Addiction Recovery Care, or ARC, Kentucky’s largest provider of treatment and recovery services, has announced its pending sale to Ethema Health Corp., a Palm Beach, Florida-based behavioral health company.

ARC reported the potential sale in a news release Wednesday, saying the two companies have “entered into a letter of intent” for Ethema to acquire the assets and operations of ARC. It did not disclose the sale price.

Once the fastest-growing provider of addiction services in Kentucky, ARC has foundered over the past 14 months amid reports of an ongoing FBI investigation into possible health care fraud and closer scrutiny by insurers who process claims for patient care and had begun slashing reimbursement.

Over the past year, ARC has closed multiple facilities and programs and laid off several hundred employees. At its peak in 2024, ARC had about 1,800 residential treatment beds, programs throughout Kentucky and about 1,350 employees.

Medicaid — the government health plan for low-income individuals — pays for nearly all of ARC’s services, which include residential and outpatient care. ARC in 2023, received about $130 million in payments from Kentucky’s Medicaid program, which gets about 70% of its money from the federal government.

Tim Robinson, the founder and CEO of ARC based in his Eastern Kentucky hometown of Louisa, did not immediately respond to a request for comment.

But in an email Wednesday to ARC employees obtained by the Kentucky Lantern, Robinson said the sale was not “a decision we made lightly.”

“Following the necessary organizational changes, this strategic consolidation is the most responsible and forward-looking step we can take,” the email said. “It ensures the necessary long-term stability and investment required to continue our core mission: providing high-quality treatment for addiction and co-occurring disorders across Kentucky.”

He added that Ethema, operating under the name ARIA Kentucky, “has indicated a strong intent to hire a substantial portion of the current ARC staff in the same or similar roles. There will be no disruption to your daily operations or client care, as the well-being of our clients is our top priority,” Robinson said in his email to ARC employees.

Kentucky lawyer climbed out of alcoholism, launched a recovery boom

Entities to be acquired by Ethema include ARC, the Bellefonte Hospital and Recovery Center, Pioneer Rural Health Clinic and a pharmacy and laboratory, Robinson’s email said.

The announcement makes no mention of the FBI investigation which the federal agency has described as “ongoing.”

But in an email Wednesday, an FBI spokeswoman suggested it may have been affected by the current federal government shutdown due to an impasse in Congress.

“During the current lapse in appropriations, (Department of Justice) operations are directed toward national security, violations of federal law, and essential public safety functions,” the email said. “Inquiries outside of these functions will be considered when the lapse in appropriations ends.”

The ARC news release did not disclose a potential sale price or whether Robinson would retain a role in the new operation and company officials did not immediately respond to questions about the deal.

Shawn Leon, owner of Ethema, said in the news release the purchase of ARC would advance the company’s goal of expanding addiction and recovery services in the region.

“This acquisition will significantly contribute to reaching our goal of building a network of 3,000 beds by the end of 2026 and solidifying ARIA Kentucky as a regional powerhouse in recovery services,” he said,

Ethema already operates the former Edgewater Recovery Center based in Morehead, whose previous owners came under federal scrutiny last year over alleged fraudulent billing practices. The company agreed to pay $2.2 million in a civil penalty for its role in a scheme to submit false laboratory claims to Medicaid and Medicare for drug testing, according to the U.S. Attorney’s Office for the Eastern District of Kentucky.

If the sale of ARC to Ethema goes through, it will bring to an end ARC’s 17-year operation by Robinson, a lawyer and recovering alcoholic who founded ARC in 2008 as a single halfway house in Lawrence County. He later established ARC’s headquarters in Louisa where it became the small town’s largest employer.

Over the years, the company grew rapidly, fueled by the changes in Medicaid in 2014 that dramatically expanded access for adults in need of addiction treatment, opening a new stream of revenue.

Robinson, his employees and companies affiliated with ARC, also became substantial political donors.

Recovery CEO gives big to support Democrat Beshear and a host of Republicans

The Lantern reported last year that Robinson, his corporations and employees have made at least $570,000 in political contributions over the past decade as his for-profit company grew from a single halfway house to about 1,800 residential beds and outpatient care for hundreds more clients.

Among beneficiaries were Kentucky Gov. Andy Beshear, a Democrat Robinson has said he thinks should run for president, but many political donations went to Republican candidates and causes.

Robinson also benefited.

The Lantern reported last year he and his wife, Lelia, received an annual income of about $533,400 a year, according to tax filings of a non-profit affiliated with ARC, Odyssey Inc.

Robinson said he didn’t think that unreasonable, given that he and his wife had worked and sacrificed to build the company.

“We took a lot of risks,” he said last year. “I’m living the American dream. I’m doing better than I ever thought I could be doing financially.”