The Kentucky drug treatment provider that will operate two facilities in Dickenson County is being investigated for possible health care fraud by the FBI — but county officials and the company say that won’t affect the planned treatment centers in Southwest Virginia.
Addiction Recovery Care, or ARC, a for-profit company headquartered in Louisa, Kentucky, has also laid off 321 employees this fall and temporarily closed 10 treatment facilities, including two that were shuttered on Thursday. The changes were necessary because of reduced Medicaid reimbursement rates in Kentucky, said Vanessa Keeton, ARC’s vice president of marketing. Those cuts also aren’t expected to impact the Dickenson projects, she said.
Dickenson County officials say they remain excited about the two local treatment centers, which are progressing as planned, said Dana Cronkhite, the county’s director of economic development.
On Thursday, a spokesperson for the FBI office in Louisville, Kentucky, said the investigation is ongoing and she couldn’t provide additional information. No criminal charges have been filed against ARC.
She did, however, encourage anyone with information to share it via a form on the FBI website. The spokesperson said they’ve had more than 400 tips via the online link.
The posting, which seeks information from people who believe they were victimized by ARC, refers to the probe as a “healthcare fraud investigation.” The form asks if the person taking the survey was a patient or employee between 2019 and today and whether they know of any procedures or treatments that weren’t medically necessary.
Asked if ARC officials know what the FBI investigation is about, Keeton said that in March 2024, ARC self-disclosed a potential overpayment due to incorrect coding of modifiers to the Kentucky Department for Medicaid Services Division of Program Integrity. That information is under review by the Department for Medicaid Services, she said.
In July 2024, ARC received a civil investigative demand from the Office of the U.S. Attorney for the Eastern District of Kentucky, she added. A civil investigative demand is used by federal agencies to obtain information and documents relevant to an investigation without going through formal court procedures.
“Per standard procedure, Addiction Recovery Care, LLC cannot comment on the substance of an ongoing investigation,” Keeton said, adding that ARC is cooperating with the civil and criminal investigations.
A call and email to the U.S. Attorney’s Office for the Eastern District of Kentucky were not immediately returned on Friday.
The job cuts and closings are due to current and expected Kentucky Medicaid reimbursement cuts totaling 30% that took place in October and November and will take effect in January, she said. They are not related to the FBI probe and won’t affect the two treatment facilities in Dickenson County, she added.
Keeton said the Medicaid cuts are specific to Kentucky and have “necessitated a realignment of business operations only in Kentucky. … As the commonwealth of Virginia is not experiencing similar cuts, we remain excited about offering our Crisis to Career [program] there and remain committed to our original plans for Virginia.”
According to the Kentucky Lantern, an independent news source, ARC took in $130 million in Medicaid funds in 2023, making it the state’s largest provider of substance use services.
In late July, ARC officials said the company operated more than 30 facilities in Kentucky. Today, the company’s website says it has a network of more than 20 licensed addiction treatment centers in 19 eastern, central and western Kentucky counties.
The treatment centers in Dickenson County will be ARC’s first foray outside of Kentucky. The developer is Greg May, who owns Southwest Properties and developed three addiction treatment centers in Kentucky, including one in nearby Pikeville. His centers are all operated by ARC.
May said Friday he has no reason to believe that ARC’s issues will affect the Dickenson County projects.
Addressing a growing need for treatment
In Dickenson County, as in parts of Kentucky, there is a substance abuse crisis, and officials have long sought solutions. In 2023, the death rate for overdoses in Dickenson was 49.7 per 100,000 residents, while it was 26.1 across the state, according to data from the state health department.
In 2023, county leaders announced the opening of two residential treatment facilities, one for men and another for women.
The first one, Wildwood Recovery Center, is expected to open in early 2025, while the second, Primrose Recovery Center, will be built at a former school in Nora and is still in the planning stages.
The county’s plan has been to provide help for those struggling with substance use disorder and then provide training so they can get a job and change their lives. The residential treatment program lasts about a year.
“We are pleased to share that we recently received the Certificate of Occupancy for the facility, marking a significant milestone in the project,” Cronkhite wrote in an email. “This achievement allows us to move forward with our mission of addressing the critical need for long-term substance use disorder treatment and vocational training in our community.”
he added that county officials are awaiting final inspections from the health department and the fire marshal, which are expected to be completed by the end of the year. ARC will then have the documents necessary to apply for licensing, according to Cronkhite.
ARC will be vetted by the state of Virginia during that process, she said earlier.
She also pointed to a statement that county Administrator Larry Barton posted in October on the county’s Facebook page addressing some of the concerns about the local projects that may have been raised by news coverage in Kentucky and social media posts about the FBI probe and the closings and job cuts.
Barton emphasized that the county’s Industrial Development Authority owns the buildings and the land Wildwood is built on.
“Our agreement is with Southwest Properties, no taxpayer or grant dollars have been awarded to ARC,” Barton said in the statement.
But he went on to say that companies sometimes face tough decisions stemming from influences outside their control. In ARC’s case, cuts to Medicaid in Kentucky forced the company to make some difficult business decisions, the county administrator said.