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Will lawmakers tighten regulations on sober living homes in the wake of massive fraud?

Arizona senators debate Senate Bill 1655 on March 12, 2024, to tighten regulations on behavioral health facilities. Photo courtesy of the Navajo Nation Council Office of the Speaker

Nearly a year after Gov. Katie Hobbs and Attorney General Kris Mayes announced a crackdown on a sprawling Medicaid fraud scheme that preyed on vulnerable Indigenous people across Arizona, state lawmakers are taking steps toward ensuring something similar can’t happen in the future.

The ongoing struggle to manage the crisis caused by fraudulent sober living homes continues, but Sen. Theresa Hatathlie’s effort to reform state law to address the underlying abuses won unanimous approval in the Arizona Senate.

Her Senate Bill 1655, which passed the Senate on a 27-0 vote on March 12, is one of nine bills introduced this year that focuses on regulating health care and behavioral health care facilities. However, only three remain alive: Hatathlie’s bill, one from a GOP senator that also passed March 12 and a measure that passed the House of Representatives earlier this month.

SB1655 and the GOP measure, Senate Bill 1361, are now in the hands of the Arizona House of Representatives, where their fate remains unclear. The have been assigned to the Health and Human Services Committee, but the panel has not scheduled either for a hearing. And the committee’s March 18 meeting is its last before a March 22 deadline for committees to consider bills, meaning the clock may run out on both proposals. A Senate committee is slated to take up House Bill 2317 on March 19.

The bills are a direct result of the predatory tactics uncovered last year, in which people would claim to be legitimate health care providers but who would instead bill the state’s Medicaid system for rehabilitation services that were never provided 

In addition to the hundreds of millions of dollars in fraud, there has been an immense human cost.

The fraudulent healthcare facilities have remained unchecked for years across the Phoenix area, targeting Indigenous people who are enrolled in Arizona’s Medicaid program, resulting in many becoming displaced within the city or losing their lives. 

State officials have called the scheme a “humanitarian crisis” and a “stunning failure of government,” since the issues were identified years ago and nothing was done to stop the predatory behavior.

Hatathlie said her goal is to reassure the public that her bill to change behavioral health entities’ licensing, oversight and regulation is not to punish them, but to hold them accountable for their services.

The changes would apply to adult behavioral health therapeutic homes, inpatient facilities, residential facilities, and substance abuse transitional facilities that receive federal funds or any federal healthcare program. The businesses affected are those that provide behavioral health, substance use disorder, substance abuse, alcohol, drug abuse or other behavioral health services

The purpose, Hatathlie said, is to weed out bad actors while giving space for legitimate service providers to operate.

For instance, the bill says that any individual operating or maintaining a behavioral health entity in the state without a license is guilty of a felony and may be subject to a civil penalty fine of between $5,000 and $10,000. 

One of the new regulations in SB1655 would require behavioral health entities and sober living homes to file all the necessary documents for incorporation within 10 business days before they can conduct business. 

Hatathlie said that when the sober living crisis came to light last year, the sheer scope proved the need for reforms like those in SB1655 to hold the state of Arizona accountable.

The bill is not the answer to remedy the situation, Hatathlie said, because the impact of the loss and ongoing trauma that Indigenous people have faced due to this crisis is long-lasting and will take years to resolve. 

She said the bill is a way to implement practices that will protect individuals. After years of deficiencies, measures needed to be implemented to bring these behavioral health entities into compliance with the law, she said.

“We’re talking about everyday Arizonans that are walking down the street who have fallen prey to this practice of fraudulent, predatory schemes that have, so far, been unaccounted for,” Hatathlie told a Senate committee when it considered her bill.

Hatathlie, who is Navajo, added that she continues to hear about the people who have died in these unregulated behavioral health facilities, and she wants to make sure that these places are going to be held accountable for the families and people who have been impacted.

Wanting accountability within these facilities is not “too big of an ask,” she said.

During the bill’s committee meeting, Hatathlie said people have long advocated for changes and highlighted the impact of unregulated behavioral health care facilities. 

She said she has heard stories from her community and introduced bills in previous sessions to address this issue, but they have remained unchanged.

“I’ve heard these stories for a long time, and they were always credited to the ramblings of the drunk (or) the ramblings of the addict,” Hatathlie told her colleagues. “Nobody bothered to listen or to investigate. So, that’s the purpose of this bill.”

The bill also addresses the exploitation of how unlicensed sober living homes recruited individuals by picking them up off the street or driving onto tribal nations and directly transporting them to homes in the Phoenix area.

Hatathlie’s proposal also outlines how behavioral health entities are not allowed to coordinate, facilitate, arrange for, or solicit transportation of a person to the behavioral health entity if the person is intoxicated or under the influence of substances.

And  SB1655 would increase the civil penalties for violating health care institution laws from $500 to between  $1,500 and $10,000 for each violation.

Hatathlie said she worked with health care entities to ensure the bill’s language worked and the suggested amount was reasonable. They agreed to raise the penalty floor to $1,500.

Crystalyne Curley, the speaker of the Navajo Nation Council, said SB1655 is important to ensure the safety of the state’s vulnerable populations and tribal communities, and prevent their exploitation for monetary benefit.

Curley said seeing the bill receive full support in the Senate was a relief. The issue is finally being brought up within the Arizona legislature, she added, even though the incidents have occurred for years.

“This is not a tribal issue,” Curley said, but a state one. 

She said the bill’s passage through the Senate is the first step in building the foundation that connects the state and tribal nations on this issue, and she believes it’s important to highlight it. 

“We lost many of our relatives within that system,” she added. “We really had to push the state to recognize that this is a state-funded program, and some type of regulations and accountability had to be in place.”

Hatathlie said she was glad that some of her colleagues from across the aisle voiced their support of the bill, including Senate President Warren Petersen, who praised the work put into it during the Senate floor vote.

“My bill is not only bipartisan, but it also receives unanimous support,” Hatathlie said.

If the bill makes it through the House and ends up before Gov. Katie Hobbss, she said that unanimous backing will be important. 

“It’s going to send a very strong message,” she added. “We don’t always agree, but in this case, we’re going to stand united.

“We’re going to make sure that Arizonans are protected, and we’re not going to stand for criminals coming to the state of Arizona.”

Hatathlie said getting her bill this far has been challenging, and she’s had to fight to get it heard, but she’s not one to shy away from advocating for important issues. 

She said she is advocating for the vulnerable relatives impacted by the ongoing sober living crisis because they continue to mourn and continue to be frustrated with the system.

Although it has yet to be heard in the House, Hatathlie is confident it will become law. And when that happens, she said that it will send a message to the tribal nations across Arizona that it’s a good thing Indigenous people are out there advocating and fighting for Indigenous communities. 

“I believe that that’s when resiliency and healing will start,” she added.

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