The chaotic transition a state agency forced last year from 15 New Mexico-based health organizations to five Arizona companies had many problems, an annual audit has found.
Last year, a contractor hired by the N.M. Human Services Department (HSD) alleged Medicaid overbilling totaling $36 million by the 15 health organizations in an audit. As the state froze funding to those 15 organizations, referred the findings to law enforcement, and shuffled contracts to the Arizona providers, many patients experienced service disruptions.
Now HSD’s annual audit is out, and among the issues it examined was last year’s contract audit of the 15 providers that, at the time, were providing services like drug treatment and suicide counseling to an estimated 30,000 New Mexicans. At multiple stages in the transition between behavioral health providers last year, the independent auditing firm CliftonLarsonAllen found problems with HSD’s actions. Findings included:
• A “lack of oversight” by HSD allowed the potential $36 million in overbilling that last year’s audit uncovered.
• HSD inappropriately approved nearly $7,000 in expenses by the auditor who found the potential $36 million in overbilling, Public Consulting Group (PCG), for duplicate per-diem reimbursements and costs including alcohol purchases.
• HSD circumvented its own policies by not having the agency’s program integrity unit perform initial investigations of the allegations against the 15 audited health providers.
• The agency approved more than $620,000 in expenses not allowed by the contracts with the five providers brought in from Arizona. That included $412,747 paid out more than 15 days after the fiscal year ended on June 30 and $187,896 in payments based on estimates rather than reimbursement of actual costs.
The office of State Auditor Hector Balderas oversaw the annual audit. Balderas said in a news release that HSD “created additional fraud risks by violating state contracts and approving advance payments to private contractors for services not rendered.”
“The department should hold itself to the same high standard of accountability that it demands from organizations that receive federal funds,” Balderas said.
State agency disputes findings
In written responses included in the annual audit, HSD disputed many of the audit’s findings. The auditing firm stood by its report.
For example, state law and regulations give HSD five years to identify and recover Medicaid overpayments, and the agency stated that it is providing oversight by acting to recover the money within that timeframe.
The agency also claimed it did involve its public integrity unit in the investigation of the 15 agencies. The auditing firm responded that HSD provided no “supporting information” to back up that claim. In a prepared statement, HSD spokesman Matt Kennicott said the public integrity unit, which has only a few employees, “has never performed, nor is it capable of performing, a program integrity audit involving 15 large providers and hundreds of millions of dollars in claims, as was performed by PCG.”
HSD said in its written response to the audit that there was no repayment to PCG for alcohol, and insisted that it provided documentation to prove that; however, the auditing firm, once again, said HSD had not provided such documentation. Kennicott said HSD previously identified the duplicate per diem reimbursements, which would be taken out of the agency’s final payment to PCG.
The agency also claimed in its written response to the audit that the $620,000 in payments to the Arizona providers were appropriate given “the emergency” created by HSD’s decision to freeze payments to the 15 providers. Kennicott added that waivers of late billing at the end of fiscal years – which accounts for most of the $620,000 auditors flagged as problematic – “is routinely done by state agencies.”
Unrelated to the behavioral health transition, the audit also found more than $60 million in federal funds HSD failed to collect over several years – going back to the administration of former Gov. Bill Richardson – that the state can no longer collect. The Medicaid fund is currently short $72 million, according to the audit.
Kenicott said that $60 million is an issue from the Richardson years “that this administration is cleaning up.”
He also accused Balderas, a Democratic candidate for attorney general, of “using his office to make politically motivated statements.”
Editor's Note: This story originally named the auditing firm as CliftonLawsonAllen. The correct name of the firm is CliftonLarsonAllen.