The June 2013 mental healthcare shakeup continues to reverberate nearly two years later, as New Mexico behavioral healthcare providers accused of Medicaid fraud file lawsuits against Republican Gov. Susana Martinez' administration. Meanwhile another one of the five Arizona providers the state paid a collective $17 million to take over services of those accused in-state providers departs New Mexico.

Last week, Tucson-based La Frontera

that it's no longer going to be providing services to mental health clients in southern New Mexico, making it the second of five Arizona nonprofits that's severing ties with New Mexico, putting the state's Medicaid-funded healthcare network that treats low-income patients with mental healthcare issues into even further disarray.

The company's CEO Dan Ranneri has said that reimbursements rates it negotiated with managed care organizations that oversee the state's Medicaid money had been too low for it to make money for treating Medicaid patients. The firm told news outlets it would help ensure a smooth transition for its some 3,800 clients as it pulls operations out of the state.

A six-month SFR

of the shakeup shows that one of those managed care companies, United Healthcare,

access to administration officials through campaign cash and junkets just as its subsidiary conducted its own audit of New Mexico firms with new fraud detection services it was pitching to sell to the state.

New Mexico brought in Arizona organizations to provide mental healthcare services to clients of a dozen New Mexico agencies accused by Martinez' Human Services Department of defrauding the Medicaid program of $36 million in a three-year period.

The attorney general's office said last year that Medicaid fraud probes triggered by HSD's allegations would take seven years to complete. Accused New Mexico agencies, some of which have closed because the state froze Medicaid payments to them, have been forced to watch on the sidelines as Arizona firms provide Medicaid-funded treatments that those in-state agencies have provided for years.

A First Judicial District

already ruled in favor of Easter Seals El Mirador in a January decision in which he said HSD violated the Santa Fe-based nonprofit's due process rights. Meanwhile, in March, four more accused agencies filed similar lawsuits against the administration, including Santa Fe-based TeamBuilders, Counseling Services Inc, Valencia Counseling Inc., Hogares Inc and Counseling Associates Inc.  

The New Mexico agencies allege the state violated the their due process rights due in making the accusations that they defrauded the Medicaid program. Providers cite the stated length of the Medicaid fraud probes, the state's initial refusal to show them the audit by a Boston-based company that triggered the administration's allegations as well as the Human Services Department's refusal to give the providers a chance to respond to the allegations through internal HSD procedures.

Upon taking office this year, the New Attorney General Hector Balderas, a Democrat, released the full audit with limited redactions, a shift from his predecessor's position of keeping the audit sealed from the providers and the public during the fraud investigations. Balderas narrowed the stated amount of time it would take to complete the Medicaid fraud probes on the providers, two of which have been cleared of criminal wrongdoing, to six months.

HSD defends its actions in the shakeup.


"The audits found more than $36 million in overpayments, numerous whistleblower complaints, and suspect business relationships," HSD Spokesman Matt Kennicott tells SFR in a prepared statement. "The Attorney General's Office has said it will take six months to complete their investigations, and we are looking forward to the release of those investigations. Regardless of the outcomes, any overpayments that were made will have to be paid back to the taxpayers of New Mexico. HSD will continue to ensure those most in need receive their behavioral health services."

As state auditor, Balderas revealed that HSD removed language in the audit that said it didn't find "credible allegations of fraud" in the accused organizations' billings over a three-year period—which is the legal trigger that allows states to freeze Medicaid payments to healthcare providers.