By James Staley
LAS CRUCES >> State officials revealed Tuesday new glimpses of the alleged wrongdoing unearthed in a recent behavioral healthcare audit, and defended their controversial actions in the aftermath of those findings during a lengthy and sometimes heated hearing in front of a state Legislature subcommittee at the Pan American Center.
The New Mexico Human Services Department has refused to release -- continually and to several parties -- the full audit of 15 prominent behavioral healthcare providers, since announcing this summer that it had frozen their Medicaid funds, effectively crippling those agencies. HSD officials have maintained that making those details public could hinder a criminal investigation, one they allege involves overbilling and "credible allegations of fraud" worth $36 million.
But Tuesday morning, HSD Deputy General Counsel Larry Heyeck addressed slivers of the findings against two Las Cruces-based agencies: Southwest Counseling Center and Families and Youth, Inc. They involved, generally, relationships between those agencies, other companies, potential conflicts of interest and how Medicaid dollars were spent in those deals.
As examples, Heyeck said FYI CEO Jose Frietze owns, through a corporation, two houses. Using its Medicaid money, Heyeck said, FYI paid Frietze's company $6,700 per month to use those facilities for a teen program.
He added that Southwest Counseling Center CEO Roque Garcia took trips to "vacation spots" using Medicaid money.
"Executives and some others were doing extremely well," Heyeck said.
State legislators scrutinized Heyeck's revelations and many other details surrounding the audit, it's results, HSD's response and the future of behavioral healthcare in New Mexico.
State Sen. Howie Morales, D-Silver City, urged Garcia to address the behavioral health subcommittee so he could respond to the allegations Heyeck detailed. Garcia, who was among the crowd in the packed Barbara Hubbard Room, sat next to the HSD panel and compared its findings to a political campaign.
"There's a shred of evidence with some truth and it gets blown up to something it's not," Garcia said.
He added that the network of providers -- questioned by the audit, but a setup endorsed at a national conference -- saved the state $40,000 per year. Garcia also said he has never been to "the Jersey shore," one of the "vacation spots" mentioned by Heyeck.
Frietze, who was also in attendance, did not address the subcommittee.
One of the committee members asked the HSD panel about the corporate relationships of La Frontera, the Tucson-based agency that took over as the provider in the area, opening New Mexico offices.
Brent Earnest, HSD deputy secretary, said HSD "would get back to" the subcommittee with that information. He noted that HSD would have preferred that a provider already in New Mexico handle the transitions, but that wasn't possible. The 15 audited agencies handle more than a third of the patients using Medicaid services in the state.
HSD Secretary Sidonie Squire did not attend -- she was recovering from eye surgery, Earnest said -- nor did a representative from La Frontera, something that drew criticism from legislators.
Neither were there to hear questions or criticism legislators had about the transition, and possible service interruptions that resulted. State officials have repeatedly stated they would eliminate such interruptions.
"I hope none of us has painted change as rosy," said Diana McWilliams, director of HSD's behavioral health services division. "It's difficult."
She highlighted some of the positive experiences in the transition, including some employees receiving raises and improved benefits.
HSD shifted $17.8 million of its money to pay for the transition, the panelists said. Of the roughly $6 million it has spent so far, about $4 million went to payroll so the audited agencies could survive through the transition phase.
In the afternoon, a North Carolina attorney addressed the subcommittee. Knicole Emanuel said she represents healthcare providers that use Medicaid money and have been subjected to state-ordered audits. Many of her clients, she said, were audited by Boston-based Public Consulting Group, the firm that HSD contracted.
Emanuel urged appeals of the PCG audit because of what she said were the "top 10 blunders" she has seen in her practice. Those included using policies form the wrong year, lack of training and extrapolation errors. She said PCG showed one North Carolina agency had more than $700,000 in possible billing errors, but when that agency was allowed to address the findings, PCG dropped that number to $336.
"Who made sure this audit was correctly done?" she said.
Thomas Aldridge, a representative of PCG, said his firm's results are 95 percent accurate when they receive all the requested documents.
Emanuel said the state has done "irreparable" damage to the audited firms.
Earnest noted, that if any of the agencies are cleared, they could start operations again.
Many in the crowd jeered at the HSD panel and supported Emanuel. They had to be quieted when Aldridge said he went with HSD officials to meet with perspective Arizona providers before the audit was complete.
James Staley can be reached at 575-541-5476