State officials say the ongoing takeover of Medicaid-funded behavioral health providers by Arizona companies is going smoothly, while critics point to plenty of bumps.

Seven weeks ago, the state Human Services Department announced that an audit of 15 New Mexico providers that treat mental illness and substance abuse showed overbilling, mismanagement and possible fraud. It abruptly froze Medicaid funding to all of them and said five Arizona companies were prepared to step in, help out, or potentially take them over.

Since then, HSD has restored Medicaid behavioral health funding only to a small nonprofit in Raton. The other nonprofits have continued to operate, either from their reserves or with non-Medicaid temporary funding from the state.

At least five of the 15 nonprofits are currently being transitioned to management by Arizona companies. The HSD won’t say how many of the 15 will end up under new management; spokesman Matt Kennicott said that’s being determined “on a case-by-case basis.”

Nancy Jo Archer, CEO of Albuquerque-based Hogares, which is being transitioned to an Arizona provider, calls it a “hostile takeover.” She’s scrambling to get everything ready to turn Hogares over to the new provider, called Open Skies, by the end of this week.

“It’s not that we’re trying to be difficult; it’s just how do you get the logistics together?” Archer said.

Getting medical records from one provider to another, for example, has been an issue.

“We can’t just give Valle del Sol” – another of the Arizona providers – “the records of all our clients. It’s their private health information,” said Patsy Romero, chief operations officer at Santa Fe-based Easter Seals El Mirador, which shut down its Casa de Corazon behavioral health programs in Española, Taos and Raton last week.

Instead, clients must sign releases that allow the New Mexico providers to turn the records over to the Arizona companies.

Romero’s agency – which continues to provide other Medicaid-funded services, to the developmentally disabled – wrote to its nearly 300 behavioral health clients and advised them it was shutting down services and the clients needed to sign release forms so that information could be given to a new provider.

But Romero said Monday that she has received only six such release forms.

“HSD’s contention that there is no disruption in services is not the reality in this community,” Romero said.

Carlos Galindo-Elvira , chief development officer, said Valle del Sol is “up and running” in northern New Mexico, has hired staff at all sites, and is training them as well as meeting with families.

He said he has met with school personnel and officials of other agencies that would refer children for services and distributed letters that parents can use to authorize the release of records.

“We are moving forward as fast as we can and as ethically as we can” to provide services, Galindo-Elvira said.

In the first of the transitions, when Arizona-based La Frontera took over at the end of July from Southwest Counseling Center in Las Cruces, the Arizona company discovered that Southwest’s computers were in storage – potential evidence in the ongoing investigation by the attorney general of possible fraud among the 15 providers.

“That was an issue we didn’t anticipate, to be honest,” said La Frontera CEO Dan Ranieri.

Medical records weren’t accessible, and neither were client schedules, so La Frontera began keeping schedules on paper and getting clients to sign releases as they came in for services.

La Frontera has bought computers and is training staff in a new system.

The HSD says it may need nearly $18 million to pay the Arizona companies during the transition, and the Legislative Finance Committee, which reviews the transfer of funds within agency budgets, recently gave HSD the go-ahead to shift $7.5 million within its budget for that purpose.

But the LFC objected to the transfer of an additional $10.3 million and scheduled a hearing on the matter for Aug. 21. The LFC says the additional money is premature, the contract amounts and payment rates are high, and HSD has not provided requested information about what the New Mexico providers did wrong. And it said the transitions appear to be disrupting services.

The LFC can delay the funds transfer until the hearing, but can’t stop it. HSD’s Kennicott said the delay won’t cause a problem because the Arizona providers haven’t started billing yet.