Medicaid Freeze Cost Anoka Provider 25 Years of Operations

Avalon Home Care ceased operations in June after the Minnesota Department of Human Services halted reimbursement checks for four months. Owner Jonathon Hansen attributed the closure to a payment freeze that began in April. The state agency cited a credible allegation of fraud as the reason for the hold. Hansen said the freeze left the company unable to cover payroll or operational costs. The business, which operated for 25 years, is now closed.

Hansen stated that 160 employees lost their positions when the doors shut. Additionally, 99 clients had their care services disrupted. The owner described the financial impact as a total ruin for the company. He said he has spent 25 years building the business and that it is no longer possible to recover from the loss of revenue during the freeze. Hansen argued that the state continued the payment hold for months without providing an explanation or confirming a criminal investigation.

The timeline of the dispute began in April when DHS stopped paying Avalon for services rendered. In June, Hansen filed a lawsuit against the state. Court filings indicate that two state agencies declined referrals from DHS to investigate the company. Emails included in those records show the Minnesota Attorney General’s Medicaid Fraud Control Unit rejected a referral in June. The unit declined a second referral in September. In both instances, the office stated that DHS provided limited new information.

On Friday, the Attorney General’s office confirmed it received and declined several referrals regarding Avalon. A spokesperson explained that a decision not to open a criminal case does not prove the provider did nothing wrong. The office noted that DHS can still take administrative action for waste or abuse. The spokesperson added that the standard for criminal fraud charges is much higher than the standard for administrative action. The Minnesota Bureau of Criminal Apprehension said it forwarded a July referral from DHS to the Medicaid Fraud Control Unit. The BCA offered to assist if the case were opened. A BCA spokesperson said it has not received a request for help from the Attorney General’s office.

Hansen said DHS has never specified what the fraud allegations are. He said he has spent $200,000 in legal fees to determine the reason for the payment hold. Hansen questioned why he would want to partner with the state again if it could withhold payments without a clear reason. He asked who else would want to be a service provider in Minnesota under those conditions. A DHS spokesperson said on Friday that the status of investigations and payment holds is protected from disclosure under state law. The agency added that it acts aggressively to detect fraud and cuts off money when credible allegations appear.

A Ramsey County judge denied Hansen’s request to force DHS to release the withheld money. The judge wrote that the obligation for DHS to pay was not clear and indisputable. The ruling noted that it was unclear whether DHS was actively investigating Avalon. The judge expressed concern that the payment withholding appeared based on referrals that had not gained traction. Hansen said he plans to appeal the ruling. The next step in the legal process is the filing of that appeal.

Hansen said the business had no surviving path forward after the revenue stopped. He noted that the freeze lasted months despite the lack of a criminal case. The two agencies that declined to investigate did so in June and September. The Attorney General’s office maintained that administrative actions are separate from criminal referrals. The BCA has not been asked to help the Attorney General’s office. DHS protected its internal status from public disclosure. The judge found the state’s obligation to pay was not indisputable. Hansen is preparing to challenge that decision.