United States District Court, D. New Mexico
BORDER AREA MENTAL HEALTH, INC., COUNSELING ASSOCIATES, INC., EASTER SEALS EL MIRADOR, FAMILIES & YOUTH, INC., HOGARES, INC., SOUTHWEST COUNSELING CENTER, INC., SOUTHERN NEW MEXICO HUMAN DEVELOPMENT, INC., TEAMBUILDERS COUNSELING SERVICES, INC., THE COUNSELING CENTER, INC., and VALENCIA COUNSELING, INC., Plaintiffs,
UNITED BEHAVIORAL HEALTH, INC. and UNITED HEALTHCARE INSURANCE COMPANY, INC., d/b/a OPTUMHEALTH NEW MEXICO, PUBLIC CONSULTING GROUP, INC., ELIZABETH A. MARTIN, ANDREW SEKEL, TIMOTHY S. MILLER, and JOHN DOES 1-10, Defendants.
MEMORANDUM OPINION AND ORDER
VÁZQUEZ UNITED STATES DISTRICT JUDGE.
MATTER comes before the Court on the Motion to Dismiss All
Claims Against It filed by defendant Public Consulting Group,
Inc. (“PCG”). [Doc. 7]. The Court, having
considered the motion, briefs, and relevant law, and being
otherwise fully informed, finds that the Motion is well-taken
and will be granted.
United Behavioral Health, Inc. is a foreign corporation that
does business on a national basis and is authorized to do
business in New Mexico. [Complaint, Doc. 1-1 at ¶ 2].
Defendant United HealthCare Insurance Company, Inc. is a
foreign insurance company that does business on a national
basis and is authorized to and is doing business in New
Mexico. Id. at ¶ 3. Defendants United
Behavioral Health, Inc. and United HealthCare Insurance
Company, Inc. conducted business in New Mexico through a
“d/b/a/, ” Defendant Optum Health New Mexico
(“OHNM”) (collectively “United”).
Id. at ¶ 4.
2009, United entered into a “Statewide Contract”
with the New Mexico Human Services Department
(“HSD”) and its 16-member Inter-Agency Behavioral
Health Purchasing Collaborative (“Collaborative”)
to act as New Mexico's “Statewide Entity” to
establish, operate, manage, and pay for delivery of
behavioral health and substance abuse services to children,
families and adults enrolled through the Collaborative's
various programs. Id. at ¶ 12. Pursuant to the
Statewide Contract, from July 1, 2009, through June 30, 2013,
United was to serve as the “Statewide Entity” to
administer the delivery of behavioral health services to
individuals enrolled in and eligible to receive services
under the Collaborative's agency programs. Id.
at ¶ 14. In turn, United, in its capacity as the
Statewide Entity, entered into contracts with numerous
healthcare providers, including Plaintiffs, to provide the
necessary behavioral health and/or substance abuse health
care services to the individual enrollees. Id. at
express provision of the Statewide Contract obligated United
to employ a person to be its dedicated Statement Contract
Compliance Officer. Id. at ¶ 22. United was
prohibited from assigning or delegating this key management
function. Id. United's designated Compliance
Officer responsible for exercising key management functions
was indicted on May 28, 2014, for alleged criminal misconduct
relating to allegations of falsifying records. Id.
at ¶ 23. The allegations of the Complaint arise from
incidents occurring from 2009 through 2012. Id.
allege that United mismanaged its Statewide Contract and, in
order to cover up its mismanagement, accused its healthcare
providers, including Plaintiffs, of engaging in institutional
fraud. Id. at ¶¶ 35, 43.
Plaintiffs further allege that in 2012, United knew that
HSD's newly-designed behavioral health services delivery
model under New Mexico Centennial Care would be the subject
of procurement in 2012 and become effective January 1, 2014.
Id. at ¶ 40. Under the new Centennial Care
Model, United would no longer be the Statewide Entity for
delivery of all behavioral health and substance abuse
services for the Collaborative. Id. United wanted
new contracts with HSD after its Statewide Contract expired
on June 30, 2013. Id. Plaintiffs allege that in
order to achieve its New Mexico contract and company revenue
goals, United needed an exit strategy from its Statewide
Contract that would expire June 30, 2013. Id. at
¶ 41. As one component of United's strategy, United
sought and received, effective September 4, 2012, a six-month
extension on its Statewide Contract through December 31,
2013. Id. at ¶ 42. Another component of
United's strategy was to cover up its defective data and
claims processing system and its mismanagement of state and
federal money by blaming its subcontracted providers,
including Plaintiffs, for billing errors that United
characterized as “institutional fraud.”
Id. at ¶ 43.
about October 25, 2012, Defendant Elizabeth A. Martin, the
Chief Executive Officer of OHNM, made a written proposal to
the Collaborative representing that United could solve the
made-up “institutional fraud” problem by
terminating United's existing contracted “bad
actors, ” including Plaintiffs, and substituting
Arizona providers to “assume wholesale
management” of New Mexico's behavioral health
services. Id. at ¶¶ 5, 44.
written proposal suggested that United “import from a
neighboring state accredited provider(s) of greater or equal
size fully vetted by the State, ” and represented that
United's Arizona network of behavioral health providers
could assume wholesale management to maintain uninterrupted
delivery of behavior health and substance abuse services to
United's Enrollees in New Mexico. Id. at ¶
Martin also asked the Collaborative for “legal
clarification of who owns the dollars if recovery
ensues” over concerns that there was no incentive for
United to deal with the made-up “institutional
fraud” if United did not get a cut of any recovery.
Id. at ¶ 45. On May 13, 2013, United, the
Collaborative and HSD executed the Professional Services
Contract, Contract Amendment No. 15, which provided that
United was entitled to receive up to 40% of all state funds
recovered from any United subcontracted provider that United
accused of fraud. Id. at ¶ 46.
Complaint alleges that in December 2012 and January 2013,
United conducted “pre-audit investigations” of
several of its subcontracted behavioral health care and
substance abuse subcontracted providers and identified what
United called “billing errors” by its
subcontracted providers, including Plaintiffs. Id.
at ¶ 36.
on United's pre-audit summary, in February 2013, HSD
contracted with defendant Public Consulting Group, Inc.
(“PCG”) to conduct a confidential audit of 15 of
United's subcontracted providers, including Plaintiffs,
at a cost to New Mexico of $3 million. Id. at ¶
37. These 15 subcontracted providers constituted
approximately 87% of the Collaborative's spending for
Medicaid and state-funded non-Medicaid behavioral health and
substance abuse services. Id.
allege that although the PCG audit was supposed to be
confidential between the Collaborative and PCG, United
actually participated “in partnership” with PCG
to audit United's subcontracted providers. Id.
at ¶ 38.
on “information and belief, ” plaintiffs further
. United, HSD and PCG “agreed to audit
the fifteen providers, including Plaintiffs, with the
pre-determined outcome that HSD would make a determination
that there were ‘credible allegations of fraud'
against each of fifteen providers pursuant to 42 C.F.R.
§ 455.23, which would trigger immediate suspensions of
all pending State payments for behavioral healthcare services
already rendered and billed by each provider, including
Medicaid, CYFD and Department of Corrections payments.
Id. at ¶¶ 52-53.
. Defendants knew that suspending payments
to the 15 audited providers, including Plaintiffs, under 42
C.F.R. § 455.23 would result in HSD referring the
providers to the New Mexico Medicaid Fraud Unit
(“MFCU”), which would investigate and cause the
suspensions to last indefinitely, thus interfering with the
providers' contractual and business relationships with
HSD and other state agencies and impair or destroy Plaintiffs
ability to continue to operate. Id. at ¶54.
. United, HSD and PCG agreed that PCG would
violate standard auditing practices, including but not
limited to refusing to allow the audited providers to respond
to initial audit findings and provide explanations and
further documentation to address initial findings, in order
for the PCG audit to support United, HSD and PCG's
pre-determined outcome that there were ‘credible
allegations of fraud' against the providers, including
Plaintiffs.” Id. at ¶ 55.
allege that United, HSD and PCG developed a scorecard for
each provider, rating them between 1
(“Compliant”) and 4 (“Significant
Non-Compliance”), then used scorecards to categorize
the providers in Risk Tiers from 1 through 4 in the PCG Audit
1 “Findings that include missing documents, etc.,
” for which PCG recommended, “Provide training
and clinical assistance as needed.”
2 “Significant volume of findings that include missing
documents” for which PCG recommended “Provide
trainings and clinical assistance as needed” and
“Potentially embed clinical management to improve
3 “Significant findings, including significant quality
of care findings” for which PCG recommended
“Provider training and clinical assistance as needed,
” ‘Potentially imbed clinical management to
improve processes, ” and “Potential change in
4 “Credible Allegations of Fraud” for which PCG
recommended “Mandatory change in management.”
Id. at ¶ 56.
“confidential” final audit report, dated June 21,
2013, found, inter alia, the following:
a. United overpaid fifteen of its subcontracted providers
approximately $37.3 million over the period of July 2009 -
January 2013. United's overpayment amounted to
approximately 15% of the money New Mexico annually paid to
b. United's claims processing system was not capable of
timely and properly adjudicating provider claims.
United's promise to use “best practices” in
encounter and claims processing in compliance with federal
and state statutory and regulatory schemes was not
implemented. Id. at ¶ 38.
allege that PCG ranked none of Plaintiffs higher than a 3.
Id. at ¶ 57. Although PCG determined that all
fifteen of the audited providers failed the audit, it
nonetheless concluded that: “PCG's Case File Audit
did not uncover what it would consider to be credible
allegations of fraud, nor any significant concerns related to
consumer safety.” Id. at ¶
Complaint alleges that three days later, on June 24, 2013, it
was publically announced that HSD received “credible
allegations of fraud” concerning 15 of United's
contracted non-profit providers of behavioral health
services, including Plaintiffs, “which HSD spun as the
providers having actually defrauded the Medicaid program out
of $36 million over a three-year period.” Id.
at ¶ 39. The ...