ST PAUL, Minn. — Amid the well-publicized chaos in the final days of the Minnesota legislative session, there was an area of consensus.
Lawmakers overwhelmingly approved reforms aimed at cracking down on the way addiction recovery programs bill for so-called “peer services” – where people in recovery are paid to help mentor others battling addiction.
"We had to do something," said Representative Heather Edelson (DFL-Edina), reflecting on the legislative votes that came in the wake of KARE 11’s year-long “Recovery, Inc.” investigation.
In a series of reports, KARE 11 exposed allegations that taxpayers were being overbilled by a company called Kyros and its nonprofit partner Refocus Recovery.
Although Kyros and Refocus denied any deliberate wrongdoing, KARE 11’s reporting uncovered taxpayer-funded movie nights, contests to increase Medicaid billing, and allegations that taxpayers were billed for addiction recovery services never provided.
Key reforms
“This legislation came in response to one specific bad actor,” said Rep. Luke Frederick (DFL – Mankato), who sponsored a bill to require all recovery peers to be classified as employees – not independent contractors. He says it was designed to reduce the risk of perverse billing incentives and better protect workers.
Rep. Edelson played a key role in drafting another law that increased supervision of peers, enhanced auditing of billing to ensure the services were medically necessary and banned nonprofits with conflicting self-interests.
KARE 11’s investigation exposed how Daniel Larson founded both the tech company Kyros and the nonprofit Refocus Recovery and used the nonprofit to steer work and millions of tax dollars into the for-profit company he headed.
About conflicting self-interests, Edelson said, “It was very clear to us in Minnesota that that was happening,”
Some of the reforms passed begin immediately. Others, such as the requirement that peers not be contract workers, kick in beginning in 2025.
Questionable billing
Former Kyros clients who requested copies of bills for peer services allegedly provided to them told KARE 11 they repeatedly found errors.
“Some of the events were just like, made up,” said Daniel Schulz.
“You’re saying that didn’t happen?” KARE 11 asked another former Kyros client. “I’m saying that outright did not happen,” Aubrey Kjerstenson replied.
“Some of it’s just flat out lies!” said Nic Costa after reviewing his Medicaid billing records. “It’s like fantasy.”
Costa’s records reveal taxpayers were charged for an hour-and-a-half of “peer services” after he allegedly spent time with a Kyros peer watching a Michael Jordan documentary in his sober living home.
Costa says he momentarily passed through a room where it was playing on the way to his bedroom. It’s just one of the examples where Costa says his taxpayer funded insurance was wildly overbilled.
“When people do things like this, “Costa said, “people aren’t going to want to fund it (peer services) anymore and you’re going to have people die all the time.”
Multiple investigations
At a legislative hearing in February, the Inspector General for the Minnesota Department of Human Services said both Kyros and Refocus Recovery were under investigation.
In May, KARE 11 reported that Special Agents from the Federal Bureau of Investigation’s Minneapolis Field Office along with the U.S. Department of Health & Human Services Office of Inspector General have begun interviewing former employees and contractors of the two organizations.
Even as official investigations mounted, records show Kyros employed lobbyists like Tom Poul to try and kill the legislative reforms. They were unsuccessful. Poul declined to comment on multiple occasions when approached by KARE 11.
In May, Kyros announced that Daniel Larson was stepping down as Kyros’s CEO. Earlier in the year Blaine Mayor and former state legislator Tim Sanders resigned as Executive Director of Refocus Recovery.
Red flags
Under the law, the for-profit Kyros cannot bill Medicaid directly for peer services. But the nonprofit Refocus Recovery can. So, the nonprofit founded by Larson hired his for-profit company to actually provide Certified Peer Recovery Specialists (CPRS).
Between January 2022 and October 2023, state records show Refocus was reimbursed more than $14 million – more than all other peer support nonprofits in Minnesota combined.
In its most recent public tax filing Refocus reported that more than 96% of the nonprofit’s revenue in 2022 went to subsidiaries of Larson’s for-profit company.
The tax filing also disclosed that Larson owned “greater than 35%” of Kyros at the time. Tax returns for 2023 are not yet available.
After reviewing the records, the former head of the U.S. Attorney’s white collar crime section in Minnesota told KARE 11 they raised red flags. “If it turns out that the nonprofit is a mere shell corporation to get the money into a for-profit, that’s a huge red flag,” Doug Kelley said. “And I think that’s the main red flag here that everybody should be scrutinizing carefully.”
Nic Costa and others are awaiting the outcomes of the ongoing official investigations, believing that justice for taxpayers and exploited individuals in recovery is overdue.
“It makes me angry, frankly,” he said.
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