Many Minnesota addiction treatment providers help pay for clients' housing, which they say supports recovery and prevents homelessness.

It also may be illegal.

The practice has long raised some eyebrows, but an FBI raid of St. Paul-based Evergreen Recovery this summer put treatment providers on high alert. Federal investigators said the organization defrauded Medicaid by luring people with free housing, then billing them for treatment "induced with illegal kickbacks."

Now recovery service providers are waiting to see if a state or federal crackdown is coming for the widespread practice of offering free or subsidized housing to people in outpatient treatment. Some are shifting away from the model. And many are asking: What could happen to the thousands of people who rely on the housing?

"Our treatment system would totally collapse," Hennepin County chemical health unit supervisor Tom Turner said. "If all of a sudden we didn't have outpatient with housing, where are all of these people going to go?"

Roughly 4,000 Minnesotans rely on such housing programs, he estimated, though no one tracks the exact number.

This year, the Minnesota Department of Human Services' Office of Inspector General, which looks into Medicaid fraud, advocated for a state anti-kickback law that would mirror the federal one. Lawmakers did not pass it.

Offering free housing to someone on Medical Assistance — Minnesota's version of Medicaid — in exchange for them agreeing to get services would likely be a kickback if the proposal passed, DHS officials said. But without a change in state law, the agency said it can't take action against providers.

"DHS and our state and federal partners have seen evidence that kickbacks are happening in Minnesota," Inspector General Kulani Moti said in a statement. "That's why we brought an anti-kickback proposal to the Minnesota Legislature last session. We will continue to work with the Legislature next session on ways to strengthen the integrity of our public programs."

How the programs work

Nuway Alliance, one of the state's largest nonprofit substance use disorder treatment providers, pays up to $700 a month for someone's housing while they are in intensive outpatient treatment, the organization's website states. The site lists dozens of sober housing programs clients can choose from.

Nuway leaders said they got an inquiry from the government about two and a half years ago indicating they are conducting a civil investigation into the housing model.

But officials with the nonprofit said in an email they believe what they are doing is legal and clients need it. More than 600 people are using their assistance to stay in recovery residences, Nuway officials stated. They said having a safe, supportive place to stay is particularly important for the vulnerable people they serve, more than half of whom reported being homeless in the six months before they started treatment.

Health plans knew about, approved and even lauded their program, Nuway leaders said, noting that health insurer UCare even gave it an award.

"The state of Minnesota has been fully aware of our program for a decade," the organization said. "Since payors are fully aware of, and support the program, we struggle to see how anyone could argue it is improper, let alone fraudulent."

Other places have similar models. Elite Recovery, which is part of Horowitz Health, is another large provider of intensive outpatient treatment with housing help. It has a rent credit program where people who attend more treatment get more money for sober housing. A client can get up to $550 for housing if they attend 80 hours of treatment a month, according to a chart on their website.

While some organizations partner with sober housing providers, others operate their own free housing programs for outpatient clients.

Park Avenue Center is one of those. It has run an intensive outpatient program with housing since 1989 and was the second in the state to offer it, owner and executive director Mark Casagrande said.

"We always have known that the feds are uncomfortable with it," he said, but they never said anything.

Its program is more intensive than many others, with clients doing 30 to 40 hours of treatment a week, Casagrande said, compared to other places that require around 20 hours.

About 90% of the roughly 70 clients it houses were homeless and almost all of them were involved in the criminal justice system and came to them as a condition of their probation, he said. The jails would be overrun if intensive outpatient treatment with housing suddenly has to stop, he said.

"The consequence of this is potentially enormous," Casagrande said. "You think Minneapolis has a homeless problem now, it's going to be exponentially [more] challenging."

To protect his organization if the state passes the anti-kickback law, he is going through a lengthy, complicated process to license their housing and shift to a different model.

However, Casagrande predicted that instead of going after providers, the federal government could penalize state regulators who have known about the free housing practice for decades.

"Who should be terrified, in my opinion, is DHS," he said.

Legal, ethical opinions differ

Addiction-treatment providers who don't offer free or discounted housing said they have felt pressure to adopt the model as it has spread over the past decade. They said organizations that don't cover housing lose clients to those that do, like Nuway.

Kickbacks not only misuse federal funds, they are "anti-competitive" and "corrupt" people's decisions when they are selecting a service provider, DHS officials said.

Minnesota Attorney General Keith Ellison echoed that concern in a letter advocating for the proposed anti-kickback bill last session. He said the legislation would ensure Minnesotans get health care services from a provider "for the right reasons," like the provider's specialties or cultural sensitivity.

Several providers that haven't adopted the housing-aid model cited ethical and legal concerns. Many people in such programs should instead be at a residential facility, where they would get 24-hour supervised care, those providers said.

If people getting outpatient services must attend 20 or 30 hours of treatment a week it can hinder their recovery, they said.

"You need to wean off of treatment," Recovering Hope Treatment Center President Sadie Broekemeier said. "You need to be able to get employment and structured meaningful activity and purpose. And if your purpose is going to group [therapy], no one is going to stay sober. That's just turning people through the system again."

David Glaser, an attorney who is working with several organizations that do free or subsidized housing, said there are likely 20 or more organizations offering housing aid with outpatient treatment. He doesn't believe they are violating the anti-kickback law as long as they are promoting access to care, have a low risk of harming clients and aren't hurting health care programs.

"This should happen," he said. "It is good for the world."

Searching for solutions

The lack of oversight and regulations for sober houses can leave room for bad actors to emerge, said Turner of Hennepin County.

In the case of Evergreen Recovery, court documents from a federal investigator said that, in addition to the housing kickback, the provider was defrauding Medicaid by falsifying records to bill for more people than actually attended treatment and calling free client meals "therapeutic recreation" — billing for them as though they were group counseling. The documents cited a KARE 11 investigation this spring that illuminated fraud allegations there.

Evergreen used housing to draw clients and its sober homes were unsafe and had little supervision, Turner said. But he said other providers are spending a lot of money to put people in supportive housing and instead of the government coming in "with a big stick" they should be working with them to find a solution.

DHS said in a statement that if a program has to stop operating, they coordinate with counties, tribes and other providers to determine if their clients qualify for financial assistance, rent help or other support.

The state does have a housing support program that helps cover room and board costs each month for roughly 20,000 low-income seniors and adults with disabilities. But Turner said that housing model isn't necessarily a great fit for people early in their recovery.

If the program took on thousands of people served by addiction treatment providers that would be a big added cost to the state, said Brian Zirbes, executive director of the Minnesota Association of Resources for Recovery and Chemical Health, a group of addiction-treatment professionals. He noted some counties also have moratoriums on those housing support beds.

The association created a sober housing work group that is coming up with proposals to suggest to DHS, he said, as they wait for a clear answer on whether the programs are legal.

"What are the other options?" Zirbes asked. "What is the path out of this?"