Governor Katie Hobbs Underscores Arizona’s Leadership on Medicaid Accountability and Announces New AI Tool to Fight Fraud

Phoenix, AZ - Today, Governor Katie Hobbs announced that Arizona's Medicaid agency, Arizona Health Care Cost Containment System (AHCCCS), will launch a first-of-its-kind AI tool this summer to detect and prevent fraud. This is the latest action in Arizona's aggressive, multi-year effort to eliminate waste, fraud, and abuse after Hobbs inherited the largest Medicaid fraud in Arizona history. Her efforts include one of the largest crackdowns in state history that successfully uncovered and targeted as much as $2.5 billion in Medicaid fraud. Last week, in a letter to Centers for Medicare & Medicaid Services Administrator Dr. Mehmet Oz, Governor Hobbs outlined Arizona's leadership on Medicaid program integrity and detailed the state's robust and wide-ranging efforts, from expanding screenings for providers to strengthening partnerships with law enforcement.

"Arizona didn't wait for Washington to call - we've been building and deploying the tools to fight Medicaid fraud since I took office," said Governor Katie Hobbs. "My administration inherited one of the most significant behavioral health fraud schemes in Medicaid history and responded directly, transparently, and in close partnership with CMS to stop the fraud and hold accountable the bad actors who defrauded taxpayers and harmed our most vulnerable. Under my watch, Arizona has become a national leader in cracking down and preventing Medicaid fraud. I'm proud of this record and ready to show what Arizona has accomplished. Now, we're building on this work and launching a first-of-its-kind AI system that will catch fraud before money goes out the door."

Administrator Oz's April 23 letter called on all governors to undertake a swift revalidation of high-risk Medicaid providers and submit a broader provider revalidation strategy within 30 days. Governor Hobbs' response made clear that Arizona was already well ahead of the curve.

At the center of Arizona's response is the upcoming launch of an AI-informed Medicaid claims prepayment review system through AHCCCS - believed to be the first such system nationally. Launching in July 2026, the system uses AI to rank claims by fraud, waste, and abuse (FWA) risk before payment is made, directing human review resources to the highest-risk claims while minimizing delays for compliant providers.

The system pairs AI-driven risk scoring with clinical oversight, using automated tools to inform - not replace expert judgment. The approach reflects a deliberate shift away from pay-and-chase recovery toward stopping improper payments before they happen. Governor Hobbs has offered a briefing and demonstration to Administrator Oz ahead of the July launch.

Since 2023, Arizona has built one of the most comprehensive Medicaid program integrity frameworks in the country across every dimension of the FWA continuum:

• Provider Enrollment: AHCCCS has continuously strengthened its provider enrollment portal, expanded third-party screenings, integrated exclusion lists from other jurisdictions, added risk-tiered screening requiring fingerprints and background checks for high-risk providers, and deployed AHCCCS Provider Connect - a proactive communication system modeled on the agency's successful Public Health Emergency member initiative.
• Law Enforcement: AHCCCS has formalized and expanded partnerships with the FBI, IRS Criminal Investigations, the Arizona Attorney General's Office, county prosecutors, Tribal police, and local law enforcement statewide. Since 2023, Arizona has initiated more than 364 Credible Allegation of Fraud payment suspensions. More than 100 individuals have been indicted as a result of the agency's actions.
• Prepayment Review: AHCCCS has significantly expanded prepayment review, including 100% review for providers with unusual billing patterns, prior FWA referrals, or high per-member costs. A new prepayment review vendor is contractually required to report any FWA suspicions.
• Data Analytics: AHCCCS is deploying the Alivia FWA Finder, part of the Alivia 360 product suite, applying machine learning to identify billing anomalies at scale, and creating a new Office of Data Analytics (ODA) to monitor population-level cost and utilization trends.
• Managed Care: AHCCCS proudly continues its almost 45-year history of serving the vast majority of its members via Medicaid managed care organizations, private-public partnerships bakes program integrity incentives into the foundation of the agency's largest Medicaid programs.
• Enterprise Governance: Standing FWA meetings across all AHCCCS divisions, a new Operations Committee within the Division of Fee for Service Management, and a robust self-disclosure program ensure accountability is embedded organization-wide.

"AHCCCS is once again on the cutting edge of the battle against fraud, waste, and abuse in the Medicaid system," said AHCCCS Inspector General Vanessa Templeman. "My team's tireless work in the early years of the Hobbs Administration brought Arizona's widespread behavioral health fraud schemes to their culmination. I am honored to lead a fantastic team that works to ensure the protection of taxpayer dollars, and more importantly, that Arizona's Medicaid members are safe from the bad actors who seek to exploit them and to commit fraud, waste, and abuse. In collaboration with state and federal partners, Arizona is excited to be deploying new and upgraded FWA analytics tools, including Alivia FWA Finder, part of the Alivia 360 product suite. I am proud to continue this vital work, and prouder still that Arizona will once again set the national bar for innovation in our fight against those who seek to defraud Medicaid and exploit our most vulnerable populations."

Read the letter here