PHOENIX — A class action lawsuit, filed last week, accuses state officials of ignoring a whistleblower who tried to warn them about what became $2.8 billion scandal involving fraudulent sober living homes.
The scheme, which state officials believe went on for years, involved people setting up businesses that supposedly provided sober living services and facilities to Native American clients. They would then "recruit" clients, often by hiring people to drive to reservations and convince them to come with them.
Once signed up, the business would then bill the state for services it never provided. The lawsuit alleges clients would end up more addicted than when they came in. Others would die in the sober living homes, others would go missing and some are still missing today.
But the lawsuit claims that a whistleblower contacted Arizona Health Care Cost Containment System in 2019, detailing the workings of these fraudulent businesses, and even providing names of those he suspected of being behind some of it.
The whistleblower, according to the lawsuit, had hired an outside company to handle billing for his rehab company. He soon discovered his billing had increased dramatically, although his actual services had not.
The lawsuit quotes an affidavit from a special agent with the Arizona Attorney General's Office. The affidavit, according to the lawsuit, said the whistleblower believed there was an organized group behind the fraud, which he called "the reservation."
The lawsuit claims the whistleblower's file was closed "without further investigation" by the Arizona Attorney General's Office.
Because of this, the lawyers who filed the lawsuit allege, the fraud was allowed to balloon from tens of millions of dollars to several billions of dollars and continue for years before AHCCCS began to suspend hundreds of providers from billing.
"It was spelled out in detail," attorney John Brewer said. "Who the players were, why they were doing it, how they were carrying it out."
"This is a much bigger picture than individuals," attorney Dane Wood said.
Brewer and Wood said they could represent hundreds or thousands of plaintiffs in the lawsuit.
When reached by 12News, a spokesman for the Arizona Attorney General's Office said he could not comment.
Late Tuesday afternoon, AHCCCS and the Arizona Department of Health Services issued a joint statement:
"AHCCCS and ADHS are unable to comment on the substance of pending litigation. Addressing behavioral health fraud remains at the forefront of our efforts. Governor Hobbs and State Agencies have acknowledged the pain and suffering associated with behavioral health fraud and the significant impact on Tribal nations in Arizona. The Hobbs administration has taken swift action against the fraudulent providers, prioritized an emergency humanitarian response, and continues to prioritize operational reform in collaboration with law enforcement and Tribal partners.
Our focus remains protecting the populations we serve, ensuring that Arizonans receive the vital care and services they need, and eliminating fraud."