Embattled Kentucky treatment provider Addiction Recovery Care agreed to a $16.2 million settlement with federal prosecutors Monday related to allegations of Medicaid billing fraud.
The addiction treatment company, known as ARC, agreed to the civil judgment to resolve the allegations that it defrauded the federal program by submitting fraudulent claims for payments, according to a press release from the U.S. Attorney’s Office for the Eastern District of Kentucky.
ARC had announced a civil settlement related to Medicaid billing allegations two weeks ago, but the settlement was approved by the federal judge on Monday.
The FBI first announced it was investigating ARC for potential Medicaid billing fraud in the summer of 2024, after which the company underwent massive layoffs and clinic closures around the state. The company’s attempt to sell its assets to another company fell through in early 2026, when lenders sued ARC for defaulting on promised payments.
ARC founder and CEO Tim Robinson resigned last month, following his federal indictment on felony counts of wire fraud and money laundering. These did not relate to alleged Medicaid fraud, but the company’s alleged scheme to sell the same federal tax credit payments — worth millions of dollars — to the two different lenders that sued ARC. Robinson pleaded not guilty.
Cassandra Webb, who took over as interim CEO of ARC after Robinson’s departure, said in a statement two weeks ago that the civil settlement “represents an important milestone for ARC.”
“We approached this process transparently, cooperatively and worked diligently to identify and resolve the billing issues involved,” Webb stated. “The resolution provides greater certainty for our organization and allows us to move forward with an enhanced focus on compliance, accountability, and the delivery of high-quality treatment services.”
The lawsuit against ARC by the lenders previously submitted into evidence an unsigned draft settlement between the company and DOJ for $27.7 million to settle Medicaid fraud allegations, including fraudulent billing for non-clinical psychoeducation services. As previously reported by Kentucky Public Radio, a new federal database also shows ARC was paid $70 million from Medicaid for this psychoeducation service in 2023 and 2024 — which accounted for 20% of all Medicaid payments under that billing code in the entire country for this two-year period.
According to the DOJ press release, ARC must pay the $16.2 million over several years, with the total amount “negotiated and reduced due to Defendants’ financial condition and prospects for ongoing operations.”
The new civil settlement agreed to this week was first spawned by a sealed civil lawsuit filed by three whistleblowers in April of 2023. That lawsuit was unsealed Monday, revealing that it was filed by three former ARC employees who detailed fraudulent billing practices they witnessed, including a billing supervisor and two peer support specialists who provided services to clients. The federal government subsequently intervened, leading to the settlement this week.
Under the settlement agreement, the plaintiffs and federal government allege ARC and its affiliates falsely represented the qualifications of staff delivering services like psychoeducation in order to receive higher reimbursements than they were entitled to from Medicaid. ARC was also alleged to have billed duplicate office visits to Medicaid and charged for services that were provided by staff with the necessary credentials.
The DOJ press release on the settlement said the resolved claims “are allegations only” and “there has been no determination of liability.”
When first announcing the settlement, ARC claimed that it has also entered a civil settlement with Clear Cove Capital, one of the lenders who sued it for alleged defaulted payments this year. While ARC has agreed to a proposed settlement with that company, it has not been approved by a judge and ARC has not entered into a settlement with Angelica Capital Trust.
Webb said in her statement that ARC remains committed to “maintaining a culture of compliance, transparency, and continuous operational improvement.”
“Over the past two years, ARC has taken significant steps to strengthen its compliance, financial, and operational infrastructure,” Webb said. “These initiatives include increased financial and management oversight, enhancements to internal controls, improvements to billing and compliance processes, and additional accountability measures throughout the organization.”
