MN Medicaid fraud: 2 plead guilty to recovery treatment overbilling

GOP lawmakers ask feds to audit state’s Medicaid program

Republican state lawmakers on Wednesday formally asked a federal watchdog to investigate the state’s "rampant" Medicaid fraud. The request came a week after the FBI raided homes and businesses as part of a sweeping fraud investigation. FOX 9's Mike Manzoni has the update.

ST. PAUL, Minn. (FOX 9) - Leaders of Evergreen Recovery, an addiction treatment center, pleaded guilty to wire fraud after billing Medicaid for services that were never provided. 

READ MORE: 800 inactive Medicaid providers dropped as Minnesota aims to 'tighten oversight'

Addiction treatment Medicaid fraud 

Big picture view:

Evergreen Recovery leaders Shantel Magadanz and Heather Heim admitted to their roles in a Medicaid fraud scheme, pleading guilty to conspiracy to commit wire fraud, according to the Minnesota Attorney General's Office. 

Prosecutors say they also engaged in illegal kickbacks with a sober housing provider, Sber Chances Sober Living. 

Clients were offered housing in exhange for attending "a certain amount of programming at Evergreen Recovery, but which, in many cases, Evergreen did not actually provide," according to the AG's Office. 

Another Evergreen leader, Shawn Grygo, is accused of fraud but has not pleaded guilty.

The U.S. Attorney’s Office indicted the trio in December 2024. 

All are accused of being involved in a scheme that falsified records and coerced clients into unnecessary programs, costing Minnesota taxpayers millions.

What they're saying:

Minnesota Attorney General Keith Ellison released the following statement on the convictions:

"While I am pleased to see these fraudsters face justice for their crimes, the fact that anyone would steal money meant for poor people’s health care makes my blood boil. My team and I will continue working with federal and state partners to investigate Medicaid fraud, hold wrongdoers accountable, and recover Minnesotans’ tax dollars."

Magadanz and Heim, were involved in overbilling for substance abuse treatments not provided. They also engaged in illegal kickbacks with a sober housing provider.

Another leader, Shawn Grygo, is accused of fraud but has not pleaded guilty.

Fraud in Minnesota

The backstory:

The Minnesota Housing Stabilization Service program was formed in 2020 to help seniors and people with disabilities, including those with mental illnesses and substance abuse issues, find stable housing.

READ MORE: 8 federally charged in massive Minnesota Housing Stabilization Services fraud scheme

The Medicaid program was estimated to cost about $2.6 million annually, but it quickly grew, and the program paid out a total of $302 million in claims over 4.5 years.

Hundreds of companies enrolled in the program and claimed to provide housing stabilizations services to clients throughout the state. Acting U.S. Attorney Joseph H. Thompson explained that the operators followed a similar scheme by identifying vulnerable people, many of whom were being released from drug or alcohol rehab facilities, and signed them up to receive services. They then submitted inflated and fake reimbursement claims, resulting in substantial pay-outs of taxpayer money. 

"Despite the hundreds of millions of dollars in payments that have gone out from the state of Minnesota to housing stabilization services companies, most of these individuals did not receive the stable housing they so desperately needed. The money was just simply stolen," said Thompson.