About 300 people jammed the legislative hearing at the University of New Mexico, with dozens more sign-carrying protesters outside in a hallway.
Funding was halted to 15 nonprofits by the Gov. Susana Martinez administration recently after the state Human Services Department said a special audit showed overpayments, mismanagement and possible fraud.
All but one remain frozen out of behavioral health money, and HSD officials told lawmakers they are prepared to move immediately to have new managers take over some of the agencies.
Eight of the 15 asked U.S. District Judge Christina Armijo during a three-hour hearing in Albuquerque to order their funding restored and require HSD to hold name-clearing” hearings.
Their lawyer told the court their reputations were being ruined without their having an opportunity to find out what they were accused of.
“Everybody reading the newspaper thinks that we have 15 renegade providers that have ripped off the Medicaid program,” said Patric Hooper, a Los Angeles lawyer for the providers.
He said $6 million has been withheld from the eight nonprofits, and he estimated it was more like $10 million for all 15 providers.
“This is a draconian measure. They’re forcing these people out of business,” Hooper told the court.
Armijo made no immediate decision on the request, saying there was no simple resolution and noting that mentally ill and addicted clients have an “ongoing therapeutic relationship” with providers.
The full audit by Boston-based Public Consulting Group has not been released to the nonprofits or the public; HSD has provided only a summary.
State Auditor Hector Balderas obtained a state District Court subpoena, which was served on HSD officials Wednesday, seeking to obtain a copy. His petition to the state court said HSD Secretary Sidonie Squier refused to give it to him and that interfered with his ability to examine HSD’s financial affairs for the 2013 budget year.
The Human Services Department defended its actions in the courtroom and at the later hearing of the Legislative Finance Committee, saying the audit results were so bad the agency was required to refer the findings to the attorney general and suspend payments immediately.
Freezing the funds was “mandated by law. … We didn’t really have any choice,” Squier told the LFC.
Attorney General Gary King, who attended the legislative hearing, agreed the agency had “very little discretion” under federal law once it concluded there were credible allegations of fraud.
The attorney general has 17 staff members working on the investigation, lawmakers were told.
TeamBuilders Inc., which serves children and families in 23 counties, had more than 200 employees, clients and others at the LFC meeting Wednesday, according to CEO Shannon Freedle.
“We are finishing our fourth week without funding and in very short order our reserves will be exhausted,” Freedle told legislators. His agency is among 11 whose requests to HSD for behavioral health funding restoration have been rejected; money was restored to one nonprofit, and requests from three others were pending.
HSD says even if the management of a nonprofit is ousted, clinicians and other workers shouldn’t be affected and the department will make the transition – either to new managers or perhaps even newly created nonprofits – as smooth as possible for people who get Medicaid services.