Undue Process: New Mexico Settles Lawsuits with Behavioral Healthcare Providers

State Legislature has passed a new law to protect due process.

You all likely have read the reports by RACmonitor regarding the debacle in New Mexico, wherein 15 behavioral healthcare companies, which comprised providers of 87.5 percent of such services in the state, had their Medicaid reimbursements suspended upon “credible allegations of fraud,” defined in 42 C.F.R. §455.23. Or you may have heard about the catastrophe from other news articles, or even seen the documentary, “The Shake-Up.”

In June 2013, Gov. Susana Martinez’s administration decided to freeze Medicaid funding to these 15 organizations after an audit allegedly found problems including overbilling and potential fraud, at which time the Attorney General was asked to investigate. The media did a great job covering the fallout. Public Consulting Group (PCG) conducted the audit. I am not a fan of auditors in general, and especially PCG, but in this case, PCG was not allowed to finish its audit, which uncovered no credible allegations of fraud. New Mexico – for whatever reason – ordered PCG to remove the statement that no credible allegations of fraud existed, and forwarded the resultant report to the Attorney General, stating that credible allegations of fraud existed.

I was actually the attorney hired to defend three of the 15 companies accused of fraud. I have not spoken out before, and I have to abide by attorney ethics issues. However, now that there has been a documentary, the amount of press in the media, and last week’s press release, I believe that I have the green light to discuss.

I became involved in the New Mexico behavioral healthcare suspension and termination administrative appeals back in July 2013. When the suspensions went into effect, the providers, the recipients, and the citizens of New Mexico were floored, as was the New Mexico Legislature. The Legislature requested that I fly to New Mexico to testify before it, along with a representative of PCG and the CEOs of the behavioral healthcare companies involved. I testified about my past experience with PCG, which included hundreds of audit appeals of PCG findings that were successfully overturned. My testimony was the beginning of a six-year relationship with these healthcare providers.

I can report now that most of the cases have been settled. Last week we settled the case for TeamBuilders, which was by far the biggest behavioral healthcare company in New Mexico. The Freedles, who owns the company, ran a tight ship. It was an impressive company. TeamBuilders’ documents were spot-on. In fact, when we appealed the alleged overpayment of over $12 million, the administrative law judge (ALJ) hired by the New Mexico Human Services Department (HSD), the single state agency charged with managing Medicaid for New Mexico, and paid by HSD, found that TeamBuilders owed only $896.35.

However, in New Mexico, as in many states, the ALJ only renders a recommended decision. The state agency has the last word, and in this case, HSD decided that the ALJ was wrong and that TeamBuilders owed the entire extrapolated amount. Of course, we appealed. An appeal of an administrative decision is called judicial review and goes to the state court. For judicial review, you cannot present any more evidence, so you have to rely on the transcript from the administrative appeal. That is why the administrative appeal is so important.

Concurrently, we had a lawsuit pending in state court for damages based on the government’s actions, which we claimed were illegal. HSD had suspended all these Medicaid reimbursements without due process, and we contended that by doing so, HSD breached its Medicaid contract with the providers.

On Aug. 21, 2019, we settled our appeal and our damages case. TeamBuilders got the money that had been suspended. We forewent our lawsuit for damages, but we got some pretty good promises in return from the current New Mexico administration. My crystal ball shows that TeamBuilders will become an integral part of serving the behavioral healthcare needs of New Mexico’s Medicaid recipients going forward – just like they were prior to June 2013.

In my opinion, my three clients from New Mexico were exemplary companies and provided medically necessary services to those most in need in the state. The settlement agreements include no admission of guilt on the parts of the healthcare providers or the government. It is my stance (and, remember, I have reviewed all the documents at issue) that there was never a question of guilt on behalf of my client providers. They deserved a “thank you,” not a referral. The debacle is finally over, and I wish the best for all the behavioral healthcare providers in New Mexico. The damages the providers endured are irreparable.

As a last comment, the Legislature was successful in passing a new regulation to protect the due process of healthcare providers in the future, in order to ensure that such a calamity never happens again.

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