PHA Healthcare, a drug addiction treatment provider that enrolls hundreds of Medicaid patients in Maryland each year, has been ordered by the state health department to stop providing services to patients.

The state’s Behavioral Health Administration issued a “cease and desist notice” to the outpatient program on Dec. 23, three days after an investigation published by The Baltimore Banner, in collaboration with The New York Times, revealed that PHA Healthcare places patients into what are effectively government-funded drug houses.

PHA Healthcare has chosen to relocate the patients it houses and has been cooperating with health authorities to ensure all patients are “transitioned appropriately” before operations cease on Jan. 23, state health department spokesman Chase Cook said in a statement Friday.

The state’s order said PHA Healthcare was operating without a valid license, which had expired in April. It requires the program to notify its clients and transition them to alternative programs or “make other arrangements to ensure continuity of services.” The provider can appeal the state’s decision.

The Behavioral Health Administration is actively investigating the program, according to Behavioral Health System Baltimore, a nonprofit that oversees treatment providers on behalf of the city, and Councilwoman Phylicia Porter, who leads the council’s health committee. When asked about the investigation, Cook declined to confirm it.

PHA Healthcare has operated out of an office in downtown Baltimore, but most of its patients stayed — and attended online group counseling — in residences operated by the program scattered across West Baltimore. It also served some patients in Prince George’s, Howard and Washington counties, its owner Stephen Thomas said in a previous interview.

Thomas, who had no significant experience in providing drug treatment, started operating the for-profit business in 2020. In the fiscal year that ended in June, the company enrolled more than 720 patients and received $8.5 million from the state for providing counseling services. Thomas credited its growth to a reputation for client care. Last year, PHA Healthcare’s operators received a grant through the city and a commendation from the City Council for affordable housing.

The investigation traced the deaths of at least 13 people to the company since 2022, including that of a 1-year-old boy who starved after his mother died in the program’s housing. No one from the program had seen the mother for two weeks, a medical examiner’s report said.

Patients described living in poor and unsanitary conditions, where drug use was widespread and even house managers got high. In recent months, the treatment they received was often group counseling conducted online by people who lived in places like Nigeria and did not appear to be licensed as counselors in Maryland. In prior interviews, Thomas said that any housing complaints were quickly addressed, and that group counseling sessions were led by interns from other countries who had advanced degrees and were working to get licensed in Maryland.

State regulators have told PHA Healthcare to stop treating patients at least once before. The state notified the program it would be suspended in December 2022 because its license had expired almost two years earlier. But the state then allowed it to obtain a new license, using a different address, and kept paying it, Cook said previously.

The Banner/Times investigation showed that state officials for years failed to adequately vet and audit addiction treatment operators, allowing a flood of new programs, some of which used tactics that health officials and other, longstanding providers have described as unscrupulous.

Offering free housing to patients in exchange for enrolling in Medicaid treatment is one practice that health officials have described as illegal, because it violates federal anti-kickback laws, but increasingly common in Baltimore. Thomas has said the company has housed “many people” who are not getting its treatment.

Reached by phone Friday, Thomas, PHA Healthcare’s owner, declined to comment on the state actions, but he said the reporting by The Banner/Times caused “a lot of damage.”

“I thought it was very, very unfair and particularly unfair to the clients that we serve,” Thomas said, adding there are “hundreds and hundreds of clients who have good stories to tell about PHA Healthcare.”

It’s unclear how many patients currently live in the program’s buildings, but winter is typically the busiest season for substance use treatment companies that offer housing as part of their services. In a text message Thomas sent to an employee in December of 2023, he said PHA Healthcare housed 300 adults and more than 50 children.

Emily Dommartin, a former counselor for PHA Healthcare who said she was fired after raising concerns about the program with Thomas, said she was glad the state was stepping in, but worried about what would happen to the patients.

”If they’re back on the streets and homeless again, it puts them in their initial situation,” she said. “It can impact their recovery, whatever little recovery they made.”

At least three people enrolled with PHA Healthcare have recently called another treatment provider, looking for new places to live, an official at another program said.

An official at another addiction treatment provider, who did not want to be named due to safety concerns, said at least three people enrolled with PHA Healthcare have recently called looking for space in the provider’s residential facilities.

State Sen. Clarence Lam, who is a physician and teaches at the Johns Hopkins University Bloomberg School of Public Health, said the cease-and-desist order is “long overdue” and he supports a full investigation of PHA Healthcare and other possible “bad actors” operating addiction treatment in Maryland.

“These are state dollars contributed to their deaths and that’s unconscionable,” he said, referring to people who have died while under the program’s watch. “This needs to be addressed as soon as possible to make sure no more deaths happen.”

Read the cease and desist: