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Arizona Companies Prepare To Manage New Mexico Behavioral Health Providers

Bryant Furlow

When the New Mexico Human Services Department(NMHSD) announced last month it would suspend Medicaid payments to 15 behavioral health providers, Joe Frechen was worried.

For nearly 20 years, Frechen has worked as psychiatrist in Southern New Mexico with some of the most vulnerable patients in the region.

“I know when something’s going wrong,” Frechen said. “I know what’s happening in the family, I know all the various trials and tribulations they’ve been through, I know about the progression of their medical problems, I feel a link with the people I treat.”

The suspension of payments to providers is a result of allegations of fraud by NMHSD.  In the wake of these allegations, New Mexico has hired five Arizona behavioral health firms to take over management of 15 providers, starting Friday. The move is expected to impact an estimated 30,000 behavioral health patients with possible lapses in care, and, some worry, a loss of services all together.

The 15 providers represent only 1 percent of the behavioral health providers currently in operation in New Mexico. However, they serve nearly 35 percent of the state's behavioral health population.

As of Friday it’s unclear whether three or four providers are preparing to immediately hand over patient files, grant access to computers, and turn over the management to five Arizona behavioral health providers.  Other providers are likely to make the transition in the near future.

The original allegations of fraud stemmed from an audit conducted by Public Consulting Group (PCG) and paid for by the New Mexico Human Services Department, released June 24:

The Program Policy & Integrity Bureau has been notified that there is a credible allegation of fraud for which an investigation is pending. Therefore, PPIB requests that ALL Medicaid payments be suspended this includes any claims that are pending or in queue to be processed for the following Providers and ALL associated Tax Identification Numbers.

PCG’s audit looked at 150 randomly sampled billing claims from each of the 15 providers. From those random claims, PCG estimated there may have been nearly $33.8 million in total overpayments to those providers.

PCG also found that the total estimated overcharges from sampled claims ranged from a low of $7,856 for one provider, to a high of $9.2 million at another.

Auditors also found the following:

The provider’s records indicate “NO” was marked for conducting a safety assessment with the consumer. After six different clinical sessions – each of which indicated that the provider had failed to follow up with the primary care provider either for treatment, or to conduct any assessments on the consumer – the consumer committed suicide by hanging himself at his grandmother’s home.

The auditors also recommended a change in the way HSD oversees billing and regulation.

With those allegations and the possibility of a criminal investigation, NMHSD — through an emergency, no-bid procurement — hired Arizona companies Agave Health Inc., Valle Del Sol, La Frontera Inc., Southwest Network Inc., and Turqouise Health and Wellness, Inc., to temporarily take over New Mexico behavioral health organizations for a combined price tag of $17.85 million.

But there are questions about the audit. Neither the state nor PCG have released their audit methodology, and providers say they’re unable to defend themselves because they don’t know which allegations apply to them, or how PCG arrived at its numbers.

NMHSD has also resisted turning over the full audit to reporters, or State Auditor Hector Balderas. The reason? Those records were turned over to the State’s Attorney General as part of a possible criminal investigation. Under state public records law, certain investigative records don’t have to be turned over to the public.

But Terry Schleder of the New Mexico Foundation for Open Government says that exemption doesn’t apply to the NMHSD audit, and has called for its release.

A financial audit isn’t a typical law enforcement record, like a police report. Just because the HSD handed their audit over to the AG, that doesn’t automatically convert it into a law enforcement record.

Then there’s the question of transparency. When NMHSD decided to suspend Medicaid payments to providers, they claimed that federal regulationsleft them no choice.

The state Medicaid agency must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud for which an investigation is pending under the medicaid program against an individual or entity.

But there could be other interpretations of the law if you read a little further.

Unless the agency has good cause to not suspend payments or to suspend payment only in part.

In other words, NMHSD had some discretion on whether or not to cut off providers. They could chose not to cut off providers, for instance, if there was a real threat that halting payments could disrupt services. However, the “no choice” official line doesn’t seem to match up to HSD’s own documents.

On June 28, a memo authored by Larry Heyeck, Deputy General Counsel to NMHSD, said the following:

There are several circumstances that, under the final rule, could constitute “good cause” for a State Medicaid agency to determine not to suspend payments or to discontinue an existing payment suspension, in whole or in part, to an individual or entity despite a pending criminal investigation.

There’s nothing illegal about this. Federal regulations give NMHSD the authority to suspend payment when it suspects fraud. But behavioral health providers, like psychiatrist Joe Frechen, say officials should have exercised discretion before cutting funding to support New Mexico’s most vulnerable populations.

“I know the people I have who are at risk,” Frechen said. “You have to know the person pretty intimately to know when they’ll be a suicide risk or not, and the other ones at risk. I just don’t see how people who are unfamiliar with the patient will be able to know this about these people.”

KUNM's Poverty and Public Health Reporter Deborah Martinez contributed to this report.