U.S. News

Kentucky’s Largest Addiction Treatment Provider Agreed to Pay $16.2 Million Over Medicaid Fraud

By Mike Harper · July 29, 2026

Three former employees saw what was happening and filed a sealed lawsuit. Monday, it paid off.

Addiction Recovery Care, once Kentucky’s largest addiction treatment provider, agreed to pay $16.2 million to settle federal allegations that it defrauded Medicaid by billing for services that were never provided and misrepresenting the qualifications of staff delivering patient care.

The settlement, approved by a federal judge Monday in the Eastern District of Kentucky, resolves a civil case that began with a sealed whistleblower lawsuit filed in April 2023 by three former ARC employees — a billing supervisor and two peer support specialists who witnessed the fraudulent billing firsthand.

The allegations center on psychoeducation services, a category of group therapy that ARC billed to Medicaid at rates that required credentialed professionals to deliver. According to the Department of Justice, ARC falsely represented staff qualifications to receive higher reimbursement rates, submitted duplicate claims for office visits, and charged for services delivered by employees who lacked the necessary credentials.

The numbers tell a story about scale. A federal database shows ARC received $70 million from Medicaid for psychoeducation services in 2023 and 2024 alone — accounting for 20% of all Medicaid payments under that billing code in the entire country over those two years. One company, in one state, collecting a fifth of a national billing category.

The settlement amount was reduced from an initial proposed figure of $27.7 million after DOJ determined ARC’s financial condition could not support a larger payment. The company must pay the $16.2 million over several years.

ARC’s implosion has been swift. The FBI began investigating the company for potential Medicaid fraud in the summer of 2024, after which ARC underwent massive layoffs and clinic closures across Kentucky. An attempted sale to a Florida buyer fell through in early 2026 when lenders sued ARC for defaulting on payments. Last month, founder and CEO Tim Robinson was indicted on federal charges of wire fraud and money laundering — unrelated to the Medicaid scheme — involving an alleged scheme to sell the same federal tax credit payments to two different lenders. Robinson pleaded not guilty and resigned.

Interim CEO Cassandra Webb called the settlement “an important milestone” and said the company has strengthened its compliance and billing processes.

The DOJ noted that the resolved claims are allegations only and that there has been no determination of liability. But for the three employees who filed the original sealed complaint — who watched from inside as their employer billed the government for services patients never received — the settlement is a vindication that took three years to arrive.