There’s no getting around it. Four years after Gov. Susana Martinez’s administration charged 15 behavioral health organizations with potentially defrauding the state’s Medicaid program, its case has experienced a slow-motion unraveling.
No Medicaid fraud was ever found. And those eye-popping estimates that added up to $36 million the organizations had overbilled Medicaid?
In the summer of 2017, the Human Services Department (HSD) is seeking drastically lower reimbursements for overbilling the public health insurance program for low-income residents, a review of public records and state court documents has found.
Now exonerated by the state Attorney General’s Office, many organizations are challenging even those much-lower estimates in administrative hearings or in state court.
Consider Teambuilders Counseling Services, one of the accused behavioral health providers.
Last fall it received a new estimate from the New Mexico Human Services Department. Previous numbers had varied from as high as $9.6 million to as low as $2 million. But the new figure deviated sharply from earlier calculations when Chester Boyett, an administrative law judge in the state agency’s Fair Hearings Bureau, ruled Teambuilders owed only $896.35.
Boyett argued his agency had built its $2 million estimate of Medicaid overbilling on faulty analysis, according to his 12-page decision.
Nancy Smith-Leslie, the department’s director of the Medical Assistance Division, ignored Boyett’s recommendation. In a Jan. 6 letter she said the agency’s analysis was sound, even though she seemed to confirm Boyett’s critique in a Nov. 2 memo in which she had noted the inaccuracy of the extrapolated amount. In that memo Teambuilders and its attorney had not “sufficiently disputed” the method of extrapolation, however, she wrote.
In her Jan. 6 letter, Smith-Leslie sought to clear up matters. She amended her previous statement, saying the extrapolation referred to in her Nov. 2 memo indeed was correct.
Teambuilders and its attorney, Knicole Emanuel, appealed HSD’s ruling over whether Teambuilders overbilled Medicaid and by how much to state court, where three other former behavioral health organizations are fighting HSD’s extrapolated overpayments.
Boyett’s finding that Teambuilders owed hundreds rather than millions of dollars — even if it was ignored — represents a compelling data point given where things stand with other providers.
And last September HSD closed the books on another organization — Las Cruces-based Families and Youth Inc. — without demanding any reimbursements for overbilling and releasing $1.4 million in Medicaid dollars the state had suspended. The action represented a reversal after a state-ordered 2013 audit that found $856,745 in potential Medicaid overbilling by FYI.
In fact, a review of state and court documents by New Mexico In Depth reveals a pattern regarding the state agency’s overbilling estimates: In many cases, they are moving targets, usually on a downward trajectory.
Like Southwest’s, some have dropped spectacularly. Setting aside Boyett’s figure of $896, even the $2 million HSD claims Teambuilders owes is far smaller than a high of $12 million.
Hogares Inc., another organization accused of fraud, watched last year as the state revised its overbilling estimates five times over six months, starting at $9.5 million in January and ending with $3.1 million in June, according to state court documents.
Meanwhile, Easter Seals El Mirador, initially accused of $850,000 in potential Medicaid overbilling, now stands accused of $127,000.
Emanuel and Bryan Davis, another attorney representing many of the formerly accused organizations, said the constantly changing estimates are due to HSD.
The state agency is examining a sampling of each organization’s Medicaid claims and asking the organizations for documentation to prove the government program was properly billed, they said.
“In most cases (the overbilling estimates) are dropping precipitously” as organizations submit the documents requested by HSD, Davis said.
To cite one example, HSD’s latest overbilling estimate for Counseling Associates, Inc. is $96,000, said Davis, who represents the organization. That compares to $3 million in potential overbilling a 2013 state-ordered audit found.
It is a perplexing situation, given that the Human Services Department found “‘credible allegations of fraud” against the 15 organizations using that 2013 audit, which was performed by Massachusetts-based Public Consulting Group Inc.
“They threw PCG’s audit in the trash,” Davis said of HSD, noting the cost. HSD agreed to pay PCG up to $3 million for the study in February 2013.
The current situation caused Davis to wonder “why PCG didn’t have these documents in the first place,” he said.
Emanuel offered a pointed answer.
“HSD did not allow PCG to gather all the documents,” she said.
A spokesperson for HSD did not respond multiple requests for comment for this story.
Repercussions of the Medicaid crackdown
The fight over Medicaid overbilling isn’t the only legacy left from the Medicaid crackdown, which happened the last week of June 2013.
The Martinez administration’s decision affected lives. Many lives if you listen to behavioral health advocates and officials in the 15 organizations.
Charging the organizations with fraud and then suspending Medicaid payments to many of them disrupted mental health and addiction services for tens of thousands of New Mexicans. It created chaos for employees. And four years on it has left a number of business failures in its wake, with many of the accused organizations unable to survive long-term without Medicaid dollars.
Teambuilders, which once operated 52 locations in 17 New Mexico counties, is no longer in business, according to Emanuel. Neither is Las Cruces-based Southwest Counseling Center. Or Hogares.
At the same time a gap in care has opened up after three of five Arizona companies the Martinez administration brought in to care for the vulnerable populations have departed the state, leaving New Mexico to pick up the pieces.
“It’s a mess. It’s disgusting,” said James Kerlin, executive director of The Counseling Center of Alamogordo, which no longer sees clients. Like Teambuilders, Hogares, Southwest Counseling and others, it was unable to stay in business without the flow of Medicaid dollars the state suspended. “I want the public to know where we’re at and what’s been done to us. I’m going to start making a lot of noise. This is ridiculous.”
Kerlin’s organization was the first of the 15 organizations exonerated by then Attorney General Gary King in early 2014. And it offered the earliest glimpse of the weaknesses in the Martinez administration’s case against the behavioral health providers.
First signs of weakness in the state’s case
HSD hired PCG to audit all 15 organizations and it found $655,000 in potential Medicaid overbilling by the Counseling Center.
PCG reached that conclusion after finding $1,873 in questionable Medicaid claims and then extrapolating from those claims that the center could have overbilled Medicaid by more than $600,000 based on the size of its Medicaid business over several years.
But during its fraud investigation the AG’s office flagged fewer Counseling Center claims than PCG and found a much lower cost of potential overbillings. It resolved some of the issues by reviewing records and interviewing staff.
In many cases, auditors give staff of audited organizations an opportunity to refute findings or address misunderstandings before finalizing their findings. For example, most state and local governmental agencies are audited annually in New Mexico. Staff within those agencies are afforded the chance to see and respond to audit findings within a certain amount of time before audits are made public.
Kerlin did not get that opportunity during the PCG audit.
PCG later confirmed to NMID that it is the firm’s standard procedure to give companies a chance to respond before issuing official audit findings. A PCG spokesperson would not tell NMID why that didn’t happen in New Mexico.
By the time HSD held a hearing for the Counseling Center, the state agency had lowered its Medicaid overbillings estimate to $379,135. And Kerlin finally was able to hear the accusations against his organization.
Counseling Center submitted evidence to rebut the state agency’s claims, but the hearing officer sided with HSD. The Counseling Center appealed to state court.
In late 2015, State District Court Judge Francis Mathew ruled in favor of Kerlin’s organization, calling HSD’s hearing decision “arbitrary, capricious or otherwise not in accordance with law.”
In addition, the judge found the administrative law judge had shifted the burden of proof from HSD to the Counseling Center and then set too high a standard for the organization. Citing portions of the administrative law judge’s ruling, Mathew noted the Counseling Center had “offered certain amount of credible evidence in opposition” to HSD’s findings but not as much as the hearing officer required: a “100 percent audit” of records, which the state district judge found “unreasonable.”
HSD appealed the judge’s decision to the state Court of Appeals.
Examples of rejected claims
The overly stringent standards for documentation — and even a basic lack of understanding by HSD staff of Medicaid billing requirements — can be found in cases involving other organizations that are contesting the department’s charges of overbilling, a review of court documents found.
In a motion appealing the administrative law judge’s ruling that it owed the state $127,240, Easter Seals disputed seven claims, including one HSD had rejected because there was no medication consent form in place, even though the patient and parent had signed a general informed consent form and the patient’s parent was present when the medication was prescribed.
According to the court document, “There was no dispute that the service was medically necessary and was provided to J.A. There is no question as to quality of care provided to the recipient of services.”
Another claim was rejected because there was no doctor’s signature on a psychosocial assessment, however the state could provide no legal requirement for the signature, according to Easter Seals’ appeal. “A signature might be best practice, or advisable, but it is not a requirement,” the filing argued.
Also in the appeal, Easter Seals noted that the Human Service Department’s coding witness not only could not cite rules disallowing two services to be delivered during the same time period, but also appeared to be using a coding manual from Medicare, the insurance for seniors, and not Medicaid. And furthermore, she did not even realize there was a manual for Medicaid.
HSD ignored evidence in 2013 that refuted overbilling claims
Even those organizations that have avoided administrative hearings and court battles have stories to tell about HSD and its actions.
It wasn’t an easy decision, its CEO said this week, and it shouldn’t be construed as agreement with the state’s conclusions.
“We agree to disagree” is how Steven Hansen put it.
Until Presbyterian began negotiating an agreement, in fact, it had not seen the findings of the PCG audit.
During the negotiations PMS officials found documents they thought could refute PCG’s audit findings, Hansen and other PMS officials told state lawmakers in October 2014.
Presbyterian tried to give the files to PCG and the Human Services Department as proof that they had properly billed Medicaid for payment. The consulting firm said it would review the documentation if directed to by HSD, but PCG later told Presbyterian Medical Services the state agency “did not want to accept those records.”
“We believe there is a strong argument that nothing was owed back to HSD,” Presbyterian’s general counsel told lawmakers in 2014.
At that point, Presbyterian had to make a choice: Settle with the state or fight and possibly run out of money.
Presbyterian settled, paying the $4 million.
The decision has worked out for the organization.
“We’re doing more business than we did before” the 2013 crackdown, Hansen said.
That’s because as the Arizona providers the Martinez administration brought in have left New Mexico, Presbyterian Medical Services has taken over mental health and addiction services.
Presbyterian has added Carlsbad, Alamogordo, Deming, Espańola, Grants, Artesia, Santa Fe and Rio Rancho to the places it provides behavioral health services, Hansen said, adding it’s “bits and pieces” of areas formerly serviced by three of the five Arizona companies.
“We feel like it’s going in a good direction for us,” Hansen said. “That’s hard for us to say because there were so many great organizations that are no longer in the state. But we’ve had to move on.”
By: Ed Roche, founder of Barraclough NY LLC, a litigation support firm that helps healthcare providers fight against statistical extrapolations
It was published in RACMonitor.
Healthcare providers sometimes can get caught up in a political storm. When this happens, audits can be used as a weapon to help preferred providers muscle into a market. This appears to have happened recently in New Mexico.
Let’s go back in time.
On Sept. 14, 2010, Susana Martinez was in Washington, D.C. She was looking for campaign contributions to run for the governorship of New Mexico. She visited the office of the government lobbying division of UnitedHealth Group and picked up a check for $25,000.
The next day, Martinez published an editorial claiming that Bill Richardson’s administration in New Mexico was tolerating much “waste, fraud and abuse” in its Medicaid program. Eventually, she was elected as the 31st governor of New Mexico and took office Jan. 1, 2011.
According to an email trail, by the fall of 2012, Martinez’s administration was busy exchanging emails with members of the boards of directors of several healthcare companies in Arizona. During this same period, the Arizonans made a number of contributions to a political action committee (PAC) set up to support Martinez. At the same time, officers from New Mexico’s Human Services Department (HSD) made a number of unannounced visits to Arizona.
The lobbying continued in earnest. Hosted in part by UnitedHealth money, the head of HSD visited Utah’s premier ski resort, and the bill was paid for by an organization financed in part by UnitedHealth. The governor’s chief of staff was treated to dinner at an expensive steakhouse in Las Vegas. There is suspicion of other contacts, but these have not been identified. All of these meetings were confidential.
The governor continued to publicly criticize health services in New Mexico. She focused on 15 mental health providers who had been in business for 40 years. They were serving 87 percent of the mental health population in New Mexico and had developed an extensive delivery system that reached all corners of the state.
Martinez honed in on one mental health provider because the CEO used a private aircraft. He was accused of using Medicaid funds to finance a lavish lifestyle. None of this was true. It turned out that the owner had operations all over the state and used the plane for commuting, but it made for good sound bites to feed the press.
The state decided to raise the pressure against the providers. Public Consulting Group (PCG), a Boston-based contractor, was called in to perform an audit of mental health services. In addition to taking samples and performing analyses of claims, PCG was asked to look for “credible allegations of fraud.”
In legal terms, the phrase “credible allegations of fraud” carries much weight. Under the Patient Protection and Affordable Care Act, it can be used to justify punitive actions against a provider. It is surprising that only “allegations” are necessary, not demonstrated proof. The reality is that in practical terms, a provider can be shut down based on allegations alone.
In a letter regarding its work, PCG stated that “there are no credible allegations of fraud.” Evidently, that was the wrong answer. PCG was kicked out of New Mexico and not allowed to complete its audit. HSD took over.
The PCG letter had been supplied to HSD in a Microsoft Word format. In a stunning act, HSD removed the statement concluding that there were “no credible allegations of fraud.” HSD continued to use the PCG letter, but only in this altered form.
HSD continued to insist publicly that there were credible allegations of fraud. Since PCG had been kicked out before completing the audit, a HSD staff attorney took the liberty of performing several statistical extrapolations that generated a repayment demand of more than $36 million. During testimony, the attorney admitted that the extent of his experience with statistics was an introductory course he had taken years earlier in college.
Two years later, statistical experts from Barraclough NY LLC who are elected fellows of the American Statistical Association examined HSD’s work and concluded that it was faulty and unreliable. They concluded there was zero credibility in the extrapolations.
But for the time being, the extrapolations and audits were powerful tools. On June 24, 2013, all of the aforementioned 15 nonprofits were called into a meeting with HSD. All were accused of massive fraud. They were informed that their Medicaid payments were to be impounded. The money needed to service 87 percent of New Mexico’s mental health population was being cut off.
The next day, UnitedHealth announced a $22 million investment in Santa Fe. We have not been able to track down the direct beneficiaries of these investments. However, we do know that the governor’s office immediately issued a press release on their behalf.
The 15 New Mexico providers were being driven out of business. This had been planned well in advance. Shortly thereafter, the government of New Mexico, through HSD, [approved] issued $18 million in no-bid contracts to five Arizona-based providers affiliated with UnitedHealth. These are the same companies that had been contributing to the governor’s PAC.
These five Arizona companies then took over all mental health services for New Mexico. Their first step was to begin cutting back services. To give one example: patients with two hours therapy per week were cut back to 10 fifteen-minute sessions per year.It was the beginning of a mental health crisis in New Mexico.
As of today, two of the Arizona providers have abandoned their work in New Mexico. A third is in the process of leaving. What is the result? Thousands of New Mexico mental health patients have been left with no services. Entire communities have been completely shut [cut] off. The most vulnerable communities have been hit the hardest.
Through litigation, the 15 original providers forced the New Mexico Attorney General to examine the situation. It took a long time. All of the providers now are out of business. The Attorney General reported a few weeks ago that there were never any credible allegations of fraud.
This should mean that the impounded money would be returned to the 15 providers. After all, the legal reason why it was impounded in the first place has been shown to be false. One would think that the situation could return to normal.
The original 15 should be able to continue their business, and hire back the more than 1,500 persons they had been forced to lay off. Once the impounded monies are returned to the providers, they will be able to pay their legal bills, which now add up to hundreds of thousands of dollars.
Unfortunately, that is not happening. HSD still is claiming that the $36 million extrapolation is due, and that actually, the providers owe the state money. The New Mexico government is not budging from its position. The litigation continues.
Meanwhile, New Mexico now is tied with Montana in having the highest suicide rate in the continental United States.