TUCSON, Ariz. (KGUN) — On October 1st, the Arizona Senate Health and Human Services Committee held a hearing to review how the state is handling one of the largest fraud scandals in its history, a scheme involving fake sober living homes that defrauded Arizona’s Medicaid program out of an estimated $2.8 billion.
The massive fraud, uncovered in 2023, involved fraudulent behavioral health operators billing the Arizona Health Care Cost Containment System (AHCCCS) for addiction treatment services that were never provided. Many of the victims were Native American women, recruited from reservations and vulnerable communities under the promise of free care, only to be abandoned in unregulated homes with little or no treatment.
Following the state’s crackdown, hundreds of facilities were shut down and new enforcement rules were enacted through Senate Bill 1308, signed by Governor Katie Hobbs earlier this year. The law requires sober living homes to be licensed, inspected, and held to strict reporting standards.
But legitimate behavioral health providers say the system has swung too far in the other direction, leaving them unable to operate or receive payments for services they’ve already provided.
At last week’s committee hearing, The Haven, a Tucson-based recovery center that’s served women in Southern Arizona for more than fifty years, testified about the growing fallout.
Vondi Grijalva, The Haven’s admissions supervisor, spoke on behalf of the organization, warning lawmakers that payment delays and overly broad penalties are threatening access to care for some of the state’s most vulnerable women.
Amy Graves, The Haven’s CEO, said the facility is currently owed about $375,000 from AHCCCS for services delivered in good faith, funds that have been held up for months since the fraud investigation began.
“We started noticing in the fall that payments were being delayed,” Graves said. “But there was no information coming about why they were delayed. It’s been this big vacuum of a lack of clarity, a lack of communication, and certainly with AHCCCS, a lack of transparency.”
Emilia Honkasaari, Vice President of Communications at the Haven, says
“We emphasize that restoring AHCCCS funding is not about protecting organizational finances—it’s about protecting people,” Honkasaari said. “When reimbursements are delayed, women lose access to treatment and counseling, and native and Indigenous women lose culturally grounded care. Our members should not pay the price for fraud committed by others.”
Graves said the financial strain is beginning to ripple across the nonprofit. The missing payments have made it difficult for The Haven to qualify for foundation grants, which often require organizations to show financial stability.
“It’s starting to threaten the Haven’s ability to apply for other funding from additional venues, like private foundations,” she said. “And of course, donors would be concerned about the Haven’s financial situation.”
She added that insurance has also decreased the lengths of stay when they do get prior authorization, going from a 90-day residential program to a 60-day.
She added that the delays have also reduced access to care for Native American women through The Haven’s Native Ways Program, which relies heavily on funding from the American Indian Health Program (AIHP).
Sandra Preston, a Native Ways Therapist, says that receiving prior authorizations from AIHP has been a challenge and has led to Native women being left out in the cold when it comes to treatment options.
“If they live on the reservations and they’re not able to get help, what does that leave them with?” Preston said. “They’re basically living on the streets, homeless and not able to deal with their trauma.”
Preston says that many victims of the scandal have come through the Haven’s doors following their ordeal, which she says added another layer of trauma on top of their previous issues. She hopes that the Haven will be able to work with AIHP to continue providing help to these women. However, she’s heard that health providers are increasingly refusing to deal with AIHP, due to the onerous hurdles put up to receive care.
Natividad Cano, a cultural educator and addiction specialist at the Haven, says the issue has led to fewer native women receiving help with substance abuse.
“The last two years, we’ve noticed a decrease in Indigenous and Native American women coming to our program,” Graves said. “They’re not getting the services they need, and they continue to suffer the consequences of addiction, which then gets passed down from one generation to the next.”
Graves said that while she supports holding fraudulent providers accountable, but warned that legitimate programs like The Haven risk being swept up in the fallout.
“My hope would be that our working relationship and the trust could be rebuilt — and of course that The Haven would be paid for the services rendered in good faith,” she said.
If the payment delays continue, Graves said, the consequences could reach far beyond one treatment center — potentially cutting off life-saving care for hundreds of women across Southern Arizona.
Cano says the Haven is just one example of small, local health providers being threatened and that the impacts could ripple throughout the entire community.
“If we had to close down because of all this, it would be a huge loss,” she said. “We’ve been here for 55 years providing quality service, and to lose that ability to provide more services would be very impactful.”
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Joel Foster is a multimedia journalist at KGUN 9 who previously worked as an English teacher in both Boston and the Tucson area. Joel has experience working with web, print and video in the tech, finance, nonprofit and the public sectors. In his off-time, you might catch Joel taking part in Tucson's local comedy scene. Share your story ideas with Joel at joel.foster@kgun9.com, or by connecting on Facebook, Instagram or X.
