Deal to sell embattled Kentucky addiction treatment provider falls through
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Addiction Recovery Care
Allegations against Kentucky’s largest drug rehab center, Addiction Recovery Care, claim that it knowingly falsified medical records to collect millions in Medicaid payments.
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A deal to purchase Kentucky’s largest for-profit addiction treatment provider, which is still the subject of an FBI investigation, has fallen through, the company announced this week.
Addiction Recovery Care told staff in October that much of the company would be purchased by Ethema Health Corporation, a Florida-based behavioral health and drug treatment company.
The move was part of a “strategic consolidation” to continue growing the number of addiction treatment beds in Kentucky under Ethema’s existing Kentucky brand, ARIA Kentucky. Tim Robinson, ARC’s founder and CEO, would retain a corporate leadership role in the merger, he told ARC staff.
But both parties have “mutually agreed not to move forward with the partnership previously announced on Oct. 22, 2025,” Ethema announced in a Dec. 31 press release. Despite the failed acquisition of ARC, “we . . . expect to continue growing our businesses in Florida and Kentucky,” the company added.
Ethema currently operates approximately 400 treatment beds in Kentucky and Florida.
ARC’s Vice President of Marketing Vanessa Keeton said in a Dec. 31 statement that ARC and Ethema “have decided not to move forward with the previously announced potential partnership. Addiction Recovery Care, LLC looks forward to continuing to serve our clients and communities.”
Keeton declined to answer any additional questions from the Herald-Leader.
Ethema President Shawn Leon did not respond to more emailed questions about the failed merger, which would have included the sale of most of ARC’s remaining treatment centers, Bellefonte Hospital and Recovery Center in Ashland, Pioneer Rural Health Clinic in Louisa and South Creek Drug in Monticello. Crown Recovery Center in Springfield, a roughly 700-bed facility, was not originally included in the sale.
It is unclear who pulled the plug on the sale, when the discussion happened and why the companies would no longer be working together.
When the acquisition was first announced, Leon outlined his goal of building a network of 3,000 drug treatment beds to Kentucky’s capacity in the next two years, solidifying ARIA Kentucky as a “regional powerhouse in recovery services.”
Ethema arrived in Kentucky in January 2025 when the company 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.
The FBI announced it was investigating ARC for fraud in August 2024.
In the year-and-a-half since, the company has laid off hundreds of staff and closed all but 16 of its treatments centers. In September 2025, ARC announced it was closing five more locations, including its flagship location in Louisa, blaming Medicaid reimbursement cuts.
Though the investigation is still ongoing, Keeton said in October the intended sale of most of ARC’s assets and operations was unrelated to that criminal probe or any type of civil settlement.
This story was originally published January 2, 2026 at 11:48 AM.
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