Fraud in New Mexico: Credible? Incredible? | Behavioral Healthcare Executive Skip to content Skip to navigation

Fraud in New Mexico: Credible? Incredible?

September 5, 2013
by Dennis Grantham, Editor-In-Chief
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Late in June, 15 major New Mexico behavioral health provider organizations were hit with a “temporary” suspension of Medicaid payments after New Mexico’s Human Services Department (HSD) announced that “credible allegations of fraud” were discovered during what it called “likely the most rigorous behavioral health audit in state history.”

HSD said that the audit, which was performed by the Public Consulting Group (PCG, Boston) at a cost of $3 million between February and June, was “prompted by a pattern of serious concerns that were identified during the first eight months of 2012, which point to the presence of endemic and egregious mismanagement throughout the state … and in some cases potential fraud.”

According to DHS spokesman Matt Kennicott, the alleged mismanagement of Medicaid behavioral health funds was identified after OptumHealth, which has held the state’s behavioral health managed-care contract since July 2009, made a series of improvements to its program-integrity software during 2011. The improvements were required as a condition of OptumHealth’s multi-year state contract to be the single entity that would manage Medicaid behavioral health programs statewide.

Kennicott explained that as those improvements went into place, they uncovered “potential red flags, starting with one provider in the southern part of the state.” Further work, he said, led to the finding of red flags at 15 other providers, which led DHS leaders to “take a look” with the detailed audit process. PCG was used, Kennicott said, because it was well qualified and was readily available to the state via an existing GSA (governmental services agreement) with the federal government.

On June 24, with audit results in hand, HSD took the unprecedented step of halting payments the 15 organizations, 11 of whom are members of the National Council for Behavioral Health, whose membership includes 24 agencies in New Mexico and about 2,000 nationwide. The audit is said to detail $36 million in overpayments to the 15 organizations who together serve some 30,000 of the state’s most seriously mentally ill individuals and, according to HSD, consume about 85% of the state’s $340 million in state Medicaid mental health spending annually.

Almost immediately, it became clear to these non-profit provider organizations that if the payment suspension persisted for long, they would run out of money and be forced to reduce hours, cut services, lay off staff and, perhaps within a month or two, be forced to close their doors. And, because the audit results had been handed over for review to the New Mexico Attorney General’s office, they could only speculate about the actual fraud allegations they faced, or read an 18-page summary provided by HSD. The uncertainty spread quickly to the state’s consumers who wondered whether the treatment relationships they had built with provider staff would endure beyond their next scheduled appointment. What would happen to their provider, to services, and to their own recovery?

Amid the chaos came word from North Carolina, where State Auditor Beth Wood examined a similar PCG audit conducted at a cost of $3.2 million more than a year before. Although the audit reported $38.5 million in Medicaid overpayments to providers in North Carolina, state officials said that less than 10 percent of that amount was recovered. In her final report, Wood stated that “recoupments identified by PCG have not proven to be reliable, so the actual benefit derived from the contract [for the audit] is unclear.”  

An extraordinary circumstance

The huge de-funding, Kennicott acknowledged, “is definitely an extraordinary circumstance.”

The HSD’s decision to proceed with it, as well the Department’s controversial exercise of the Affordable Care Act provision that made it possible, have captured the attention of behavioral health providers nationwide. Why? Because there’s every possibility that what is extraordinary in New Mexico today — involuntary closure, reorganization, and transition of 15 community-based behavioral health organizations to the control of state-appointed managers — could become more commonplace tomorrow. 

On July 14, with the providers’ case still pending in Armijo’s court, Kennicott released a statement from Brian Cook, Director of Media Relations for the Centers for Medicare and Medicaid (CMS) that defended the HSD’s 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." 

But, say many observers, there are other ways to “act in accordance” with Medicaid regulations that don’t necessitate secret audits, immediate payment suspensions, or state-funded management changes, even when there are allegations of potential fraud involved.

“There’s no problem, no question about the issue of auditing providers, even with unannounced on-site visits,” said Patric Hooper, a Los Angeles-based healthcare attorney who has filed two court actions on behalf of the affected providers. He points out that with regard to audits, “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.”




Light and sanity are needed inside NM government. A handful of mindful and concerned legislators is not enough. The FBI should be seriously called in to investigate the whole audit-gate.

HSD said is waiting for whistle blowers coming up. The first one appeared. It is a lawyer suing HSD because she was allegedly fired in retaliation of her criticism to the audit when it was at the early planning stages. [1]

We now learned at the Las Cruces behavioral health hearing that the replacement plan was put in place _before_ the audit results were produced. A smoking gun that is an extremely high indicator of wrongdoings. [2]

The claims portion of the audit was done with samples of 150 records per provider, and then "extrapolating" values. This alone is a joke and should render the whole audit invalid. [3]

The whole claim record set is available from the agencies billing systems and from the Optum Health billing system. This information fits in any modern laptop and can be analyzed by looking at the whole universe of data, the fact that they only take about a 2-3% sample is a bad technical joke to anybody that works with data.

The audit values contain rent paid over several years by agencies for their buildings use and is reported as a fraudulent item. Some execs and employees took bank credits to build the buildings they needed to operate, and they rent out at a fair market value (these facts were publicly disclosed long time ago).

In one of the few tv appearances about the audit, the governor touts 250k/year for TeamBuilders CEO as being to much, and the salary is part of the audit declared fraudulent amount. The solution brought by HSD cuts said agency in three parts and puts one new CEO in each at a $600K/year value (total $1,8M).

In another tv appearance HSD condemns the CEO of Southwest Counseling center for using his private airplane for business trips and being reimbursed $16k/year for it. If the millage was done by car it would cost about the same (it's a single engine prop airplane, not a turbo jet). And of course if he payed more expensive commercial airliners there will be no opportunity for propaganda. It nows costs to NM more than 10k to fly the new management every week.

The audit reports numerous double billing for same client at two different locations at the same time.
One of the most provided services is telehealth, where the psychiatrists use a video conf setup to see patients in other towns, the proper billing _must_ be for the same time at two different locations, one for the client service, and one of the telemed component.

On January 1st all behavioral health medicaid contracts get re-bid, since obamacare, they'll be a bundled part of regular insurances. The bottom line (for which there's no proof) as senator Ortiz y Pinto points, seems to be that the big players, Presbyterian, Aetna, BCBS, et call, do not wanted to contract with the former agencies because they advocate for the patient, not for saving medicaid dollars, so it will appear that the shut down is planned so these big players can contract BH services with agencies that minimize services and maximize profit. [4]

There's nothing wrong with industry maximizing profits, but there's something very wrong when the government is involved in facilitating business for some by destroying others.

None of the expenditures from HSD +~$20M has gone through any kind of due procurement process,
all actions are behind a subjective and secret declaration of emergency.

The darker fact is that the audit is not being released even when judges ruled that should be released to state auditor, he was only given an edited copy. [5]

All facts in the audit are known by the agencies because they provided the facts to the auditors, they only do not known which part is interpreted as "alleged fraud".

The NM State Auditor Balderas said publicly that the audit edited copy he received is not showing fraud. [6]

One could infer that it the audit is released now, it will be to obvious to soon that the subjective interpretation of HSD about "credible cause" will be too far of a stretch to be sold to the public opinion, and that all the emergency consequences will have to be interrupted, (shut down, take over, new contracts)

Therefore HSD will try to avoid the release of the audit until is to late to roll back 2014 contracts.

There's focus on the disruption of services due to transition. But the interruption vs non-interruption is being used as a smoke screen to avoid discussing with the public the real problem that is government corruption.

And so on, any fact, or saying from HSD about the audit, when scrutinized with a bit of basic analysis shows to be a ridicule lie. [this doc]

There's nothing, not a single fact, that suggest that HSD is doing anything right.

HSD might have sneakily acted withing the boundaries of the letter of the law when mandating audits and signing resolutions, but is surely slipping out of those constraints when the motivations are coming out clear, and when after being warned of the wrongdoings they keept in the same direction.

In my opinion, no sane functionary would take actions like this just because they can. They are either seriously unfit for the task they are assigned to, or corrupt.

Either way they are already a liability as it could cost NM taxpayers way more when the agencies are cleared and sue back. [7]

If HSD operators are to be judged with the indications presented here and with the same spirit HSD judged the audit and without due process as they did judge the agencies, all HSD executives would be serving sentences in prison already.