Embattled Kentucky addiction treatment provider to be sold to Ethema Health

One of Kentucky’s largest for-profit residential addiction care treatment providers, which has been the subject of an FBI investigation for more than a year, is being sold, administrators confirmed Wednesday.

Addiction Recovery Care told staff this week that Ethema Health has signed a letter of intent to “acquire the assets and operations” of ARC as part of a “strategic consolidation.”

“Following necessary organizational changes, ARC’s ownership has determined that partnering with Ethema Health Corporation is the most responsible and forward-looking step towards a stronger future,” ARC said in an Oct. 22 press release. “Ethema will operate the considerable assets under its existing Kentucky brand, ARIA Kentucky.”

The announcement of the acquisition is the latest in a tumultuous year for the addiction treatment giant. Over the last 14 months, the company has laid off hundreds of employees and closed all but 14 of its treatment centers. In September, ARC announced it was closing five more locations, including its flagship location in Louisa, blaming Medicaid reimbursement cuts.

It was not immediately clear how the sale affects ARC’s remaining clients.

ARC’s Vice President of Marketing Vanessa Keeton declined in a Wednesday afternoon phone call to offer details about the acquisition, including the sale amount and whether ARC or its founder, Tim Robinson, would maintain a leadership role or any ownership over the company in the merger.

“All the information that I’m going to share about that is currently in the press release,” Keeton said.

In an Oct. 22 email notifying employees of the sale, which a current employee shared with the Herald-Leader, Robinson said he would “have a corporate leadership role working with Ethema Health’s CEO and leadership team.”

The ARC health care entities being sold include Bellefonte Hospital and Recovery Center in Ashland, Pioneer Rural Health Clinic in Louisa, and South Creek Drug in Monticello, Robinson told staff in that email. “Non-health care entities, such as Millard School, Millard College . . . are NOT included in this transaction,” he said.

At its height, ARC’s year-long crisis-to-career model set it apart from other addiction treatment providers.

Clients enrolled in ARC typically spend six months matriculating through a residential treatment program, and six months learning trade skills or working at one of ARC’s public-facing businesses, which previously included a welding shop, an auto shop, an event planning business and a bakery and cafe. ARC also opened Millard College in 2021 to help its clients more easily earn higher-level degrees and certificates.

Keeton said the acquisition of ARC was not related to the ongoing federal investigation into whether the company has committed Medicaid billing fraud.

“There’s nothing related to the investigation,” Keeton said. “Nothing to do with Ethema Health or ARIA Kentucky or anything that’s in the press release today, nothing to do with that has anything to do with any type of investigation or settlement.”

Addiction Recovery Institute of America, also known as ARIA, is a detox and rehabilitation company that operates a center in Morehead.

Shawn Leon, owner of Ethema Health Corporation, said in a statement that the company is honored to carry on ARC’s “legacy of service.”

“This agreement isn’t just about growth, it’s about commitment,” Leon said in a press release. “Together, we will build on Kentucky’s leadership in addiction recovery by investing in people, programs and communities that change lives.”

Leon said the acquisition will significantly contribute ARIA’s goal of building a network of 3,000 beds by the end of 2026 and solidifying ARIA Kentucky as a “regional powerhouse in recovery services.”

In 2023, when elected leaders boasted that Kentucky had the most residential addiction treatment beds per capita of any state, it was in large part thanks to ARC’s expansive footprint.

Ethema in January also finalized its purchase of Edgewater Recovery Center in Morehead. Edgewater, which previously operated addiction recovery outpatient and inpatient facilities across the state, agreed to pay roughly $2.2 million in January 2024 as part of a federal settlement related to a False Claims Act case.

A diagnostics lab was ordered to pay nearly $5 million for allegedly submitting false claims for urine testing services to Kentucky’s Medicare and Medicaid programs, and Edgewater allowed for the submission of those allegedly false claims for reimbursement, a U.S. Attorney for the Eastern District of Kentucky said at the time.

In the Oct. 22 email notifying staff of the sale, Robinson described the move as a “major strategic decision that will secure the long-term future and continued growth of our mission,” and that the move “ensures the necessary long-term stability and investment required to continue our core mission: providing compassionate, high-quality treatment for addiction and co-occurring disorders across Kentucky.”

ARIA Kentucky “has indicated a strong intent to hire a substantial portion of the current ARC staff in the same or similar roles,” he told staff.

This story was originally published October 22, 2025 at 4:54 PM.

Alex Acquisto

Lexington Herald-Leader

859-231-1427

Alex Acquisto covers health and social services for the Lexington Herald-Leader and Kentucky.com. She joined the newspaper in June 2019 as a corps member with Report for America, a national service program made possible in Kentucky with support from the Blue Grass Community Foundation. She’s from Owensboro, Ky., and previously worked at the Bangor Daily News and other newspapers in Maine. Support my work with a digital subscription

Taylor Six

Lexington Herald-Leader

Taylor Six is the criminal justice reporter at the Herald-Leader. She was born and raised in Lexington attending Lafayette High School. She graduated from Eastern Kentucky University in 2018 with a degree in journalism. She previously worked as the government reporter for the Richmond Register.