The Behavioral Health Audit Scandal 101

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In June, 2013, Governor Susana Martinez’s administration announced that a secret audit commissioned by her administration had uncovered “credible allegations of fraud” at 15 non-profit behavioral health providers in the state.   The administration abruptly cut off Medicaid funding to those providers and replaced them with five Arizona-based firms which had been hand-selected months earlier without public knowledge.

The original audit remains secret while the attorney general reviews the allegations of fraud. However, court documents and a heavily redacted copy provided over the summer by the attorney general’s office now tell us that the private auditors commissioned by the administration found no evidence of fraud.  But the administration altered those findings, removing the exculpatory finding, and announced that the audit had in fact found evidence of fraud, requiring them to cancel contracts under their interpretation of federal laws.

Here is a brief summary of key developments in the ongoing scandal.  For more, visit New Mexico In Depth.

  • Prior to the audit beginning: A PCG staffer travels with Martinez administration officials to Arizona to meet with Arizona providers who were already selected to take over New Mexico providers.  NM Taxpayers paid for that trip.  (testimony of PCG staffer to Legislative committee, September 13, 2013 – audio here)
  • May 29, 2013:  Human Services Department staff are engaged in contract negotiations with Arizona firms to take over NM behavioral health providers, a full month before the PCG audit is finalized.
  • June 21, 2013:  Human Services Department representatives present their audit to representatives from the US Attorney’s Office, New Mexico Attorney General and other state agencies.  They claim the audit has found credible allegations of fraud and they are required by federal law to cut off payments to providers.
  • June 24, 2013:  Human Services Department notifies 15 New Mexico providers that Medicaid payments to them for behavioral health services have been frozen because an internal audit found credible allegations of fraud against each.
  • HSD publicly announces the payment freeze.
  • June 25, 2013:  HSD contracts with five hand-selected Arizona providers to replace displaced New Mexico providers.   State purchasing code does not require the use of a bidding (RFP) process for certain urgent health care contracts. 
  • July 25, 2013:  State Auditor Hector Balderas wins a three-way fight with the Governor’s Office and Attorney General to obtain a copy of the audit.  An agreement overseen by a district court judge requires HSD to provide the auditor with a full copy of the audit for his review under his duties as the elected state auditor.