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.”