AG releases new portion of health audit


A screenshot of a page from the portion of the Public Consulting Group audit that details findings for The Counseling Center in Alamogordo.

A state-hired auditor found $1,873 in questionable Medicaid payments to a health-care provider cleared of fraud last week by the state’s top cop, according to a portion of the audit released Wednesday.

Using a statistical formula, the auditor then extrapolated from that $1,873 figure to come up with approximately $612,000 in potential Medicaid overpayments by The Counseling Center in Alamogordo, the document shows.

The overbilling estimate, in part, led the N.M. Human Services Department (HSD) to find “credible allegations of fraud” against the Alamogordo organization in June 2013. The over-billing also played a role in the state agency’s decision to freeze The Counseling Center’s Medicaid funding and forward the audit to several law enforcement agencies, requesting that they investigate issues including potential Medicaid fraud.

Ultimately, the Counseling Center shut its doors in August following the state’s decision to freeze Medicaid funds to the organization, which was providing services like drug treatment and suicide counseling.

The release of the portion of the audit Wednesday comes a few days after the attorney general’s office announced last week that it had found “insufficient evidence” of fraud in its investigation of The Counseling Center. The AG did find just over $19,000 in overbilling of Medicaid, the government’s health insurance program for the low-income. Investigations by other agencies including the state Taxation and Revenue Department, the FBI and the U.S. Attorney’s Office are ongoing, an HSD spokesman said Wednesday.

HSD did not respond to a request for comment about its finding that there were “credible allegations of fraud” against the Alamogordo Counseling Center in light of the newly disclosed information from the audit.

The $1,873 in questionable costs was included in an audit of The Counseling Center and 14 other New Mexico health-care providers conducted in early 2013 by Public Consulting Group Inc. (PCG) of Massachusetts. Portions of the audit report have been released previously, but sections that included specific findings against each of the 15 providers have been kept secret until Wednesday, when the attorney general released the portion of the audit report that detailed the specific findings against The Counseling Center.

Portions that detail specific findings against the other 14 providers remain secret, and the attorney general’s investigations into those organizations are ongoing.

The release of the 24-page document came in response to a records request NMID filed last week after the attorney general cleared The Counseling Center of fraud.

Not the worst offender

According to the document, PCG randomly sampled 150 Medicaid claims worth $12,284 in payments that The Counseling Center submitted to the Medicaid program over a three-year period, the document states.

Twenty six of those claims, amounting to $1,873 in costs, were deemed to be questionable billings, the document shows. Problems included lack of supporting documentation for claims that were filed.

PCG went on to use a statistical formula based on that failure rate to project that The Counseling Center, which had submitted tens of thousands of Medicaid claims during the audited period, could have overbilled the Medicaid program for $612,663 over three years.

PCG also found another $43,137 in questionable costs after reviewing 10 cases involving 1,529 claims worth $193,871 in government money.

The Counseling Center’s executive director, James Kerlin, said Wednesday night he was hearing these numbers for the first time as an NMID reporter shared them. He said he had not seen the report, ever been told of the allegations against his organization, or had an opportunity to respond to the findings.

“There’s no way in the world that that’s accurate,” he said of the $612,663 figure. “We’re going to challenge every bit of it.” He acknowledged that mistakes are inevitable, but said that great an amount in an annual budget of about $1.5 million didn’t happen.

The Counseling Center was not deemed to be the worst of the 15 agencies, according to an earlier released executive summary of the audit.

That document showed PCG using a scorecard system to assess the risk of each of the 15 agencies audited, grouping them into risk tiers, with 1 representing the least risk and 4 representing the most.

PCG ranked The Counseling Center in Tier 2, a category for which the firm recommended the state provide training and clinical assistance as needed and, potentially, embed clinical management to improve processes.

According to the executive summary of the audit, it was up to the state, not PCG auditors, to determine credible allegations of fraud, and that’s what HSD did in freezing payments. The state brought in Arizona health organizations to fill the gap when many of the 15 organizations shut their doors.

The transition, which was overseen by HSD, was chaotic and led to service disruptions for some clients around the state.

AG investigative report also released

In addition to releasing a portion of the PCG audit, the AG’s Office also released on Wednesday a summary of a report on its investigation of The Counseling Center. It states that AG investigators were able to resolve many of the issues identified in the PCG audit and another audit by reviewing files and speaking with PCG auditors and staffers at The Counseling Center.

In addition, the AG’s report states that it investigated claims made in an anonymous letter that a supervisor at The Counseling Center ordered employees to falsify and destroy documents and bill for time not spent with Medicaid clients. AG investigators were unable to verify those claims after interviewing employees.

“Because the original complainant was an anonymous source, we were not able to obtain specific documentation to support these allegations,” the report states.

The audit identified one other problem: The Counseling Center contracted with a group called Rio Grande Behavioral Health Services to do accounting, billing and human resources work, in addition to other “management services.” Kerlin was working as an employee of Rio Grande Behavioral Health Group’s parent company, Arizona-based Providence Service Corporation.

But the organizations weren’t disclosing details including whether Kerlin and others from the audited nonprofits who worked for Providence were full-time or part-time employees, making it difficult to determine if compensation was reasonable. Such facts should have been disclosed, the audit states.