'There has to be an end': Head of AHCCCS gives insight on massive Medicaid fraud scandal in Arizona

The head of Arizona’s Medicaid agency is opening up about the AHCCCS fraud scandal plaguing our state.

It’s been nearly a year since Carmen Heredia, cabinet executive officer, took over as the head of the agency, and she has spent the majority of that time trying to crack down on the fake rehab scheme targeting vulnerable people while bilking the state for nearly a billion dollars.

In a one-on-one interview with FOX 10 Investigator Justin Lum, Heredia talks about the changes being made to reign in the fraud.

'I do think we need an overhaul’

In January 2023, Carmen Heredia had no choice but to face a scandal of massive Medicaid fraud as the new head of the Arizona Health Care Cost Containment System (AHCCCS).

"Focusing on something that was completely unexpected for me. It was new information walking into the job, and it's been our complete focus," Heredia said.

She’s talking about the scheme that preys on vulnerable people, including Native Americans fighting addiction.

Organizers of the scam entice victims to live in unlicensed and unregulated sober living homes, sign them up on the American Indian Health Plan and broker the "patients" to rehab centers so the services can be billed to AHCCCS.  

The problem is that legitimate services aren’t provided.

The amount of money AHCCCS was billed for on one code alone skyrocketed from $53 million in 2020 to nearly $670 million in 2022.

Some providers billed for members who were minors, incarcerated or dead.

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Arizona Attorney General Kris Mayes said months ago that she believed AHCCCS needed an overhaul.

Does Heredia agree with that? If so, what's been done to overhaul how things are done at AHCCCS?

"I do think we need an overhaul. I think what I have uncovered is there are a lot of things, there's policy that needs to change. There's information silos that we needed to change. There's a resource issue. I think one of the reasons that this happened in the state was a lack of resources and attention and oversight into this area," she answered.

Heredia says she’s been communicating with tribal communities impacted by the crisis.

"I hear a lot of pain, pain and suffering. Time and time again, stories of people sharing, missing loved ones and deaths that have occurred. It's important for us to understand what's happened," she said.

Now, more than 300 Medicaid providers are on the AHCCCS suspension list, accused of fraud, and are not being paid at all.

So, what would be Heredia's message to the behavioral health providers who are already suspended, who said that their services were legitimate and they think this crackdown is more of a witch hunt?

"I think there's a very complex part here where I'm being very conscientious of – I don't want good actors in the system, quality behavioral health providers – to have negative consequences here. We've been really focused on ensuring that we have access to care and services. As so many providers shut down, we're constantly evaluating if there are still enough providers and networks to continue services geographically for service levels, for genders, for cultures, for all the different ways that you have to be available," she said.

MORE: Arizona cracks down on Medicaid, sober living home fraud targeting Native Americans: 'This is tragic'

‘I believe there has to be an end’

As for the changes made, AHCCCS doesn’t allow anyone to join the American Indian Health Plan over the phone.

The agency’s technology to detect red flags on billing has improved, Heredia says.

There’s a moratorium on the enrollment of new providers but it’s set to end on Dec 9 of this year.

Is Heredia prepared for any sort of influx of rehab centers trying to sign back up?

"Well, we've heard that they're waiting for the moratorium to lift. Knowing that, and based on the great advice from the attorney general's office, and in interviews they've done, and information they have, we've actually requested CMS to allow us to extend the moratorium," Heredia said.

She’s requested a six-month extension from the Centers of Medicare & Medicaid Services. She’s spoken to Medicaid directors in other states about similar fraudulent activity but admits Arizona’s scandal is unique.

Is there a possibility in the long term that we ever see this sober living scheme disintegrate?

Heredia responds saying, "I believe there has to be an end to it because we can shut up, shut down the front door. We've put in a tremendous amount of systems in place. We're on track to make 40 different system changes, and we're about halfway through that. There has to be an end to this."

See the entire interview with AHCCCS' Carmen Heredia:

Editor's note: As of December 8, 2023, the moratorium on new provider enrollment was extended by six months, an AHCCCS spokesperson told FOX 10.