The Lexington Herald-Leader produced this article in partnership with ProPublica’s Local Reporting Network.

Renault Shirley remembers the first time he was asked to falsify billing reports for Kentucky’s largest drug rehab center.

He had just returned from a church service in 2023 where the company’s founder and owner, a charismatic Christian from Eastern Kentucky, preached about the value of getting sober to hundreds of clients and staff at Addiction Recovery Care.

Shirley, 58, who led recovery group discussions at ARC, said one of his supervisors told him to submit an invoice for the day’s canceled treatment sessions. With it, Shirley said, he was told to fabricate the details of a group discussion, including quotations from clients, as if they had attended a meeting.

“It was fraud,” Shirley told the Lexington Herald-Leader and ProPublica, adding that he refused. But he said he saw others do it often when they gathered to enter their reports into the billing system.

Shirley and ARC were part of a new economy, a boom fueled by misery and addiction and easy money from government officials desperate to curtail the opioid crisis that was devastating rural America. Kentucky’s payouts for drug treatment became so lucrative that companies bused in clients from other states to fill their treatment centers.

ARC reigned above them all, providing more than two-thirds of all treatment beds in Kentucky at its peak in 2024. Between 2019 and 2024 ARC billed the state $1.7 billion, of which it was paid more than $377 million in state Medicaid money for addiction treatment services.

During those years ARC won praise for its programs. The U.S. Department of Health and Human Services lauded ARC as a model, and Newsweek named the company one of the best addiction treatment providers in the country. Kentucky Gov. Andy Beshear called its founder “an essential partner in our fight against addiction.”

But ARC’s growth was fueled in part by billing practices that federal prosecutors and former employees now allege may have amounted to fraud. FBI investigators were alerted to the case through a whistleblower suit filed in 2023, which alleged ARC fraudulently billed Medicaid for a therapeutic service called psychoeducation. The FBI has asked those who “believe you were victimized by ARC” to fill out a tip form. That investigation is ongoing, according to the FBI.

ProPublica and the Herald-Leader interviewed six people affiliated with the company over the last six years, including former staff members, clients and some who came for treatment and were later hired on. They shared publicly for the first time how they came to ARC seeking help for addiction but became reluctant participants in the company’s alleged billing scheme. Two of them have said they made similar statements to federal investigators.

Part of the fraud, three of them said, was committed at the explicit urging of supervisors who told them they were under pressure to meet billing targets set by ARC leaders — a circumstance exacerbated by a persistent lack of qualified staff, they said.

Those who talked to the news organizations did not keep contemporaneous notes and do not have access to company emails that could support their claims because they no longer work for ARC. But their accounts are corroborated by other clients and referred to in two key documents.

The first was a draft settlement agreement between ARC, the state of Kentucky and the Department of Justice filed by lawyers suing ARC in January as evidence in an unrelated civil suit. That suit, which is pending, alleges that ARC failed to repay at least $8 million it borrowed from two loan companies to pay the DOJ settlement. ARC denied it failed to pay the company.

The draft DOJ settlement document alleges that ARC knowingly falsified some medical records from 2018 to the start of 2024 in order to collect $16 million for group meetings like Shirley described. It allegedly collected millions more by using low-level staff to bill the state for services that under the law must be delivered by a doctor or licensed therapist.

The second document was a 2025 investigative report by the Kentucky Cabinet for Health and Family Services that has yet to be released but was obtained by ProPublica and the Herald-Leader. That report said state investigators found that ARC had violated so many regulatory standards, lack of staff chief among them, that the conditions posed “an immediate danger to client health, safety and welfare.”

In response to questions for this story, ARC said it “voluntarily disclosed” billing errors to state and federal authorities after the company hired an outside agency to audit its billing practices. The draft settlement with the DOJ, the company said, was not supposed to be made public and therefore it could not comment. The draft settlement was unsigned.

“ARC has never knowingly or fraudulently billed Medicaid for services, and there is no evidence that the organization encouraged employees to falsify group notes for billing purposes,” ARC’s Vice President of Marketing Vanessa Keeton wrote in a March 23 email in response to written questions about the company’s billing practices and employee allegations.

She said that the company could not comment on staff, but that it “maintains a strict, zero-tolerance policy for fraud and non-compliant billing practices.” Keeton added that “any claims from clients or Peer Support Specialists about whether a specific service was billed are based on assumptions and do not accurately reflect actual billing practices.”

Nearly all of the people interviewed for this story credit ARC with playing a key role in their sobriety. But most also said they felt betrayed by an organization that publicly touted a Christian message and a commitment to helping others while internally prioritizing money over the well-being of their clients and staff.

Called by God

In late 2008, ARC owner Tim Robinson was working as an assistant county attorney near Ashland when he had an epiphany. An evangelical Christian who’d recently gotten sober from alcoholism, Robinson has said God told him to start a “health care ministry” to help his neighbors in the mountains and hollows of Appalachia hit hard by the opioid crisis. There were few treatment centers in the state at the time.

Robinson in 2010 opened the first ARC center in Louisa, a small town on the West Virginia border, 30 miles from his hometown in Martin County. ARC steadily grew across Eastern Kentucky. In 2015, the company was the state’s first drug treatment provider to accept Medicaid patients, which dramatically increased the number of available clients. The following year, ARC unveiled its yearlong “crisis-to-career” program, equal parts drug treatment and job training that ultimately helped clients become staff at ARC.

But it was during the COVID-19 pandemic that ARC exploded in size, thanks in large part to changes to billing rules put in place by the governor. As the global health crisis unfolded, Robinson — a well-connected political donor who has given hundreds of thousands to people from both major parties, including Beshear, a Democrat — emailed the governor and said drug treatment centers needed help to stay afloat amid pandemic restrictions.

In March 2020 Beshear signed an executive order that gave companies providing addiction services new latitude: The seven managed care organizations that controlled Medicaid billing in the state would need to allow providers to bill for an expanded menu of services without prior approval. Beshear said last month that order helped the commonwealth make significant and important progress in the fight against addiction.

“Kentucky has lost far too many children of God to overdose related deaths,” he said, citing the recent decline in overdose deaths in the state.

The decision meant companies could easily bill for what are known as peer support services, which are designed to help clients follow a treatment plan; these can be provided by staff who complete a 30-hour training course. ARC encouraged clients like Shirley to take the course and get credentialed as peer support specialists. Then, once they graduated from ARC’s program, many transitioned to staff and provided services they could bill to Medicaid.

The order also allowed easier billing for psychoeducation, a session during which a clinician talks to a patient about their diagnosis and treatment. The broadly defined service, which at the time could be billed for multiple times a week, is usually provided as part of a clinical therapy session, but Kentucky allows it to be billed as a separate service — which state Medicaid experts opposed because it drives up the cost of treatment.

From 2019 to 2024, ARC billed the state over $400 million for psychoeducation and peer support, earning the company more than $125 million, about a quarter of all reimbursements paid to Kentucky providers during that time. The revenue allowed it to open at least four new centers, including the roughly 700-bed Crown Recovery Center on a former college campus in Springfield, and to purchase a shuttered hospital campus in Ashland that ARC now uses for inpatient, outpatient and psychiatric services.

Psychoeducation soon became ARC’s most lucrative service, accounting for almost half of its reimbursement from Medicaid in 2024. ARC said its billing for the service was in accordance with applicable laws and regulations and followed established billing protocols.

The spike in billing caught the attention of the companies that oversee state Medicaid spending. Liz Stearman, director of behavioral health for Humana, and other Medicaid experts repeatedly warned Kentucky officials that the state’s high spending on lower-level peer support and psychoeducation without the attendant clinical services wasn’t helping people seeking addiction treatment. They said in a letter to the Kentucky Cabinet for Health and Family Services that evidence showed clients in the state had more emergency department visits and more admissions and readmissions to hospitals and residential drug treatment facilities.

Stearman reminded lawmakers that Kentucky was one of the few states that allowed the service to be billed separately. Psychoeducation “does not have any national standards of clinical criteria that exist anywhere in the country, and the vast majority of states do not actually cover (it) as a standalone service,” she told a state legislative committee on Dec. 3, 2024. “Unfortunately we’re paying a higher amount of Medicaid dollars for less evidence-based services,” she said.

Beshear’s 2020 order and permission from Kentucky Medicaid to bill psychoeducation as a separate service helped create a new revenue stream for providers.

Still, on the surface the expansion of Robinson’s company was a good thing, giving Kentucky more treatment beds per capita than any other state — a fact Beshear and other elected officials touted. “I remember not too long ago when finding a treatment bed meant driving hours away or sitting on endless waiting lists. That’s all changed,” state Attorney General Russell Coleman said in a 2024 press conference.

By that point, ARC was operating as many as 30 facilities in more than 20 Eastern and Central Kentucky counties. That year Robinson announced ARC would expand into Ohio and West Virginia.

‘It was just herding cattle’

During these years staff members said they were repeatedly asked to falsify bills for nonexistent treatment. ARC said it has since invested significant funds to hire a compliance and auditing team.

The half dozen people who spoke to the Herald-Leader and ProPublica said the company sometimes billed when a gathering did not meet the requirements of a meeting, such as when clients watched movies unrelated to recovery or had informal discussions while traveling in ARC vans. Other times clients played board games in lieu of group meetings, or the gatherings simply didn’t happen but were billed for anyway, three former peer support specialists said.

When Shirley was a client at Crown, ARC’s largest center, he said it was common for a peer support specialist to “sometimes walk in, ask me what I was grateful for. I would write it on a piece of paper, then they would leave.” Shirley said from talking with other staff members that this was a strategy often used to submit bills for group meetings that did not occur.

Odell Hager arrived as a client at ARC in 2015, after a judge ordered him to do so for carrying drugs. He ping-ponged between treatment and jail for the next few years until he landed in 2021 at May Hill, one of ARC’s centers in Louisa.

During his time there, first as a client and then as a peer support specialist, Hager saw examples of well-run peer support groups but said they were rare.

“Our peer support group was, ‘All right, you all just sit in the living room and watch a movie,’” while group leaders sat in the office on their phones, he said.

Hager, who worked at three ARC centers during the span of nearly a decade, said those kinds of groups that ARC billed for were the standard and forging group notes was common. Hager’s account was corroborated by an ARC client who overlapped with him. Hager said he also relayed his experience to the FBI in an interview.

“In my mind, it was no different than a prison system,” Hager said. “It was just herding cattle: get them in, get them out, get them in, get them out.”

Individual peer support is intended to be a check-in with a client: “How are you doing, are you having thoughts of relapse, are you feeling good right now?” Hager said.

At the end of the check-in, a peer support specialist sent in quotes from the client to ARC’s billing department to prove the discussion took place so the company could then bill Medicaid for the service. “But we were doing that with people we wouldn’t even see because we were so behind,” Hager said.

Hager said he doesn’t blame low-level peer support specialists for falsely logging group notes. Many peer support specialists, newly in recovery and overworked, were following orders from their supervisors or didn’t know any better, he said. Hager counts himself among them.

“I’m not justifying it,” he said. “When we were doing it we didn’t know it was a bad thing.”

Dustin Cornett, 34, was a client at Crown. After years of addiction, Cornett, who’s from South Eastern Kentucky, admitted himself in 2022 to ARC. He said he was disappointed when he attended peer support groups that largely consisted of watching popular movies. “We never did a damn thing,” he said. “We all knew it was just a money racket, an insurance scam.”

Peer support staff said they were asked to meet billing “quotas” each week. Pressure to meet those expectations sometimes resulted in staff falsely recording group notes, said Hager and Beckie Rose-Bowman, who was initially a client at ARC and later director of Riverplace, a 120-bed ARC facility in Pikeville, which has since closed.

“There were days I had peer support groups booked back-to-back in one- and two-hour increments with no space in between,” Rose-Bowman said. Billing was “100% their emphasis,” she said. ARC supervisors above her monitored peer support group attendance and would “come down” on staff if their attendance was short in the notes they submitted for billing, Rose-Bowman remembered. Other times, if a client was missing from a group, staff would count them as being present, she said.

In addition to denying that ARC encouraged such fraud, Keeton, the company spokesperson, said it had processes in place to ensure appropriate billing. “When issues are identified, for example, a peer support group watching a movie rather than receiving prescribed services, corrective action is taken immediately, and those services are not billed,” she said.

‘I don’t have enough staff’

As ARC expanded, its staffing shortage grew more dire.

Lack of staff, including licensed clinicians, was one of several “systemic deficiencies” the Kentucky Cabinet for Health and Family Services found during the 2025 investigation of ARC’s operations.

State officials conducted multiple site visits at three of ARC’s largest centers after a client died in July 2025 at Riverplace, where Shirley worked. The probe, which lasted from August to November 2025, was also partly triggered by separate allegations that clients “did not receive timely or appropriate care.” The report did not disclose the source of the allegations.

Keeton said the company was “extremely saddened” by the client’s death and, following an internal review, concluded there was “no indication that the death resulted from any action or inaction on the part of ARC.”

But those Kentucky investigators concluded that ARC operated with an “absence of qualified, licensed clinical personnel,” calling it a “sustained and systemic pattern.” In some instances, state investigators found clients were recording and reporting their own vital signs, a violation of state and clinical rules.

That full report, obtained by the Herald-Leader and ProPublica, shows employees regularly complained to ARC supervisors and administrators with “persistent concerns” that a shortage of staff was putting clients’ health and safety at risk and hamstringing staff’s ability to properly run groups.

ARC staff raised this issue to supervisors and state investigators, according to the report, saying “it feels like we are working around the clock” and “my life is about to become unmanageable because I don’t have enough staff.” Another employee, according to the findings, implied the shortage was so dire, “I am scared to take vacation.”

To help deal with the shortages, the company began sending clients to its own college to get trained as counselors to work at ARC. Roughly 60% of ARC’s workforce is former clients, the company’s spokesperson said.

ARC said it disputed the findings of the report to the state and requested a hearing. It noted that the Cabinet did not suspend or close the facilities and that the company “continues to operate and accept clients across all applicable levels of care with the knowledge and approval of the Cabinet.”

The state said the report has not been released because the investigation was ongoing.

People inside the company said that those newly trained staff were often used when ARC couldn’t provide regular visits with licensed clinical professionals.

Shannon Gray, who started at ARC in 2021 and oversaw all treatment services there until early 2025, said clients rarely saw psychologists and counselors and did not receive enough treatment from more highly trained clinicians. Instead, ARC relied too much on peer-led sessions billed under peer support and psychoeducation, Gray said.

“From a therapeutic value, (that’s) too many services, too many groups,” said Gray, who also wrote the curriculum that Shirley and others used when leading groups. “I argued it many times, but even though I voiced concern, I still stayed there, so I’ll call myself out on this.”

The state’s 2025 investigative report agreed with Gray, saying unlicensed employees at ARC were often asked to do jobs for which they were not qualified, such as medication oversight. This was “despite the lack of licensure, training and clinical competency required by state regulation,” the Cabinet found.

The draft DOJ settlement alleges something similar: Between 2018 and March 2024, ARC “knew or recklessly disregarded” Medicaid rules by allowing unlicensed staff — “practitioners that did not have a professional credential” — to bill for behavioral health services that should’ve been provided by a therapist or professional counselor.

Shirley, who had minimal training, said the company’s computer billing system only allowed him to bill peer support groups under the psychoeducation code, which yielded a higher reimbursement rate, even if a clinician wasn’t present with him when leading a group.

“There was never a discussion about any other code to use,” said Shirley, adding that he didn’t know at the time how lucrative the psychoeducation code was. He only knew “everybody was using it.”

Keeton disputed this allegation, saying that while ARC did receive millions from Medicaid for peer support and psychoeducation, “there was no directive requiring staff to bill exclusively under a single code.”

Legislators step in

Today, Robinson’s grand vision has begun to unravel.

In 2024, the seven managed care organizations in Kentucky raised alarms in a letter to the state’s health and welfare agency citing high costs and poor outcomes.

That year Republicans in the Kentucky General Assembly acted, reducing the amount Medicaid would pay for psychoeducation and peer support, and ARC’s major source of income began to decline, state data shows. Republicans also reinstated the requirement that providers seek authorization from insurers before they provide services.

In March of this year, a Kentucky lawmaker introduced a bill that outlawed billing for psychoeducational services in the state. The legislature delivered the bill to Beshear’s desk in late March. It is awaiting his decision.

Kentucky Republican state Rep. Kim Moser, the bill’s sponsor, said the measure is urgent because billing for psychoeducation has grown exponentially.

“We can look at the numbers and see that it’s being overused,” Moser said. “I just think we need to do something about it.”

ARC continues to bill Medicaid and Medicare. But since the state’s cuts to Medicaid payments for certain services, and the launch of the FBI investigation in 2024, ARC has laid off hundreds of employees and shuttered dozens of facilities, leaving some clients homeless.

Last year, ARC’s founder tried to sell off most of the company in part to pay the DOJ’s settlement, according to the creditors’ suit, but that deal fell through in December. When the two loan companies sued ARC in January 2026 for allegedly refusing to pay back millions they were owed, they claimed ARC was in “desperate financial straits” and facing “imminent bankruptcy.”

ARC claimed in a separate filing it needed that money for operating costs and called the demands for repayment “unduly burdensome.” The company is still seeking a buyer.

Even with the recent changes, lawmakers say Medicaid spending on drug treatment is still too high. In part this is because “there’s big money in making sure that addicts don’t actually enter into recovery,” Kentucky state Sen. Chris McDaniel, who co-chairs the legislature’s appropriations and revenue committee, said during a Feb. 24 hearing.

“I’ve never met an industry that can so effectively obfuscate the results of their work as the substance use industry,” he said in the February hearing. “At some point, we have to ask ourselves, how much of Medicaid is about patients, and how much is about profits?”

As for Shirley, he was laid off last year. He now works at a different residential recovery center in Western Kentucky — a move that he said opened his eyes to how poorly clients were treated at ARC and how little clinical care they received.

“Their model is not to help clients,” he said of ARC. “For them, it’s a revolving door. It’s warehousing.”

Keeton said this assessment isn’t reflective of ARC’s mission or the success of the thousands of individuals it serves. “We don’t ‘warehouse’ people,” she said. “We invest in them.”

Ellis Simani of ProPublica contributed reporting.

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