KARE 11 Investigates: Addiction recovery company Kyros shuts down amid fraud allegations
Minnesota's largest addiction recovery peer services provider told employees it is terminating peer services and shutting its Minneapolis-based office permanently.
In a sudden development, Kyros – Minnesota's largest provider of addiction recovery peer services – abruptly shut down Thursday, terminating hundreds of employees without notice.
The closure follows an extensive year-long investigation by KARE 11 that revealed Medicaid billing irregularities involving the company and Refocus Recovery – an affiliated non-profit.
For months, Refocus Recovery and Kyros have been under state and federal fraud investigations.
On September 6, the Minnesota Department of Human Services (DHS), citing “a credible allegation of fraud” stopped payments to Refocus Recovery.
Investigation findings
KARE 11’s investigation exposed how a man named Daniel Larson had founded both a for-profit tech company called Kyros and the non-profit Refocus Recovery.
KARE 11 revealed records showing how Larson’s nonprofit had been used to funnel millions of tax dollars into his for-profit company.
Under state law, non-profits are the only ones allowed to bill Medicaid for certain addiction recovery services. So, Refocus Recovery submitted the bills but paid Kyros to provide services.
Former clients told KARE 11 they believed the Kyros-Refocus partnership billed taxpayers for services they did not receive. KARE 11 also documented Kyros sponsoring taxpayer-funded movie nights and contests to see who could bill Medicaid the most. Former employees said they were instructed to bill for things the law does not allow, such as phone calls and group outings.
In a series of reports, client after client told KARE about recovery services that were not provided as claimed.
"Some of it’s just flat-out lies," said former client Nic Costa. Daniel Schulz echoed those sentiments, adding that certain events "were just made up."
Another client, Aubrey Kjerstenson, stated, "It’s not even excessive billing - it’s fraudulent billing."
Legislative action and continued fraud allegations
In response to the revelations, state lawmakers passed sweeping reforms and both state and federal investigations were launched.
But taxpayer dollars continued to flow. The latest available DHS data shows Refocus Recovery was paid more than $5.5 million during the first half of 2024 for peer services provided by Kyros workers.
Meanwhile, Kyros and Refocus clients like Holly Malecek continued to contact KARE 11 alleging their Medicaid-backed insurance was being billed fraudulently. "This is blatantly obvious," Malecek said.
DHS finally took action to halt the payments on September 6, but the action did not become public until earlier this week when KARE 11 obtained a copy of a letter DHS sent to the nonprofit.
Citing credible allegations of fraud, DHS said that Refocus Recovery had:
- Billed for services not provided
- Submitted claims not entitled to reimbursement
- Failed to provide supervision as required
Company closure
On the morning of September 19, Kyros employees took to social media, announcing mass layoffs and the closure of the company.
“When it rains, it pours,” wrote one worker, “Kyros is done. Company is gone. Everyone is laid off.”
Another employee posted, “Please keep me and my family in your prayers. Me and my wife just found out today that we were laid off with no notice.”
The exact number of layoffs is not known, but at their peak, Kyros was estimated to have several hundred Certified Peer Recovery Specialists (CPRS) and an extensive office staff.
KARE 11 obtained copies of an email sent to employees by the Kyros Peer Support Team. The email, headlined “Termination of Kyros Peer Services,” informed peers that Kyros Care had permanently closed its office headquarters in downtown Minneapolis. The email states, “This decision did not come without concern for you all and your clients and we did everything in our control to prevent this.”
KARE 11’s efforts to reach Kyros executives for comment have gone unanswered. Upon visiting the company’s downtown Minneapolis office, KARE 11 reporters found the building empty.
Kim Lowe, an attorney representing Refocus Recovery, wrote in an email that she could not comment for Kyros, but sent the following statement:
“Since receiving notification from the MN Department of Human Services that payments have been suspended, Refocus Recovery has been working tirelessly to assisting recipients in transitioning to new providers so that these recipients can continue to receive the services they need in their recovery journey. The journey for people afflicted with Substance Use Disorder is difficult. Peer Recovery Services provided by Certified Peer Recovery Specialists are an important part of many people suffering with SUD’s recovery journey. Refocus Recovery remains committed to providing people in recovery with the resources they need.”
As state and federal investigations continue, Kyros' sudden closure marks the end of what was once Minnesota’s largest addiction recovery peer services provider.
It’s not known if Kyros is still operating in other states such as Ohio, where they recently began offering services, or if the company plans to continue with the technology-based side of its operations.