Cash-starved NM agencies file emergency court appeal | Behavioral Healthcare Executive Skip to content Skip to navigation

Cash-starved NM agencies file emergency court appeal

July 31, 2013
by Dennis Grantham, Editor-in-Chief
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Facing ouster, CEOs ask to see New Mexico’s fraud allegations before agencies are taken over

Eight of 15 New Mexico behavioral health agencies whose Medicaid payments have been held since June 24 based on “credible allegations of fraud” by state Human Services Department (HSD) Secretary Sidonie Squier have appealed a July 25 decision by federal Judge Christina Armijo to the Tenth Circuit Court. Last week, Armijo denied the agencies' request for a temporary restraining order that would have forced New Mexico to reinstate their funding and make available the details of an audit that is said to document millions in waste, fraud, and abuse.

Armijo’s decision stated that the agencies’ request for a temporary restraining order was denied because “plaintiffs have failed to fulfill their heavy burden to establish that they are entitled to the extraordinary remedy” that the TRO and a resumption of payments to them would provide. While Armijo noted that the agencies made a “substantial” case in support of two of the four points necessary to win such an order, she ultimately ruled against the agencies on all four points in the brief containing her decision.

However, in emergency appeal documents filed with the US Tenth Circuit Court on July 29, plaintiffs’ attorney Patric Hooper argued that “something is very rotten in the State of New Mexico’s Medicaid program.” In the appeal, Hooper stated that since the agencies’ initial July 3 filing in Armijo’s court, HSD’s payment stoppage—affecting $ 7 million in 2013 claims so far— has “made it virtually impossible for the organizations to continue to provide services.” It also has forced the closure of one agency and the impending closure of several more.

In the appeal, Hooper alleges that the agencies are being driven out of business. Their vulnerability to cash-flow problems “gave HSD the chance to commandeer their programs by installing five handpicked Arizona organizations to take over Plaintiffs’ businesses.” At the same time, the appeal argues that the agencies continue to suffer harm as referrals dry up, employees are laid off, and the details of alleged fraud remain hidden from view or from reply.  To date, he says that none of the agencies have been given “any meaningful notice or opportunity to discuss any of the specific allegations against them.”

According to an HSD statement, a behavioral health audit by Public Consulting Group (PCG, Boston) justified the June 24 funding cutoff, which involves not only Medicaid payments but all payments from state programs. In her ruling, Judge Armijo indicated that the PCG audit findings were developed based on analysis of 150 randomly selected claims submittals from each of the 15 agencies, as well as audits of selected clinical case files and agency information technology practices. These findings, said HSD, reveal “evidence of endemic and egregious mismanagement, waste of state and federal Medicaid dollars, and in some cases, potential fraud” in the amount of $36 million. 

In testimony to New Mexico lawmakers on July 25, HSD Secretary Squier said that the behavioral health audit targeted senior agency leaders and “billing claims and management processes of the 15 agencies.” HSD has recommended that “the administration” of the agencies being audited should, in the event that the agencies become insolvent, be replaced by “transition management agencies” from five Arizona-based behavioral health providers at a cost of approximately $17 million. The transition of the insolvent agencies would be facilitated by emergency funding provided by HSD following negotiations with agency management. Squier said that clinical and service employees at the 15 agencies were not targets of the fraud action and that these employees are expected to continue forward with the new management entity that receives control at the site.

“Never seen a situation like this”

In comments to Behavioral Healthcare, Hooper stated, “I’ve never seen a situation like this one, when the state Medicaid agency has out-of-state provider organizations lined up in advance, where they are assuming the facilities, employees, and the clients of long-time community providers. It amounts to a government takeover of these businesses,” he said. Unless the Tenth Circuit court reverses the decision, Hooper said that all 15 of the accused agencies face closure or takeover.

Among the 15 agencies affected by the HSD action, Hooper stated, “There’s no problem, no question about the issue of auditing providers, even with unannounced onsite visits.” But this process was different, he said. “The usual course is to audit providers one at a time, then share specifics of any findings in an ‘exit conference’ with the provider.” After that, he continued, “there’s a full-blown hearing.” In this case, providers have been given no specifics, no chance to respond to charges that damage their reputations and to financial pressures that he maintains, will drive many out of business in a matter of weeks, perhaps sooner.

In public statements, HSD has defended its approach, noting that among the regulations associated with the still-new Affordable Care Act is a rule that requires states to halt funding to provider organizations upon discovery of “credible allegations of fraud.”  As the New Mexico Attorney General Office (AGO) noted recently, the determination of what constitutes a credible allegation belongs entirely to the chief Medicaid officer of the state, in this case, Department of Health Secretary Sidonie Squier.

In defiance of a court order, the state AGO also refused to release a complete copy of the PCG audit findings. Instead, a redacted description of the $3 million audit methodology and its key findings were made available.




$3M to audit a sample of 150 claims??