Cuts in Medicaid payments to behavioral health providers are forcing cuts at Kentucky's largest provider of treatment for addiction. (Getty Images)

The state’s largest provider of drug and alcohol treatment is making further cuts in staff and facilities as it faces steep cuts in Medicaid payments from the government health plan that covers nearly all its clients.

Addiction Recovery Care, or ARC, based in Louisa, said it will temporarily close four programs and reduce staff as it plans for cuts of 20% or more from some of the private insurance companies that process and pay most of the state’s Medicaid claims.

The cuts to ARC programs in Boyd, Jackson, Fleming and Pulaski counties follow ARC’s announcement last month it was restructuring some programs and laying off staff after the insurance companies, known as managed care organizations, or MCOs, first notified ARC of the pending cuts.

In a statement, ARC said it remains committed to providing substance use disorder treatment across Kentucky.

“These decisions were not made lightly, and we are dedicated to supporting our team members and communities affected by these changes,” said Vanessa Keeton, ARC vice president of marketing. “Above all, the safety and care of our clients remains our top priority. We are still available 24/7/365 for patients and families in need.”

The cuts come as the MCOs, including Wellcare of Kentucky Inc., are announcing broader reductions in Medicaid reimbursement to other addiction and behavioral health programs that will limit their ability to provide care, said Frankfort lawyer Anna Stewart Whites, who represents about 20 smaller treatment providers.

For example, one of her clients, a small children’s therapy program in Berea, was recently notified of cuts, she said.

“It appears to be very much across the board,” she said.

Wellcare is the largest of six MCOs that manage Medicaid claims for Kentucky, with about 418,000 enrollees.

It did not immediately respond to a request for comment.

ARC’s cuts are the latest setback for the fast-growing, for-profit company that last year took in $130 million in state Medicaid funds and has expanded from a single halfway house to a statewide network of recovery programs and residential centers in 24 counties across Kentucky.

In July, the FBI announced it was?investigating ARC?for possible health care fraud and asking anyone with information to contact the federal agency. ARC said it stands by its services and is cooperating with the investigation.

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ARC and its founder and CEO Tim Robinson have emerged as prolific political donors in recent years.

A?Lantern analysis?by Tom Loftus showed that Robinson, his corporations and employees have made at least $570,000 in contributions to Kentucky political causes and candidates over the past decade as his company grew from a single halfway house to about 1,800 residential beds and outpatient care for hundreds more clients.?

ARC said it has provided treatment for 75,000 people over the past 15 years.

‘Set back addiction treatment?’

The MCOs contract with the state to manage most of its $1.5 billion a year Medicaid program and have broad latitude in setting rates with providers. They are? paid a fixed rate per member and reimburse providers for care.

In July, ARC was among providers who testified before a legislative committee, warning that cuts by MCOs in payments for addiction treatment could hamper progress Kentucky has made in treatment for several decades of widespread addiction and overdose deaths.

An expansion of treatment services was fueled by expanded Medicaid payments in 2014 for substance use disorder under the Affordable Care Act.

“Kentucky has made significant strides in access to treatment,” Matt Brown, chief administrative officer for?Addiction Recovery Care, or ARC, told the interim Health Services Committee. “With these cuts, it could completely set back addiction treatment in our state 20 years.”

Last month, Frontier Behavioral Health, based in Prestonsburg, filed suit against Wellcare over rate cuts of 20% and a new requirement that it review all services before agreeing to pay for them. That lawsuit is pending.

Its lawsuit said that when Frontier tried to follow up with Wellcare over an August letter notifying it of cuts, the number provided in the letter for questions had been disconnected.

‘Booting’ out clients

Whites said some providers she represents have had similar experiences — or worse.

When some providers tried to contact Wellcare about rate cuts, it responded by canceling their contract altogether.

That forced clients in the midst of treatment to find another provider or switch to another MCO, both of which mean delays in care. Some providers have continued to offer treatment without reimbursement until clients can make the necessary changes, she said.

“The risk of booting someone out of your program and finding someone who can take them is just too much of a risk,” Whites said.

ARC’s Brown didn’t immediately identify how many employees will be affected by the reductions announced Wednesday. Prior to the staff cuts last month, it employed 1,350 people.

Programs to be closed temporarily are: Sanibel House in Bloyd County; Beth’s Blessings in Jackson County; Belle Grove Springs in Fleming County, and Lake Hills Oasis in Pulaski County.

Brown said clients will be offered placement in other ARC programs or the option to change to a different provider to continue treatment.

Meanwhile, he said ARC continues to negotiate over the pending rate cuts.

“We are very hopeful to have these negotiations done soon,” he said.

He said lawmakers, state officials and providers are working “to create a solution that preserves access to treatment and long-term recovery.”