Judge: State wrong to withhold Medicaid funds from provider

Oct. 24--A Santa Fe judge on Friday called a decision by Gov. Susana Martinez's administration to withhold Medicaid funds from a behavioral health care agency "arbitrary, capricious or otherwise not in accordance with the law."

The decision by state First District Judge Francis Mathew marks a victory for Alamogordo-based The Counseling Center, which was forced to shut down after the Medicaid payments were frozen due to fraud allegations. The center's attorney, Knicole Emanuel, told The New Mexican the ruling also will set a precedent that mental health care agencies can use in their legal battles with the state.

The Counseling Center was among 15 providers whose Medicaid funding was cut off in June 2013 after the Martinez administration announced that an audit had found "credible allegations" the agencies had committed $36 million in Medicaid fraud over three years of submitting bills for treating low-income patients.

The state has recovered at least $4.2 million from two providers through settlement agreements, but potential legal liabilities for New Mexico are mounting, as the Human Services Department continues to face lawsuits related to the accusations. Ten providers have sued the department in federal court for due-process and contract violations relating to the June 2013 mental health care shake-up. The case is ongoing, and the state denies wrongdoing.

At issue in the case decided Friday was whether the state department erred during an internal administrative appeal of the payment freeze by The Counseling Center. The judge found that the department shifted the burden of proof to The Counseling Center by requiring the organization to submit an audit of all of its billings to an administrative law judge before funding could be restored. Judge Mathew also said an expert witness for the Human Services Department used conclusions that were "not supported by substantial evidence."

Matt Kennicott, a spokesman for the Human Services Department, did not reply to an email seeking comment late Friday.

The department's administrative law judge ruled that The Counseling Center owed the state roughly $380,000 for Medicaid overpayments.

But the center contends the state owes it between $300,000 and $400,000 in Medicaid reimbursements that were frozen due to the administration's fraud allegations, Emanuel said.

Mathew ordered the state to pay the agency up to $30,828 -- the second case in the last year in which a District Court judge overturned a decision made by a Human Services Department hearing officer. He also ordered the case to be reheard on what Emanuel described as issues of jurisdiction.

Emanuel, a partner at Gordon & Rees' office in Raleigh, N.C., who specializes in defending health care providers accused of Medicaid fraud, said The Counseling Center is still out of business due to the fraud allegations, despite being cleared by the state attorney general. The agency employed 50 New Mexicans, she said, and served more than 200 patients.

"The Counseling Center will never be The Counseling Center again," she said. "Even though we won, The Counseling Center lost because of HSD's actions."

Medicaid is the joint federal-state program that provides health care coverage for eligible low-income Americans.

The Martinez administration in 2013 engaged in an effort to root out fraud, in line with national efforts driven by the insurance industry to audit Medicaid payments to health care providers. UnitedHealthcare subsidiary OptumHealth, then the state's auditor of Medicaid transactions, initiated that effort in New Mexico under contract with the state.

OptumHealth's work led to the 2013 behavioral health care shake-up. Later, Public Consulting Group, a Boston firm, audited the 15 mental health care providers by using a small sample of billing statements and concluded that it had found evidence of $36 million in overpayments and potential fraud. The providers served 85 percent of New Mexico's Medicaid patients who sought treatment for mental health issues.

Justin Horwath can be reached at 986-3017 or [email protected].

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