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The Counseling Center, Inc. v. New Mexico Human Services Department

Court of Appeals of New Mexico

June 7, 2018

THE COUNSELING CENTER, INC., Respondent-Appellant,

          APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY Francis J. Mathew, District Judge

          Davis & Gilchrist, P.C. Bryan J. Davis Albuquerque, NM for Respondent

          New Mexico Human Services Department Christopher P. Collins, General Counsel John R. Emery, Deputy General Counsel Santa Fe, NM for Petitioner



         {¶1} The New Mexico Human Services Department (HSD) appeals the district court's reversal of an administrative decision requiring The Counseling Center, Inc. (TCC), a behavioral health care provider, to reimburse HSD for claimed overpayments. HSD makes two arguments on appeal. First, HSD argues that the district court erred when it overturned the administrative law judge's conclusion that TCC failed to satisfy its burden of proof because it did not audit one hundred percent of the claims at issue. Second, HSD contends that the district court erroneously concluded that the administrative law judge's decision requiring TCC to return fees mistakenly paid with Medicaid funds to HSD is not supported by substantial evidence. Because the administrative law judge did not properly apply the regulations governing the recovery of overpayments, we affirm the district court's decision regarding TCC's burden of proof, though for reasons other than those stated by the district court. Further, because substantial evidence supports the administrative law judge's finding that TCC was erroneously paid with Medicaid funds and federal law requires that a provider who receives an overpayment of such funds must return them, we reverse the district court on that issue. The case must be remanded to the administrative law judge for further proceedings in accordance with our decision.


         {¶2} In 1977 the Legislature created the Human Services Department, organized in six different divisions, including the medical assistance division (MAD). See NMSA 1978, § 9-8-2 (1977); NMSA 1978, § 9-8-4(A)(3) (2007). The Human Services Department Act requires HSD to contract for behavioral health treatment and support services for New Mexicans. See NMSA 1978, § 9-8-7.1(A) (2007). In 2009 OptumHealth New Mexico, Inc. (OptumHealth), a managed care organization, was awarded the statewide contract to manage and oversee the administration of these behavioral health services. See 8.311.2.11(C) NMAC; NMSA 1978, § 9-7-6.4(A), (B)(5) (2008) (creating a "collaborative, " comprised of secretaries from various commissions and departments and chaired by the secretary of HSD, and authorizing the collaborative to "contract for operation of one or more behavioral health entities to ensure availability of services throughout the state"). OptumHealth, in turn, contracted with statewide behavioral health care providers to provide behavioral health services, with providers agreeing to provide services at a mutually-agreed upon amount, or at a reimbursement rate defined by the Medicaid rate for services rendered. See 8.311.2.11(C) NMAC.

         {¶3} TCC, a behavioral health care provider in Alamogordo, New Mexico was among the providers to contract with OptumHealth. As part of its contract with OptumHealth, TCC provided behavioral health services for the state's Medicaid clients, as well as for clients of the Children, Youth and Families Department (CYFD) and HSD's Behavioral Health Services Division (BHSD).

         {¶4} Between July 1, 2009 and January 2011, OptumHealth struggled to implement its new billing system to manage the administration of behavioral health services in New Mexico. During that time period, TCC received thirty-one reimbursement fee schedules from OptumHealth. The reimbursement fee schedules TCC received from OptumHealth listed the services TCC was allowed to provide and the reimbursement rate for those services. The fee schedules were sometimes back-dated and contained several mistakes, including missing service codes, missing modifiers, incorrect rates and incorrect units, requiring that they be revised and reissued on numerous occasions.

         {¶5} In November 2012 OptumHealth asked to meet with HSD leadership to present information regarding suspicious activities of several health care providers referred to as the Rio Grande providers, including TCC. OptumHealth's presentation suggested aberrant billing patterns in the billings of the Rio Grande providers. After hearing OptumHealth's presentation, HSD hired Public Consulting Group (PCG) to audit the Rio Grande providers.

         {¶6} On June 21, 2013, HSD leadership met with PCG and received its report. When PCG presented its report to HSD, it had not yet had the opportunity to follow up with providers to request additional documentation. Instead, PCG was advised to do no further work, as HSD had decided to refer TCC and fourteen other providers to the Medicaid Fraud Control Unit (MFCU) of the Attorney General's Office for further investigation. At the time it was directed to stop work, PCG had identified twenty-six claims out of a 150 claim sample group that failed in a random sample audit of TCC claims (PCG audit). That number was later reduced to nine when the Attorney General requested and received additional documentation from TCC.

         {¶7} When the audit of TCC was referred to the Attorney General's Office, TCC was advised by HSD that all payments on state contracts, whether for Medicaid or non-Medicaid services, were immediately suspended.

         {¶8} The Attorney General's Office conducted its investigation and issued its report on January 10, 2014. The Attorney General's investigation reviewed the PCG audit, the OptumHealth audit and a referral that came into its office regarding TCC. The Attorney General reported that the nine failed claims out of 150 randomly sampled claims from the PCG audit resulted in overcharges totaling $5, 264.24. The Attorney General was able to resolve the concerns raised in the OptumHealth audit as part of its investigation, and did not identify any inappropriate charges resulting from that audit.

         {¶9} Finally, the Attorney General investigated the allegations set out in an anonymous letter sent to its office in 2012, alleging that TCC employees had been ordered to bill more time than was actually spent with clients, including Medicaid clients, to destroy progress notes and assessments and treatment plans, and to sign progress notes even though they had seen Medicaid clients for less than one hour. The Attorney General's Office was unable to substantiate the claims set out in the anonymous letter by talking to current and former employees; however, one former manager advised that TCC had been doing basic mental health assessments of clients and billing them as enhanced assessments. Investigators from the Attorney General's Office met with the entire TCC staff and TCC attorneys in August 2013. The investigators reported that "[a]ll of the staff believe that they are appropriately preparing assessments and were surprised to learn that the assessments reviewed by our office did not qualify as enhanced." TCC staff denied ever hearing any discussions about billing for enhanced assessments while only performing basic assessments.

         {¶10} Prior to meeting with TCC, the Attorney General's Office performed an audit of a random sample of thirty clients for whom TCC had submitted bills for behavioral health services identified with an H0031 billing code between January 2010 and March 20, 2013 (Attorney General's audit). The HOO31 billing code is used to bill for several different types of behavioral health services to several different government agencies, with billing to an agency defined by whether a modifier is used or not. The H0031 billing code with no modifier indicated a billing to the BHSD. An H0031 billing code containing an HA modifier indicated an assessment of a minor billed to CYFD or BHSD. Finally, claims submitted with the H0031 U8 code and modifier denoted billing for services provided to adult Medicaid clients underthe psychosocial rehabilitation umbrella of services.

         {¶11} At the conclusion of the Attorney General's investigation, on February 20, 2014, HSD requested that TCC remit $343, 000.49 to satisfy overpayments, including extrapolated overpayments calculated from the results of the Attorney General's audit and the PCG audit. TCC timely filed a request for fair hearing pursuant to 8.352.3.9 NMAC. An administrative law judge (ALJ) held a four-day hearing to address the validity of the methodology employed in extrapolating the overpayments made to TCC, whether TCC improperly billed certain claims using the incorrect modifier, and whether TCC was paid out of Medicaid funds for those claims.

         {¶12} At the hearing, TCC challenged the failure of each of the nine claims found to have failed by the PCG audit. TCC also challenged the failure of the claims that were the subject of the Attorney General's audit. The evidence showed that TCC submitted thirty-nine claims related to thirty different clients using the H0031 billing code, both with and without modifiers, with some clients receiving multiple assessments. At the hearing, the parties stipulated that four of the claims submitted did not meet the criteria to be billed as H0031 U8 claims. Of the remaining claims, TCC presented evidence to the ALJ that nine of those claims should not have failed because TCC had not billed them to Medicaid, though they were erroneously paid with Medicaid funds. TCC also challenged the remaining failed claims in the Attorney General's audit, presenting evidence as to why each claim properly fell within the scope of the H0031 U8 billing code used when the claim was submitted.

         {¶13} At the conclusion of the hearing, HSD requested that the ALJ direct TCC to return overpayments totaling $379, 135.26, representing the extrapolated overpayments from the PCG audit and the Attorney General's audit, including claims properly billed by TCC, but erroneously paid from Medicaid funds.

         {¶14} After hearing the evidence and arguments of the parties, the ALJ made findings of fact. Among the findings made by the ALJ were findings that:

1. There were 706 claims submitted to and paid by OptumHealth to TCC under code H0031 with the modifier of U8 for the time period that is at issue. A random sample of 30 claims, all of which had been determined to have failed, was applied to this universe of 706 claims using a ratio-based analysis for extrapolation. This resulted in an overpayment claim of $285, 468.91....
2. The Attorney General's office reviewed the audit results from the Public Consulting Group (PCG) regarding the 150 claims that had been randomly sampled by PCG. The Attorney General's office determined that nine claims failed. When the nine claims were ...

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