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State liability feared in health funds cutoff

ALBUQUERQUE, N.M. — Behavioral health firms could sue if cleared, legislators say

SANTA FE – Some lawmakers are worried that taxpayers would be on the hook if the state were to be sued by behavioral health providers cleared of wrongdoing after they’d been driven out of business.

There were repeated questions at a legislative hearing Tuesday about what recourse the nonprofits would have if they’re exonerated by an attorney general’s investigation months after their doors have closed.

“To what extent is the state held in a liability position? … Is the state going to get sued or not?” asked Sen. Sander Rue, R-Albuquerque, at a meeting in Las Cruces of the interim Behavioral Health Subcommittee.


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Medicaid payments to 15 behavioral health nonprofits were suspended by the state Human Services Department in late June after an audit that HSD said showed $36 million in overbilling, widespread mismanagement and possible fraud.

Twelve of those providers are being replaced by Arizona companies brought in by HSD, while two others are under the temporary management of Arizona firms.

Various legislative committees have grilled HSD officials since then, complaining that the audit hasn’t been publicly released and alleging that providers haven’t had due process and that services to the mentally ill and addicted have been disrupted during the transition to new companies.

The HSD says that once it determined there were “credible allegations of fraud” against the agencies and referred the audit findings to Attorney General Gary King’s office for investigation, it was required by federal regulations to suspend payments.

Legislative critics say HSD also had the option of restoring the flow of Medicaid behavioral health money to the providers while the investigation was underway, but did so only in the case of a small agency in Raton.

Two others of the 15 had Medicaid funding for other services – not behavioral health – restored.

Larry Heyeck, HSD’s deputy general counsel, told the committee that the audit done by Boston-based Public Consulting Group showed a complicated web of relationships among a group of southern New Mexico providers that he called the “Rio Grande 7,” which he said raised questions about conflict of interest and where Medicaid money was going.

In a reference to Roque Garcia, the former CEO of Southwest Counseling Service in Las Cruces – which has been taken over by Arizona-based La Frontera – Heyeck said there was “a CEO putting money in his pocket for a plane and traveling to vacation spots.”

Garcia told the committee Heyeck was referring to information that was publicly disclosed – in federally required reports from nonprofits – and he denied any wrongdoing.

“I can only wait for the investigation at this point, that will prove … that nothing was ever done wrong,” Garcia said. Meanwhile, he added, “it’s a public relations battle.”