Florida company Ethema Health Corporation announced Wednesday it signed a letter of intent to purchase the Kentucky facilities of Addiction Recovery Care — the company that grew in recent years to be the largest drug treatment provider in the state.
Known as ARC, the company became a target of an FBI investigation last summer related to potential Medicaid fraud, subsequently laying off many staff and closing facilities over the past year.
According to Ethema’s owner, ARC will use part of the funds from its purchase to pay the U.S. Department of Justice as part of a pending settlement over the Medicaid fraud investigation.
In an interview with Kentucky Public Radio, CEO Shawn Leon of Ethema — operating in the state as ARIA Kentucky — said his intent to purchase ARC facilities was first discussed with ARC owner Tim Robinson last year. He pitched a way for his company to expand into Kentucky and for ARC to rebrand itself amid the FBI investigation and subsequent financial troubles.
“I said it may be an idea that you could sell your assets to ARIA and we rebrand into the ARIA brand and have one unified company across the state,” Leon said. “Recently, I just presented some ideas to him on how it could be restructured and reorganized. And he finally said, ‘you know what, it's time to turn it over.’”
“It’s tough to sort of step back and give up something that you've built and you're proud of and all that,” Leon added. “But I just said that the organization would benefit from sort of a fresh start rebranding, and certainly new management.”
Earlier this year, Ethema purchased the assets of Edgewater, another drug treatment company that was under FBI investigation for fraudulent billing practices. Leon says he envisions the purchase of ARC assets to be similar to what it did with Edgewater, when it acquired a few facilities in Paducah and Morehead.
Edgewater entered a settlement with the DOJ in 2024 to pay $2.2 million related to a fraudulent billing scheme, and according to Leon, ARC and its owner have a pending resolution with the federal government to settle its own FBI investigation.
Leon said that 25% of the sale will be in cash, with Robinson using those funds to pay down debts and “anything he needs to pay to the Department of Justice for the Medicaid issue.”
A spokesperson for ARC did not answer questions about an FBI settlement or make Robinson available for an interview. A spokesperson for federal prosecutors in Kentucky also did not immediately respond to an email seeking confirmation of the ARC settlement. A spokesperson for the FBI’s Louisville office said they could not respond due to the ongoing federal government shutdown.
Following the publication of this story, Leon called back to say he may have “misspoke” about the pending settlement and “should have said it differently.”
“I just want to make it clear that I have no knowledge of it, and that anything I may have either speculated on or surmised was just purely that,” Leon said in the follow up call. “I don't want it to come across as I know what's going on, because I really, honestly, I don't.”
Leon said that once the sale of ARC assets is final, Robinson will become a "fairly large shareholder” in Ethema and take a strategic leadership role in the company.
“He'll have an executive role,” Leon said. “He'll probably be more in the lines of business development and maybe looking into opening in West Virginia or Ohio or Virginia. Those are kind of target areas for us (to expand to).”
As for the FBI investigation into ARC under Robinson’s leadership, Leon said it is not of much concern, sharing his understanding that ARC initiated the investigation by self-reporting Medicaid issues, and that the FBI found nothing further than what they shared.
“I'm not intimately involved in any of that,” Leon said of the federal investigation. “Quite frankly, I don't even want to know what it's all about.”
Leon added that the FBI investigation still played a role in weakening the financial position of ARC.
“Unfortunately, that whole process really impacted the organization in a hundred different ways,” Leon said. “And that's what led to difficulties in every aspect of the business, which eventually required a tightening of the belt, closing locations and consolidating and continuing to do that.”
This financial trouble is what spurred Leon to first reach out to Robinson last year, pitching the potential solution that could help both companies.
“This is the idea that I brought to them, and that's why we're in the situation now, where those funding and financing ideas are kind of coming from me, and the rebranding and moving everything under our management is really just part of that,” Leon said.
Transitioning from ARC to Ethema
When the FBI investigation was announced last August, ARC had more than 30 facilities related to drug addiction treatment throughout Kentucky. However, that number has since dwindled with closures and layoffs.
In September, ARC announced it was closing five more facilities and laying off more staff, leaving it with just 14 facilities.
In an email to ARC staff Wednesday, Robinson wrote that ARC was selling five of its facilities, including Bellefonte Hospital in Ashland, Pioneer Rural Health Clinic in Louisa, a pharmacy in Monticello and its laboratory. He indicated that its educational facilities under Millard College would not be sold.
A press release Thursday from Ethema about the prospective purchase listed more assets it seeks to acquire from ARC, including four in-patient facilities, five out-patient clinics and a psychiatric hospital. It adds that the combined capacity of these facilities is approximately 900 patients.
Not mentioned in either the Robinson email or the Ethema release was the Crown Recovery Center in Springfield, which is ARC’s largest drug treatment facility.
Leon said Ethema is not purchasing the Crown facility and has no desire to, as it is too large for their business model. He added ARC may be near a potential deal for another entity to purchase the property.
Leon said Ethema has had no conversation to buy any assets or have future affiliations with Odyssey Inc., a nonprofit affiliated with ARC. According to IRS filings, Odyssey was led by Robinson, his wife and other top ARC leaders for several years, accumulating nearly $32 million of assets by 2023. It paid Robinson and wife hundreds of thousands of dollars annually, until 2023, when Robinson and his wife left the board.
As for the transition from ARC to Ethema, both Robinson and Leon said it should be seamless for both employees and clients, as they hope to have no interruption of current services once the sale is complete — which Leon hopes to have finalized within three months.
In his email to staff, Robinson wrote that the sale was not a decision he made lightly.
“Following necessary organizational changes, this strategic consolidation is the most responsible and forward-looking step we can take,” he wrote. “It ensures the necessary long-term stability and investment required to continue our core mission: providing compassionate, high-quality treatment for addiction and co-occurring disorders across Kentucky.”
Robinson added that ARIA Kentucky “has indicated a strong intent to hire a substantial portion of the current ARC staff in the same or similar roles. There will be no disruption to your daily operations or client care, as the well-being of our clients is our top priority.”
Along with the rapid growth of ARC, Robinson also became one of the top political donors in Kentucky, especially in the 2023 election.
Through two of his businesses, Robinson gave $195,000 in 2022 and 2023 to the Democratic Governors Association, the political committee that spent $19 million on ads to reelect Gov. Andy Beshear that year. He subsequently contributed $29,000 to Beshear’s inauguration fund, and was given praise by the governor in his State of the Commonwealth address the following month.
ARC has also employed over the past year the wife of Rocky Adkins, the top advisor for Beshear’s office, according to financial disclosure forms.
Robinson also gave $20,410 to Safer Kentucky, a PAC that ended up spending $70,000 on texts and phone calls to help elect Republican Attorney General Russell Coleman in 2023. He and other employees of ARC contributed to Coleman’s campaign and hosted campaign fundraisers for him.
In August, Kentucky Public Radio first reported that Coleman recused himself from all matters involving ARC, shortly before the FBI announced its investigation. His top deputy also recused himself from matters involving ARC earlier that year.
*This story has been updated to include additional quotes.
