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Former provider sues over New Mexico mental health shakeup

LAS CRUCES, N.M. — A former behavioral health provider in southern New Mexico is suing a company that once managed state Medicaid dollars.

The Las Cruces Sun-News reports ( that La Frontera’s lawsuit alleges United Healthcare engineered a cover-up of its own failings by accusing 15 nonprofit providers of fraud in 2013.

The lawsuit, filed in state district court last month, accuses United Healthcare and its subsidiary OptumHealth New Mexico of fraud and misrepresentation that led to La Frontera losing millions of dollars.

Arizona-based La Frontera had been brought in to replace several of the nonprofits that were accused of overbilling and possible fraud. Its lawsuit focuses on the first six months that it operated in southern New Mexico.

Optum spokeswoman Lauren Mihajlov said the company couldn’t comment on the pending litigation.

New Mexico’s behavioral health system was upended in 2013 when Republican Gov. Susana Martinez’s administration froze payments to the nonprofits after an audit raised questions about fraud and abuse. The audit had alleged $36 million in Medicaid funding was mishandled by the providers.

The attorney general’s office launched an investigation, but the state Human Services Department eventually replaced the nonprofits with companies from Arizona. The providers protested, saying their due-process rights were violated because they were denied hearings.

Many of the nonprofits have since filed lawsuits against the department.

The attorney general’s investigation turned up some regulatory violations but no patterns of fraud. Investigations are still pending for two of the nonprofits.

United Healthcare, via OptumHealth, was the state’s overseer of hundreds of millions in Medicaid funds, meant to reimburse providers for mental-health and substance-abuse care provided to clients. The company had a four-year contract that ended up being extended by six months.

La Frontera accused United Healthcare of having an exit strategy to meet its contractual obligations to the state and its “company revenue goals.”

The lawsuit accuses United Healthcare of having a defective claims-processing and data system and of failing to live up to the terms of its contract with the state, which included implementing technology to rapidly detect fraud.

According to the lawsuit, United Healthcare blamed its subcontracted providers for not complying with the company’s claims processing system. The company in 2012 suggested to the state that new providers be recruited to solve the problems and prevent a disruption of services.

La Frontera also claims the company refused to pay for care it provided for its first six months in New Mexico.

The lawsuit contends that La Frontera was contacted in early 2013 by United Healthcare and state officials about potentially replacing one of the nonprofit providers. Officials had told La Frontera that the state’s behavioral health and substance abuse delivery programs were nearing collapse.

It was mid-2013 when state officials announced the findings of the audit that raised allegations of overbilling and fraud on the part of the 15 nonprofit providers.


Information from: Las Cruces Sun-News,