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Treatment dollars mishandled, audit finds

Copyright © 2013 Albuquerque Journal

The New Mexico Human Services Department on Monday halted government funding to 15 providers who treat the mentally ill and substance abusers after an audit of their operations turned up widespread mismanagement and possible fraud, Secretary Sidonie Squier said.

The audit identified more than $36 million in overpayments to the nonprofit operations from 2009 to 2012 – nearly 15 percent of all payments made to those providers – and turned up questionable business practices.

Key findings included instances of highly unusual payments to family members, “large golden parachutes to nonprofit corporate CEOs” and irregular audit practices.


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“HSD recognizes that the behavioral health system is in crisis, and has been for years, as revealed by this audit,” the state agency said in a summary of audit results.

Squier said the information was given last week to Attorney General Gary King’s office to investigate possible fraud.

The department also is lining up providers from Arizona – two are already under contract – that will help the nonprofits with clinical practices and billing and, if necessary, take over their management, the secretary said.

“It’s quite serious and we’re taking it very seriously,” Squier said. “This is unacceptable error rates and unacceptable practices.”

The department refused to identify the providers by name, saying they did so on the advice of the attorney general’s Medicaid fraud control unit.

The New Mexico Foundation for Open Government said the names should be made available.

“The names of the providers clearly fall under the definition of public record, and that would apply whether they are in the possession of Human Services or the attorney general,” said Janice Honey-cutt, FOG’s acting executive director.

The 15 nonprofits – which have a total of 40 locations in New Mexico – are the biggest providers of services to a group of 30,000 adults and children considered the most vulnerable and toughest to treat population. The 15 providers account for 85 percent of spending on that population.


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HSD officials said providers are required to have some funding in reserve and should be able to continue to provide services while the next steps are being figured out.

An Albuquerque lawyer representing at least one provider – which he declined to identify – said it’s his impression that “many of the providers do not wish to comment at this time.”

“One of the key issues is … how is this going to affect their individual organization,” said David Johnson. “It’s my impression they still need to obtain additional clarity as to what the implications of this are – beyond, obviously, the payment withholding.”

Some providers may decide to pursue a “good cause exception” that HSD has outlined to them. Providers who contend access to care would be jeopardized by the payment freeze could ask HSD to exempt them from the pay hold; HSD would consult with the attorney general before making that decision.

According to HSD, the audit was prompted by concerns raised in 2012 after OptumHealth, the company that manages the state’s behavioral health programs, installed a new software system designed to catch errors and abuse.

HSD contracted with Public Consulting Group Inc., a Boston-based management consulting firm, to do the audits.

Each of the 15 providers failed to meet minimal compliance standards, according to HSD.

The providers get about 80 percent of their funding from Medicaid and the rest from other federal and state funds, according to HSD spokesman Matt Kennicott.

The overpayment to the providers uncovered by the audit exceeds the expectation in a 2003 congressional General Accounting Office report. While the audit found that nearly 15 percent of all payments made to those providers were questionable, the GAO report found that fraud, waste and abuse in the Medicaid program is expected to range from 3 percent to 9 percent of all payments.

An HSD summary of the audit findings said that “at the very least, widespread mismanagement has occurred that negatively affected the efficient and effective delivery of services, while some the audits found potential cases of fraud, waste and abuse.”

In a few cases, there was potential fraudulent activity by behavioral health executives, the agency said.

Other findings include: A CEO and family members were paid as much as $1.5 million as annual compensation for services and related transactions; one provider purchased services and rented space from a firm partially owned by the provider’s CEO and COO; and there was an “extremely excessive” deferred compensation package for one CEO in the event of termination. That package would have provided $60,000 a year for seven years, and as of June 30, 2014, for 10 years.

A review of clinical case files as part of the audit also demonstrated the “real life” effects of the alleged mismanagement, HSD said. It cited a consumer who sought help for feeling suicidal, had six sessions with a provider during which no safety assessments were done, and then committed suicide.

New Mexico has some of the nation’s highest rates of suicide, drug overdose deaths and substance abuse deaths.

Senate Finance Chairman John Arthur Smith, D-Deming, said Monday the audit results – which span the administrations of two governors – raise questions about OptumHealth’s oversight.

“It just seems to me that over a five- or six-year span something should have been flagged,” he said.