S. Attorney Katie Sheridan represented the United States.

Earlier this year, former ARC CEO Tim Robinson was indicted for wire fraud and money laundering. He’s pleaded not guilty and his trial is set for August 10.