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Judge denies resumption of funding

ALBUQUERQUE, N.M. — Funding cutoff stands in behavioral health care case

SANTA FE – Behavioral health providers whose Medicaid funding has been cut off by the state suffered a setback in federal court on Thursday when a judge denied their emergency request to order the flow of money resumed and “name-clearing” hearings held.

U.S. District Chief Judge Christina Armijo denied a temporary restraining order sought by eight of the 15 nonprofits whose funding was suspended, saying they hadn’t met the legal requirements for the extraordinary relief.

The providers still have a pending lawsuit in federal court challenging the funding loss.


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“A federal judge today confirmed that we acted properly after finding credible allegations of fraud, waste and abuse in the system, while protecting Medicaid funding for those in need,” said Human Services Department spokesman Matt Kennicott.

According to HSD, the 15 nonprofits serve more than 30,000 of the state’s “most vulnerable and difficult to treat consumers” who have mental illness – schizophrenia, for example – and substance abuse problems.

Members of a legislative committee lashed out at HSD during a hearing at the Capitol earlier Thursday. The department froze the funds to the behavioral health services providers after an audit that the department said showed overbilling, mismanagement and possible fraud. It turned the audit findings over to Attorney General Gary King to investigate.

In the wings are Arizona companies HSD is contracting with to take over at least some of the nonprofits.

“This is not just an allegation. This is an execution,” said Sen. Gerald Ortiz y Pino, D-Albuquerque, vice chairman of the Legislative Health and Human Services Committee.

He said New Mexico’s behavioral health system is being dismantled as providers go out of business with no recourse.

The committee was told that a related dispute regarding Auditor Hector Balderas’ access to the HSD audit, which was done by a Boston-based firm, has been settled by state officials.

The auditor, the attorney general and HSD have agreed HSD would turn over the audit to Balderas, but that he would not release it publicly – for example, if requested to do so under the Inspection of Public Records Act.


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Balderas had obtained a subpoena for the audit from a state district judge after HSD refused to give it to him, saying it would interfere with the attorney general’s investigation. The proposed settlement was filed Thursday with the judge.

The federal judge, in her ruling Thursday, said the providers didn’t establish that their legal arguments would prevail in their lawsuit, which is a requirement for a temporary restraining order.

Patric Hooper, a Los Angeles lawyer representing the eight nonprofits, said he was “disappointed and sorry for our clients, and their patients, who, I think, will continue to suffer as a result of this.”

Hooper said the providers will likely wait for a while “to see how all this unfolds” before deciding whether or how to amend their civil rights lawsuit.

“We hurried into court because we had to, and the court this time said you didn’t make a strong enough showing,” Hooper said.

The HSD, under the law, can allow Medicaid funding to resume to the nonprofits for “good cause,” but only one of the 15 nonprofits has managed to get its Medicaid money for behavioral health services flowing again. Two others have had their Medicaid funding for non-behavioral health services restored.

Several members of the legislative committee said the department should allow the funding to resume – while keeping a closer eye on the nonprofits – until the attorney general sorts out which, if any, of the 15 cases to pursue on fraud charges.

Lawmakers and some of those who testified before them questioned the credibility of the audit done by Boston-based Public Consulting Group Inc., and the reliability of the software program installed by behavioral health overseer OptumHealth that first raised red flags about the providers’ billing.

“I find it not to be credible. … I find it very hard to believe that 100 percent of the 15 organizations that were audited failed,” said Jim Ogle of the National Alliance on Mental Illness-New Mexico.

“These companies are running out of money and they are going under … and in the end it’s the consumers that are going to lose here,” Ogle told the committee.

He predicted that the transition to new managers from Arizona would cause a disruption in services because of licensing and credentialing issues.

Kennicott said, however, that the transition agencies “are up to date with licensing and credentials” for New Mexico. And he said the administration’s “top priority continues to be ensuring uninterrupted access to care for Medicaid patients.”

Kennicott also disputed assertions by at least two lawmakers who said they had been told HSD was in touch with the Arizona providers as early as last year, before the audit was done. Kennicott said HSD started vetting two agencies in late February “after the audit team was on the ground,” and based on the “suspicious activity presented to us by Optum.”

“We were concerned that there could potentially be some very large overpayment issues and we needed backup plans in place to ensure continuity of care,” he said.