Gov. Susana Martinez’s administration shook up the state’s mental health system last June when it said an audit had revealed 15 nonprofit groups that provided treatment to the poor had overbilled Medicaid by as much as $36 million. The groups were stripped of their contracts, and a handful of companies from Arizona were brought in to replace them.
But months before the audit was even complete, the Martinez administration was already paying at least one of the Arizona companies for salaries, travel and legal fees, state records show. At least one payment to the company, Agave Health Inc., was made before the audit had even begun, according to the records.
The state of New Mexico paid Agave $172,447 between January 2013 and June 30, 2013, and at least half of that total was disbursed before the audit was completed, according to the records. The audit, by Boston-based Public Consulting Group, began Feb. 25, 2013. The firm notified the state Human Services Department on June 20, 2013, that the audit’s findings supported suspicions of fraud by the New Mexico providers.
The state then proceeded to pay Agave over the next several months for salaries and other expenses at vastly higher rates than the ousted New Mexico providers had received, according to the records, which were obtained by The New Mexican under the state Inspection of Public Records Act.
Patsy Romero, chief operating officer of Santa Fe-based Easter Seals El Mirador, one of the New Mexico providers accused of billing fraud, said the newly revealed records show there was “no integrity in what the state did.”
“They already had a goal and objective in mind,” she said, “and it certainly wasn’t to protect services for New Mexicans. It wasn’t to protect the most vulnerable in New Mexico. It wasn’t to protect the businesses in New Mexico, the employees of New Mexico. There was no intention to protect anybody.”
Of the 15 ousted firms, Romero’s group is one of two that has since been cleared of fraud by the state Attorney General’s Office, which is continuing to investigate allegations raised in the audit. None of the groups has been criminally charged.
Matt Kennicott, spokesman for the Human Services Department, which ordered the audit, defended the early payments.
“Bottom line is that the transitional agencies were prepping in case a transition did need to occur,” Kennicott said. “Our responsibility is to ensure access to services for those most in need, and the transition agencies had to prepare. If a transition did not need to happen, then their services would not have been needed.”
But Romero says the records deepen her belief the shakeup was never needed, and that it has only served to disrupt services to the mentally ill and hurt New Mexico businesses at a high cost to the state.
“What that tells me is that the audit was already compromised, because you already have an expected outcome from your contractor,” Romero said. “They had an expectation that, No. 1, they’re absolutely going to find fraud, and No. 2, that they’re going to document an outcome so that the state can bring in outside providers to take over these operations.”
The audit has come under increasing scrutiny since a slow-moving review of its findings by the Attorney General’s Office cleared Easter Seals El Mirador and one other terminated provider of fraud. Instead of the $850,870 in overbilling that Public Consulting Group’s audit of Easter Seals El Mirador identified, the attorney general’s review found only about $34,000 in potentially improper billing over a three-year span that included $30 million in total billing.
Suspicions of fraud by the New Mexico providers were first identified in November 2012 by Optum Health New Mexico, the private contractor that oversees the state’s managed-care program for behavioral health, according to a timeline provided by the Human Services Department. The department began discussions with Public Consulting Group about conducting an audit of the providers’ billing in January 2013, according to the timeline.
Three days after the audit began in February 2013, representatives of the Human Services Department, Optum and Public Consulting Group flew to Arizona and met with representatives of two of the companies that later were brought in to replace the New Mexico providers. The companies were La Frontera Center Inc. and Southwest Behavioral Health Services, the parent company of Agave. On March 1, 2013, the Human Services Department sought and was granted emergency funds from the governor’s budget office to initiate a contractual relationship with La Frontera and Agave, according to the department’s timeline of events.
From April through June 2013, with the audit still underway, the same contingent from New Mexico visited the three other Arizona companies that would ultimately be hired to replace the New Mexico groups. The Human Services Department also sought and was granted a second emergency funding request.
The audit by Public Consulting Group was presented to the Human Services Department on June 20, 2013. Four days later, the department informed the 15 New Mexico providers that the state was terminating their contracts.
The replacement providers from Arizona began setting up shop in New Mexico immediately with help from the state, which guaranteed reimbursement for the companies’ transition costs.
A review of state financial records showed that when the five Arizona firms took the place of the New Mexico providers, at least one of them, Agave, billed the state for salary reimbursements that far exceeded the rates paid by the ousted New Mexico companies and even some of the other Arizona firms. Agave, for example, billed the state $75 an hour for a family support worker. Families and Youth Inc., one of the ousted New Mexico providers, paid workers in the same position $14.58 an hour. Open Skies Healthcare Inc., another of the Arizona firms, billed the state only $15.16 for the position, records show.
Interviews with some Agave employees, who asked not to be identified to protect their jobs, said they were paid only a fraction of what the company billed the state. One family support worker for Agave, for example, said the position paid $15.15 an hour, nearly five times less than the rate the company billed the state.
Agave officials declined to answer questions about billing during the transition, deferring questions to the Human Services Department.
All five Arizona firms billed the state between $200 an hour and $300 an hour for the salaries of their management and executive teams. A marketing and communications director from one firm, for example, billed at a rate of $250 an hour, even for time spent waiting in an airport for flights between Arizona and New Mexico. That works out to an annual salary of $520,000.
The eye-popping figures billed by the Arizona providers occurred during a transition period between June of last year and Dec. 31, 2013, when the state subsidized $24 million in costs associated with their takeover of the behavioral health caseload. During that time, the new providers billed the state for everything from employee salaries to phone bills, hotel stays, rental of ballrooms where they interviewed prospective employees, meals, legal expenses, office space rental, car rentals and airfare.
The state stopped subsidizing the Arizona companies for transition costs at the end of 2013. That meant that, effective Jan. 1, the companies were expected to rely on Medicaid billing for revenue, just like the New Mexico companies they had replaced.
Soon after the subsidies ended, some of the Arizona companies began laying off employees and cutting their salaries.
In a companywide email in March, Agave CEO Heath Kilgore, who had billed the state $28,200 for 94 hours of work during a two-week period a few months earlier — a rate of $300 an hour, warned employees of pending belt-tightening, including a 5 percent pay cut for all employees.
“After a critical review of increased expenses and insufficient productivity since Jan. 1, 2014, we have to make some significant changes in order to be financially stable as an agency,” Kilgore wrote. The Jan. 1 date was the very day the state subsidies expired.
Romero, of Easter Seals El Mirador, said the state’s willingness to subsidize the transition opened the door for wide-open billing by the replacement providers. With no such subsidy to rely on, the ousted providers were reliant on the Medicaid claims they submitted to receive fees for the services they provided.
For instance, she said, her agency never could have billed the state $6,474.98 for one month of Verizon cellphone bills, as one of the Arizona providers did.
“From that fee for service, I have to pay the salaries, the phone bill, everything,” Romero said. “I can’t send the state an invoice and ask them to pay me for these things. You have to provide a service. That’s the whole premise of a fee-for-service health care system.”
Kennicott said the Human Services Department thoroughly reviewed all of the expenses submitted by the Arizona providers during the transition, and all of the reimbursements were appropriate under the terms of their contracts.
“The transition agencies maintained services, employees, locations and continuity of care, all the while upgrading billing infrastructure and processes to ensure compliance with Medicaid rules and laws,” he said.
Enrique Knell, a spokesman for Gov. Martinez, said the steps the administration has taken have been in the interest of providing the best care and taking seriously the suspicions of fraud that were brought to its attention.
“Our highest priority is ensuring that the state is always in a position to provide services to those in need,” he said.
Contact Patrick Malone at 986-3017 or firstname.lastname@example.org. Follow him on Twitter @pmalonenm.