ST PAUL, Minn. — The Minnesota Department of Human Services (DHS) has taken action to stop the flow of millions of public dollars to Refocus Recovery – an addiction recovery nonprofit at the center of KARE 11’s investigation into Medicaid billing irregularities.
In a letter dated Sept. 6, DHS cites “a credible allegation of fraud” as its reason for withholding all new payments.
For months, the nonprofit – and its for-profit partner Kyros – have been under state and federal fraud investigations. Even so, until now, they’ve been allowed by DHS to continue billing Medicaid millions of dollars for peer services.
The state decision to stop payments comes in the wake of a year-long KARE 11 investigation into allegations of fraudulent billing involving Kyros and Refocus Recovery.
New allegations of false billing
The DHS Inspector General announced it was investigating the two organizations back in February. “DHS can confirm an ongoing investigation regarding Kyros and Refocus Recovery,” Inspector General Kulani Moti told a legislative committee.
Despite the announcement, Refocus Recovery clients like Holly Malecek told KARE 11 they believe false billing continued.
In July, Holly said she noticed suspicious bills by Refocus Recovery to her Medicaid insurance provider UCare for thousands of dollars of peer services to help her in her addiction recovery.
“No, did not happen,” she told KARE 11. “This is blatantly obvious.”
Reviewing records of appointments billed to Medicaid in her name, she identified multiple examples from this summer for services she says she never received.
“I didn’t know that I was being billed for any of these things.”
Holly says she reported the suspected fraud to her insurance company. She also contacted KARE 11.
“Events were just, like, made up”
Holly had seen KARE’s reporting – beginning last year – that exposed how a man named Daniel Larson had founded both a tech company called Kyros and the nonprofit 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, nonprofits 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 its just flat out lies!” said Nick Costa.
“Some of the events were just, like, made up,” said Daniel Schulz.
“It’s not even excessive billing – it’s fraudulent billing,” claimed Aubrey Kjerstenson.
Millions of dollars
KARE’s reporting led to legislative reforms – and prompted both state and federal investigations.
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.
DHS finally took action to halt the payments on Sept. 6.
Citing credible allegations of fraud, DHS, in a letter sent to the nonprofit, said that Refocus Recovery had:
- billed for services not provided
- submitted claims not entitled to reimbursement
- and failed to provide supervision as required
DHS told Refocus it has the right to appeal the decision. Meanwhile, it wrote the order to withhold payments will “continue until DHS or a prosecuting authority determines there is insufficient evidence of fraud, or until legal proceedings related to the alleged fraud are completed.”
Read the DHS letter here:
New examples of questionable billing
Holly Malecek’s records could be a case study of how the questionable billing continued – even after officials disclosed an investigation was underway.
Holly shared records with KARE 11 showing Refocus Recovery billed taxpayers claiming Kyros provided her with two hours of peer services on April 5 at her Rochester home.
“It says it happened at my house. But no, it did not happen,” she said.
To back that up, Holly shared text messages showing the Kyros peer reached out to her shortly after they’d allegedly spent hours together.
The Kyros worker asked, “How are u today?” to which Holly replied “Hi! I’m feeling pretty good so far today! HRU feeling.”
Holly says the most telling example of a fraudulent bill is from just last month.
Kyros and Refocus records show her insurance was billed as if she was at home in Rochester attending a support group on August 24.
“Where were you on August 24th?” asked KARE 11’s A. J. Lagoe.
“I was in Cokato, Minnesota attending my son’s wedding,” Holly replied.
Photos from the day show her dancing with her son – three hours away.
No comment
Neither Kyros nor Refocus responded to KARE 11’s interview requests.
The organizations previously denied deliberate wrongdoing and Kyros’s current CEO Kristin Landry wrote to KARE 11 in a June email, “We take accuracy and integrity seriously, and will stop at nothing to have industry leading compliance policies.”
While Refocus can no longer bill Medicaid, KARE 11 learned that Kyros is now sending out emails to clients like Holly asking them to sign waivers that would allow Kyros to keep on billing for them under the name of a different non-profit – Twin Cities Recovery Project (TCRP).
When contacted by KARE 11, TCRP’s President LaTricia Tate initially confirmed the partnership and cited Kyros’s new CEO’s commitment to positive transformation.
In a follow-up email, Tate told KARE 11 she spoke with Kyros this morning and informed them the partnership “cannot move forward.”