Minnesota addiction treatment provider to pay $18.5M in Medicaid kickback settlement

Minneapolis addiction services provider Nuway Alliance will pay $18.5 million to resolve allegations it submitted fraudulent claims to Medicaid, the U.S. Attorney’s Office said Thursday.

Nuway, a nonprofit offering treatment for substance use disorder and mental health problems, was accused of violating federal anti-kickback rules in compensating Medicaid patients who sought intensive outpatient treatment from January 2019 to February 2025, federal prosecutors said in a news release.

Patients received housing subsidies if they participated in treatment, which Medicaid payments largely funded, they said.

The settlement is not an admission of guilt, and Nuway’s lawyer said he believes the provider didn’t violate any laws.

But the nonprofit said in a statement that it “chose to pay money to the government over time to preserve their mission of treating patients with substance use disorder,” now focusing on inpatient care.

Nuway also settled allegations of submitting false Medicaid claims for outpatient treatment that it failed to provide by billing a single unit of a patient’s time twice.

The fraud had amounted to millions of dollars since 2018, prosecutors added.

Minnesota will receive more than $8 million of the settlement, Attorney General Keith Ellison’s office said in a news release. The money will cover more than five years of state funding for Ellison’s Medicaid Fraud Control Unit.

“When someone steals from Medicaid, they are both stealing from taxpayers and stealing money meant to pay for poor people’s health care,” Ellison said. “That’s disgraceful and I will not stand for it.”

Minnesota’s Department of Human Services (DHS) investigated Nuway alongside the U.S. attorney, and its temporary commissioner, Shireen Gandhi, said “overbilling Medicaid while shortchanging clients is indefensible.”

“Today’s settlement not only requires Nuway to make a substantial payback to taxpayers,” Gandhi said in a statement, “it protects the rights of clients to choose a provider that is right for them and receive the services being billed.”

Thousands of Minnesotans rely on Nuway’s programs every year. The provider previously sued the DHS, which halted Medicaid payments for the service due to the fraud allegation. Nuway said the action would destroy its program, which is the largest in the state. A judge allowed the DHS to stop payments.

Nuway, which has expanded in recent years to St. Cloud and Mankato, is not alone in pairing addiction treatment with housing subsidies; other substance use treatment providers in Minnesota have offered housing help over the years. Some providers have said the practice makes it difficult for those who don’t offer the model to attract clients.

Last year, the FBI raided St. Paul-based Evergreen Recovery, which also paid for housing for clients. Federal investigators in that case said the practice was an illegal kickback.

While federal Medicaid law prohibits kickbacks, Minnesota had not had a similar anti-kickback measure on the books, but state lawmakers this year changed that.

Legislators added criminal penalties when someone offers something of value in exchange for referrals, goods or services payable under a federal health care program.

Legislators also allowed DHS to take administrative action if a kickback occurs under Medicaid.

Some in the addiction treatment field have raised concerns about the ripple effect of the crackdown on Nuway. They warned that it would hurt people in recovery, make it more difficult for sober home providers to stay in business and lead to a rise in homelessness.

As part of the settlement, Nuway entered a five-year agreement with the Office of Inspector General in the U.S. Department of Health and Human Services to maintain a compliance program fostering “adherence to federal health care program requirements and thereby protect the programs,” the U.S. Attorney’s Office said.

The nonprofit will also have an independent organization review claims it submits to Medicaid.

“This settlement should serve as further proof that we will aggressively investigate Medicaid fraud whenever it occurs and will hold all companies to account,” Acting U.S. Attorney Joseph H. Thompson said in the release.

Gandhi said in her statement that DHS provided extensive data to federal investigators. The settlement, she added, serves as evidence of state and federal offices’ “shared commitment to work together for program integrity.”

Nuway’s lawyer, David Glaser, said he admires the nonprofit’s decision to settle.

“That said, this case bothered me in a way that no other case I have worked on has,” he said. “I believe that Nuway violated no law.”

Organizations are not entitled to a hearing when the state suspends payment, Glaser said. He described this as a “lack of due process” that he did not “expect to find in America.”

“I hope that the Minnesota Legislature will see fit to changing the law so that organizations receive a hearing when payment is suspended,” Glaser said.

“Concerns about fraud are entirely legitimate, but due process is an essential American principle.”