Arizona Gov. Hobbs and Attorney General say state is victim of health care system fraud

By Howard Fischer
Capitol Media Services
PHOENIX -- Gov. Katie Hobbs and Attorney General Kris Mayes said Tuesday the state has been the victim of massive fraud in its health care program and blamed their Republican predecessors for ignoring it.
The scheme involves "sober living homes'' signing up Native Americans, often on the street, with the promise of treatment. But when they got there, there was no treatment and, according to Hobbs, some had to "escape out of windows and jump over fences in the middle of the night just to access a phone to reach the outside world.''
Yet the governor said the Arizona Health Care Cost Containment System, the state's Medicaid program, was billed for the "services.'''
Mayes said it even involved scammers just using the names of Native Americans -- some who were dead -- to bill for services that were never provided.
All this, both contend, occurred because AHCCCS, under the direction of someone appointed by Doug Ducey, and the Attorney General's Office run by Mark Brnovich failed to adequately address the problems.
"This is what you get when you have a governor who didn't care about governing,'' Mayes said.
That drew a sharp reply from both.
"The investigations revealed today had been underway for several years, well before the current occupants took office,'' said Daniel Scarpinato, who had been Ducey's chief of staff. And he pointed out that even Mayes acknowledged that there have been more than 40 prosecutions and $75 million recovered during the past three years -- long before Hobbs and Mayes took office in January.
Scarpinato called the Tuesday press conference "grandstanding.''
Former Attorney General Mark Brnovich had a similar reaction.
"Our office prosecuted a record amount of health care fraud cases,'' he said. "It's sad that the governor and current attorney general are more focused on scoring partisan political points instead of protecting Arizonans.''
But Mayes said that the prosecutions of the past amounted to a "whack-a-mole'' approach of going after individual fraudsters but never recognizing -- or addressing -- how to prevent the problem in the first place.
In each of these cases the fraudulent claims involve care for Native Americans. And the reasons is the nature of AHCCCS.
Most of the more than 2.4 million residents enrolled are in health care plans which are paid a flat fee of federal and state dollars for all care.
But under federal law, services to Native Americans are provided on a fee-for-service basis. And Mayes said that makes it attractive for sober living homes to seek out and sign them up for care.
Mayes said that, however, is only part of the scam.
"They simply purchased lists of names and dates of birth of people and used those to bill AHCCCS,'' Mayes said. And there even were cases where the state was billed for services she said that were "impossible to render,'' like 13 hours a day of alcohol rehab services for a 4-year-old for whom they had that child's AHCCCS identification card.
"This poor child was not in one of the facilities and did not need alcohol rehabilitation,'' Mayes said. She said there were similar billings, like $1 million for treating a woman and her children over the course of a year.
There also were services for "patients'' who were dead, in jail, or clearly not in Arizona at the time.
Most of this went undetected and unprosecuted, Mayes said, despite what she said were complaints registered by investigators for AHCCCS and within the office she inherited from Brnovich.
"This never should have been allowed to happen,'' she said.
Mayes estimated that in the past three years there has "hundreds of millions of dollars'' lost due to fraud. But she declined to put a figure on it.
"I wish I could be more specific about that,'' Mayes said. "I don't think it is too much to say this is one of the biggest scandals in the history of the state of Arizona when it comes to our government.''
"The previous administrations were asleep at the switch, asleep at the wheel,'' Mayes said. "The Ducey administration was, at best, negligent while they allowed scam artists and fraudsters to take advantage of the antiquated, outdated systems and incompetent management of AHCCCS.''
And she said Brnovich did not provide "leadership'' for his own staff -- now her staff -- to pursue the issue.
"He and Gov. Ducey should have done what Gov. Hobbs and I are doing today: taking aggressive action to shut down the money supply to these fraudulent actors and working to ensure that we root out fraud and abuse in our state's Medicaid program.,'' Mayes said.
Carmen Heredia, tapped to head AHCCCS by Hobbs, said the first part of that now is occurring.
"We have suspended payments to approximately 100 Medicaid providers based on credible allegations of fraud,'' she said, the first step of what's required under federal law.
Mayes said that alarms should have been going off in the administration of AHCCCS, under the direction at the time of a Ducey appointee, for some time.
In 2019, she said, the was $53.5 million billed to AHCCCS under the code of outpatient behavioral health services. That more than doubled to $132.6 million the following year, to $291 in 2021, and hit $668 million in the 2022 fiscal year.
"I can't stand here and tell you how much of that growth represents fraud,'' Mayes said.
"But our agents will tell you, that is extraordinary growth,'' she said. "It is unusual, it is suspicious.''
Mayes made it clear there were some efforts to pursue the problem before she took office in January. In fact, she was the one who acknowledged that more than 40 people were indicted in the past three years and the state has recovered $75 million.
But the problem, she said, is that no one in either AHCCCS or her office undertook a systemic review.
And that goes to her claim and that of Hobbs that the failure starts at the top.
Mayes said that prosecutors and investigators in what is now her office have been "screaming from the rooftops'' for some time now, "trying to get the leadership of the Attorney General's Office and the leadership of AHCCCS to shut down the money'' as a way to address the problem. And she said similar alarms were being raised by investigators in AHCCCS.
Instead, she said, Brnovich and AHCCCS went after individual offenders as they were found. And all that did, Mayes said, is result in those people simply forming a new corporate entity to go back in business.
"You can't prosecute your way out of this problem,'' she said.
There's another facet to the problem. Several tribal leaders said that the recruitment -- possibly not entirely voluntary -- has led to questions of whether members who go missing actually are being held against their will in a sober living home.
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