Federal prosecutors say a South Texas mental health ranch that was supposed to keep people out of jail instead became a massive Medicaid cash machine, churning out eye-popping bills for care that often never happened.
A former leader of the jail-diversion nonprofit that ran the facility was indicted on federal charges Thursday, accused of orchestrating a scheme to bilk Medicaid while operating a ranch-based treatment program in Raymondville. Prosecutors allege the operation billed for services it did not provide and routed millions into private accounts, with court documents citing roughly $114 million in claims and nearly $36 million in reimbursements funneled away. The indictment names Brandy Kaye Hernandez, who ran the organization as a tax-exempt nonprofit, and charges her with multiple offenses, including healthcare fraud and money laundering. She is due back in federal court in early July.
According to the Houston Chronicle, a grand jury returned a 20-count indictment accusing Hernandez of scheming to defraud Medicaid from August 2018 through November 2022 by submitting about $114 million in claims and pocketing nearly $36 million. The Chronicle reports Hernandez was arrested Tuesday and released on bond Wednesday; her attorney Wendell Odom Jr. told the paper, “We’re pleading not guilty.” The indictment also alleges the Raymondville operation, known as La Jarra Ranch, routinely billed for implausible levels of care and that Hernandez used aliases including Brandy Castillo and Brandy Leonhardt.
Alleged civil case and prior government filings
Before the criminal charges landed, federal civil forfeiture filings in 2023 targeted Inspired Behavioral Health and related entities, alleging the company fraudulently billed Medicaid for more than $110 million and hid proceeds through a web of bank accounts. Federal court records and prior reporting describe claims that the ranch billed approximately $1.8 million per patient and became one of the highest mental-health billers in Texas despite housing fewer than 60 people. Those earlier filings and coverage can be reviewed in federal dockets on Justia and in reporting compiled by Becker's Behavioral Health.
How counties and residents were affected
Prosecutors say county officials in Cameron and Fort Bend were lobbied to divert people into the ranch program, and that Cameron County paid a daily fee for residents placed there as an alternative to jail. Court documents allege residents were pressured to sign over Supplemental Security Income benefits to the operator, with roughly 70% of benefits used for room and board rather than individualized treatment. The nonprofit’s public filings and nonprofit databases show the organization operated as a tax-exempt entity while its billing soared, according to ProPublica.
Legal process and next steps
The federal indictment lists 20 counts across healthcare fraud, conspiracy to commit healthcare fraud, conspiracy to commit money laundering and engaging in monetary transactions with property derived from unlawful activity. Hernandez is scheduled to be arraigned on July 2, 2026, and faces potential criminal prosecution in federal court. An indictment is an accusation, and defendants are presumed innocent unless and until proven guilty in court. The earlier federal forfeiture action against Inspired Behavioral Health was paused after the criminal indictment was filed, according to federal court records on Justia.
Why this case matters
The Hernandez indictment arrives amid an intensified federal push against healthcare fraud, as the HHS Office of Inspector General and U.S. attorneys coordinate nationwide enforcement actions targeting schemes that bill federal programs for services not provided. Federal oversight officials say those multi-district efforts aim to protect vulnerable beneficiaries and recover taxpayer dollars siphoned off by fraudulent operators, per the HHS Office of Inspector General. Local advocates who had raised concerns about the ranch’s operations say the charges underscore the risks when diversion programs operate without independent oversight and robust clinical staffing.
