A health organization battling state fraud allegations is accusing the state of acting in bad faith by “improperly withholding” more than half a million dollars in Medicaid funds it contends it is owed.
In a lawsuit filed in Santa Fe this week, Easter Seals El Mirador has asked a judge to order the state Human Services Department (HSD) to release the funds, saying it was cleared of fraud allegations by the Attorney General’s Office in late April only to have HSD ask the AG’s office in July to re-open the investigation.
The lawsuit characterized HSD’s action to re-open the investigation as the state’s attempt to “take a bad faith second bite of the apple as a justification” for withholding the money.
The lawsuit, filed in 1st Judicial Court in Santa Fe on Tuesday, represents the latest twist in a situation that has upended the state’s system for caring for the mentally ill and those struggling with issues including drug addiction.
It also threatens to become election-year fodder. State Attorney General Gary King, a Democrat, hopes to unseat Gov. Susana Martinez, a Republican, in this year’s November gubernatorial election.
According to the lawsuit, with the initial exoneration, Easter Seals, which is one of 15 organizations accused of “credible allegations of fraud” by Martinez’s Human Services Department (HSD) last year, expected HSD to release to the organization $671,000 in Medicaid money the state began withholding in June 2013. That’s when HSD accused the organization of overbilling Medicaid for its services.
“When Easter Seals received correspondence that insufficient evidence as to fraud was found, its remaining few employees were ecstatic and relieved because so much time had passed,” the lawsuit reads. “They believed that they would receive the small consolation of the release of the withheld reimbursements after almost a year of being withheld.”
But instead the HSD decided to re-file its fraud complaint with the AG.
An HSD spokesman said in July that the agency believed King’s investigators used the incorrect criteria to determine if Easter Seals’ billings around specific services were possibly fraudulent.
On Wednesday, HSD spokesperson Matt Kennicott said, “Easter Seals has had fraud problems internally for some time now. This is nothing more than a lawsuit that is intended to distract the public from the real issue at hand.”
Of the 14 other organizations accused of “credible allegations of fraud” by the Martinez administration, one other, The Counseling Center of Alamogordo, was cleared of fraud by the AG’s office this year.
The Human Services Department decided to file “credible allegations of fraud” in June 2013 against the 15 organizations following an audit by Massachusetts-based PCG Inc., which identified potential over-billing by the organizations. HSD also forwarded the audit and other documentation to the Attorney General’s Office and other investigative agencies, including the FBI, for investigation. The AG’s investigation of the organizations is ongoing.
Only portions of the PCG audit have been released, including sections related to Easter Seals El Mirador and the Counseling Center. The bulk of the audit remains secret. New Mexico In Depth and the Las Cruces Sun-News sued HSD last year in state court demanding the public release of the audit and have a hearing scheduled for later this month.