'Every sober living home would shut down': Critics slam Arizona sober living reform bills

Proposed laws to crack down on sober living fraud in Arizona are targeting the wrong problem and could have dire consequences for legitimate providers, leaving people in recovery without the help they need, some critics say.

A "Call to Action" circulating among providers in the Arizona recovery community is trying to shore up opposition to three sober living bills moving through the Legislature this session. Critics say the bills would add excessive regulation that could cause some law-abiding homes to close while not doing enough to deter unscrupulous homes from operating.

One of the bills would require licensed sober living homes to add 24/7 staffing that could cripple the entire industry, the Call To Action email says.

The three legislative bills under attack are: Senate Bill 1655 sponsored by Sen. Theresa Hatathlie, D-Coal Mine Mesa, which has passed the Senate and must now move through the House; Senate Bill 1361 sponsored by Sen. Frank Carroll, which has passed the Senate and is on its way to the House; and House Bill 2317 sponsored by Rep. Matt Gress, R-Phoenix, which has passed the House.

The Hatathlie and Carroll bills are on Thursday's House Health and Human Services Committee agenda.

Critics acknowledge the bills have good intentions and are an attempt to crack down on and prevent massive Medicaid fraud in Arizona that has made national headlines and bilked taxpayers of an estimated $2 billion. But opponents say the proposed laws ignore the fact that the fraud in Arizona was about Medicaid billing schemes and sober living homes can't bill insurers, including Medicaid.

Most significantly, the bills don't do anything to reform the deficits in Arizona's Medicaid program that allowed the fraud to happen, said Tom Fay, the owner of Gambit Recovery, which operates sober living homes in four states, including eight homes in Arizona. At the same time, they would put unreasonable burdens and expenses on home operators, he said.

"It's almost like sober living is the scapegoat. What about the billions of dollars that were fraudulently billed? Sober living homes weren't doing that," Fay said. "None of these three bills addresses the genesis of the fraud and the genesis of the fraud begins with whoever is billing Medicaid. ... The language in all three bills just shows they don't know the difference between sober living and behavioral health entities."

Sponsors of the bills have said they are trying to curb a problem that has caused havoc in numerous Valley neighborhoods, where people with drug and alcohol dependence have been essentially warehoused with promises of recovery treatment they didn't receive. The Arizona Attorney General's Office has issued more than 70 criminal indictments related to the cases.

"This deterrent will make sure bad actors are not taking advantage of the state," Hatathlie told the Senate Health and Human Services Committee Feb. 13 when summarizing her bill.

So-called "bad actors" affiliated with behavioral health treatment facilities were using patients in purported sober living homes as currency to submit claims for services to Arizona's Medicaid program that were upwards of $1,000 per patient per day, Arizona Attorney General Kris Mayes' office has said.

And Arizona's Medicaid program, known as the Arizona Health Care Cost Containment System, was paying those claims. That means a clinic with 20 patients billing for treatment five days a week could get paid $400,000 or more per month from AHCCCS. Two federal indictments connected with the case accuse fraudulent providers of bilking millions and using the money to buy homes, luxury cars and expensive jewelry.

'Every sober living home would shut down'

Hatathlie's bill, which has undergone numerous amendments, would have the most severe consequences for legitimate sober living home providers, Fay said. Among other things, it would require homes to have two paid staff per every six residents, 24/7, which is "not a sustainable model," Fay said.

"You are going to have to staff the house 24/7 so that's a minimum of six or seven employees per house. There is not one sober living in America that has the funding to staff a house 24/7," he said. "Every sober living home would shut down."

Hatathlie's bill also calls for fingerprint clearance cards and federal criminal background checks for sober living home managers, contractors, employees and owners. That background clearance in Hatathlie's bill would pose a problem for sober living staffing, critics say. Most house managers are in recovery and as a result of having lived a life involving addiction and quite a few of them have criminal histories, Fay said.

Carroll and Gress' bills are nearly identical and require the Arizona Department of Health Services to contact local jurisdictions to make sure the home is compliance with all local zoning, building, fire and licensing ordinances before it could issue a sober living home license or license renewal.

But critics from the recovery community say that while the Carroll and Gress bills do a lot to address licensed sober living homes, they don't go far enough to call out bad actors who are brokering patients and operating unlicensed homes.

"We need to stop calling them 'unlicensed sober living homes' and call them what they are — they are flop houses, and they are changing the very fabric of our communities," the recovery community's Call To Action alert says. "Remember, the bad guys don't get a license ... This is a law enforcement issue."

Schemes victimized Indigenous people seeking recovery

Investigators have said that bad actors improperly used sober living homes to find the people with drug and alcohol problems that were necessary to carry out patient brokering scams. Sober living homes can't provide treatment and can't induce patients to seek treatment at any particular treatment facility, per state law, but investigators have cited numerous instances of patient-brokering.

Indictments and search warrant affidavits connected with the Arizona fraud describe schemes where alleged providers were giving patients free room and board because they formed alliances with outpatient behavioral health clinics that overbilled Medicaid, though that's not how sober living homes usually work. Most legitimate sober living homes charge residents a weekly fee and help residents find jobs to pay the bills.

Hatathlie and other advocates for the Indigenous people who were preyed upon in the more recent schemes say that cracking down on sober living homes will not fix the fraud. But it will be a sign of the state's commitment to acknowledging a problem that for some tribal members ended in death, she said. At least two wrongful death lawsuits have already been filed against the state in connection with the fraud, both involving Indigenous people.

Hatathlie spoke out against Carroll's bill on Feb. 28 when it was considered by the Senate Committee of the Whole. Carroll's bill would raise the state fine for sober living home violations from $500 per violation to $1,000. Hatathlie wants it to be between $5,000 and $10,000 per violation, which some critics have said is too steep, particularly for smaller operators, since a violation can include problems such as not having a lid on a trash can.

"People have died," Hatathlie told the Senate on Feb. 28. "Can you put a price on that?"

Reach health care reporter Stephanie Innes at Stephanie.Innes@gannett.com or at 602-444-8369. Follow her on X @stephanieinnes.

This article originally appeared on Arizona Republic: Proposed laws targeting sober living fraud in Arizona slammed by critics