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Fraud probe update: CMS defends New Mexico's defunding amid questions about audit findings

July 15, 2013
by Dennis Grantham, Editor-in-Chief
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NM 'didn't have to' halt funding to 15 providers, some of whom are preparing to close their doors

Following the July 12 Behavioral Healthcare story involving the unprecedented decision by New Mexico's Human Services Department (HSD) to de-fund 15 of the state's behavioral health organizations due to what it called "credible allegations of fraud," HSD spokesman Matt Kennicott released a statement from Brian Cook, Director of Media Relations for the Centers for Medicare and Medicaid (CMS) in defense of the decision.

"Based on information currently available," said Cook, "CMS believes HSD acted in accordance with federal regulation and CMS guidance in imposing the temporary payment suspension." 

Questions continue to swirl around the June 24 decision by the New Mexico HSD to de-fund the 15 organizations because they provide a huge proportion of behavioral health care in the state--some 85% of funded services involving 30,000 individuals--and because no civil or criminal charges have been filed against any organizations or individuals. National Council CEO Linda Rosenberg pointedly questioned the severity of the state's de-funding action, saying that "I've never seen a state behave like this." 

In a Saturday, July 13 article, New Mexico In Depth reported that New Mexico's HSD knew that it did not have to de-fund the agencies while an Attorney General investigation of the audit findings took place. And, in a recent National Council blog, attorney Adam Falcone identified six "good cause" exceptions that states can use to avoid cutting off funds for Medicaid providers. He added that, "With nothing more than a credible allegation of fraud, it is quite likely that states will suspend payments more frequently than in the past. That is because the Affordable Care Act now prevents state Medicaid programs, absent good cause, from receiving federal financial support during the pending investigation of such allegations."

The state HSD de-funding decision was based in part on a $3 million audit by Public Consulting Group (PCG, Boston) which is said to indicate that the 15 agencies received $36 million in overpayments from HSD. The alleged overpayments were reportedly discovered after OptumHealth, the state's contracted managed behavioral health organization, installed new program-integrity software in late 2011. At present, DHS has said that the de-funding will remain in place until the New Mexico Attorney General's office finishes a review of the alleged fraud.  A spokesman at the Attorney General's offiice indicated that the review was initiated at the request of DHS.

In another recent article, the Santa Fe New Mexican cited North Carolina state auditor Beth Wood who, in a July 2012 report, criticized the validity of a provider audit that was conducted by PCG. That audit reported that North Carolina had overpaid behavioral health providers by $38.5 million, but that the state found that less than 10% of the amount in question could be recovered. That audit cost North Carolina $3.2 million.   

One of the 15 non-profits affected by the de-funding, Southwest Behavioral Associates has already asked HSD for assistance in meeting its payroll, and behavioral health advocates fear that, given the narrow operating margins common to the field, other organizations will fail or have their clients and operations taken over by out-of-state organizations, long before the Attorney General completes its review.

Meanwhile, amid calls from leading New Mexico newspapers, by Behavioral Healthcare, and most recently by New Mexico State Auditor Hector Balderas, HSD has refused to make the PCG audit - and the specifics of allegations against the providers - public. HSD's Kennicott stated that the audit cannot be shared at this time because it is part of an ongoing investigation. However, Balderas' office asked a state district judge to subpoena the audit's findings and, on Thursday, was granted the right to review the audit on Monday morning. 

Eight of the affected provider organizations filed suit to halt the state's de-funding action in early July and the case was heard by a New Mexico judge this past week.  A decision is expected any day. 

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