Over 200 people are homeless after Tucson recovery community closes during Medicaid probe

PHOENIX (AP) — A huge addiction recovery community in Tucson, Arizona, shuttered suddenly this week, leaving more than 200 people homeless as Arizona investigates widespread Medicaid fraud largely affecting Native Americans, authorities said Thursday.

Ocotillo Apartments & Hotel, a rundown complex that was being used as a sober living community, closed Wednesday.

Details about what happened were sketchy. A copy of the notices telling people they had to leave referred to them as “Happy Times clients.”

“We don’t know much about the operation,” said Andy Squires, spokesperson for the City of Tucson. “They city got called last week and our housing outreach people have been trying to help. Our response has largely been humanitarian.”

Squires said the city was working with the Tohono O’odham and Pascua Yaqui tribes to find temporary shelter or treatment facilities where the former residents can stay.

An online search failed to turn up a web page or any other online presence for a recovery community called Happy Times. The phone number for Ocotillo Apartments & Hotel rang unanswered Thursday.

Neither Happy Times nor Ocotillo Apartments & Hotel appear on a list of Arizona providers that have been suspended by the state’s Medicaid agency.

Heidi Capriotti, spokesperson for the Arizona Health Care Cost Containment System known as AHCCCS, said she had few details.

“Our care management team was dispatched to work on-site with the City of Tucson, trusted behavioral health and crisis providers, and tribal nations to establish an appropriate plan that would allow us to triage each individual’s specific need,” Capriotti said in a statement.

“This situation demonstrates the lengths bad actors will go to exploit the state’s Medicaid program, defraud taxpayers, and endanger our communities,” Capriotti said. “Situations like this are tragic, but also demonstrate that the Medicaid fraud prevention measures we’ve put in place are working to stop fraudulent billing and protect members from further exploitation.”

The Tucson community’s shutdown comes amid a massive investigation into billing fraud that state officials say has bilked Arizona out of hundreds of millions of Medicaid dollars. Since top Arizona officials announced a crackdown in mid-May, the state has identified and suspended more than 300 providers on credible allegations of fraud.

While some providers have closed, others have appealed to stay open.

AHCCCS has instituted tighter controls, including a six-month moratorium for enrolling new behavioral health clinics for Medicaid billing. Site visits and background checks with fingerprinting are now required for high-risk behavioral health providers when they enroll or revalidate.

The FBI and the U.S. Attorney General’s Office are among agencies that have joined Arizona prosecutors in the investigation. The scams have had consequences for Native Americans from as far away as New Mexico and Montana, where state and tribal governments have warned people about phony rehab programs that operate mostly in the Phoenix area.

The Navajo Nation and the Blackfeet Nation in Montana declared public health emergencies to free up resources to help affected members. The Navajo Nation also launched a program called Operation Rainbow Bridge to help members get into legitimate programs or back to the reservation.

Addiction recovery is a challenge on reservations, where resources for residential treatment aren’t always available.

The scams can be highly lucrative. In a federal case, a woman who operated a fake recovery program in Mesa, Arizona, pleaded guilty in July to wire fraud and money laundering after raking in over $22 million in Medicaid money between 2020 and 2021 for services never provided.