Medicaid contract dispute threatens services for hundreds of Arizonans with autism

A dispute between an Arizona Medicaid insurer and a large autism therapy provider could leave hundreds of patients searching for new places to receive care next year.

Mercy Care, an insurer that provides coverage through Arizona’s Medicaid program, notified Centria Healthcare on Oct. 17 that it was ending its contract with the company, which provides applied behavior analysis services, or ABA, to around 260 Arizonans with autism.

The cancellation came after Mercy Care told Centria that it was cutting the rate it pays the provider by 25%, effective Oct. 1. That came after another 15% rate cut in July, according to a letter Centria’s attorneys sent to AHCCCS, Arizona’s Medicaid agency, earlier this month.

According to Mercy Care, those cuts would affect all ABA providers in its network.

Centria claimed those cuts were unsustainable and attempted to negotiate a smaller 5% reduction, according to emails from Centria CEO David Harbour to Mercy Care.

“Centria has reached the point where additional reductions would make it unsustainable to continue serving Mercy Care clients under the current reimbursement structure, and we would need to explore pausing new admissions or potentially exiting the network,” Harbour wrote in an Oct. 15 email.

Centria, which provides autism therapy in several states across the country, also claimed Mercy Care’s decision to terminate its contract violated state and federal rules requiring it to receive AHCCCS approval before making major changes to its network and to provide a “comprehensive network” that includes behavioral health services.

But Mercy Care cited language in the contract allowing it to cancel the agreement “for any reason or no reason at all.”

And, in a statement, the insurer cited the breakdown in the negotiations when asked why it ended the agreement.

“As an Arizona-based nonprofit organization, Mercy Care is committed to providing access to high quality care, while being good stewards of Arizona taxpayer funds,” according to the statement. “We negotiated in good faith but have not been able to reach an agreement. We're dedicated to the health and wellbeing of our members and ensuring that they have access to a broad network of ABA providers.”

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Real world impacts

Centria told Mercy Care the cancelled contract could force the 261 patients in its care to find new providers.

That includes 6-year-old Micah. Tiana Brandon, Micah’s mother, said he was diagnosed when he was 2 years old and is non-verbal. She said he's shown good progress since he started receiving care from Centria in 2023.

“He is able to identify lots of letters. He's able to identify colors,” Brandon said. “He takes direction very well as far as taking two step direction. He's never had any regression. He has never even plateaued.”

She’s worried the change will negatively affect that progress, because new providers may not be familiar with Micah’s body language he uses to communicate.

“And so he was able to master the goal of being completely potty trained with no accidents, even at night or in other locations,” Brandon said. “So if he's somewhere else and they're not able to recognize his cues and his cues are being ignored, that can cause regression.”

For now, Brandon is planning to send Micah to another program at a Gilbert public school near her home. But that change carries an additional set of challenges for both mother and child.

The Gilbert school lets out early on Wednesdays, meaning Brandon, a surgical assistant, has to find another program to care for her son until she is off work. That is on top of the transportation service she already hired to bring Micah to school.

“So in addition to $800 a month, I could tack on about another $480 or $500 per month for his care,” she said.

Centria is one of the largest providers of ABA services in the state, it claims. The company, which is owned by venture capital firm Thomas H. Lee Partners, operates locations in a handful of states, including Michigan, Arizona, California, Massachusetts, New Jersey, New Mexico, Oregon, Texas and Washington.

The company’s attorneys also claimed it could lay off up to 250 employees due to the canceled contract in a state that already has a provider shortage. That comes after Arizona Autism, another provider, announced it was laying off thousands of people.

“This will exacerbate the ongoing shortage of behavioral analysts, and it will make it even more difficult for families and children impacted with ASD to obtain the services they need,” according to the letter.

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Cynthia Macluskie with the Autism Society of Greater Phoenix said there has been an influx in care providers since 2008, when she and others pushed for legislation to ensure insurers covered ABA treatment.

“But just having a huge number doesn't make the quality good,” she said, expressing concern about the increase in the number of larger, out-of-state providers that have entered Arizona. She clarified that she was not speaking about Centria, specifically.

Macluskie said many of these larger providers work primarily with younger children.

“Where we have a need is in the adult population or the teen, late teen population,” she said.

Dollars and cents

Centria’s attorneys claim that Mercy Care has “provided no rationale as to the reduction amount.”

A Mercy Care spokesperson did not respond to specific questions, only providing the statement that said the sides failed to reach a new agreement.

The dispute comes as Arizona’s Medicaid system is facing financial stress, especially the long-term care program that funds ABA services and programs for children and adults living with disabilities.

Earlier this year, lawmakers and Gov. Katie Hobbs came to an agreement to send emergency funding to the agency to avoid a budget crisis at the program. That deal came with new guardrails attached that led some parents to fear their services would be cut.

New requirements included in President Donald Trump’s so-called Big Beautiful Bill, which he signed into law earlier this year, could also result in AHCCCS losing hundreds of millions in federal dollars over the next several years.

A lack of communication

After Mercy Care notified Centria that the contract would be cancelled in 90 days, it didn’t send parents the same message.

“I've not been contacted by AHCCCS or Mercy Care this entire time via e-mail, via phone call, via mail correspondence,” Brandon, Micah’s mother, said. “I've not received anything from them.”

She said she only found out about the cancellation from a Centria employee on Oct. 31, over a week after Mercy Care told Centria is was cancelling the contract.

To make matters worse, she couldn’t change insurers to one of the other insurers contracted with the state’s long-term care system that still covered Centria due to rules requiring those changes to be made in a child’s birth month.

“Micah's birth month is September,” she said. “So I was presented with this information on October 31, and just 31 days prior to that, Micah would have been within his birth month time, and I would have been able to switch him over.”

AHCCCS, the Medicaid agency, did not respond to a request for comment, only saying it is monitoring the situation.

Hobbs also said she is aware of the situation.

“I'm actually getting a briefing on this today, and there'll be more forthcoming in the coming days,” Hobbs said on Thursday.

But, on Friday, she said, “I don’t have any updates that I can share right now.”

Mercy Care’s contract with Centria was scheduled to terminate in January, but a Centria spokesman said the company was notified on Friday night that the date was moved to March 1.

EDITOR'S NOTE: This story has been updated to correct the venture capital firm that owns Centria. It is Thomas H. Lee Partners.