The Case Of New Mexico's Altered Audit

By Tristan Ahtone
December 02, 2013

ALBUQUERQUE, N.M. — It's been almost six months since the New Mexico Human Services Department (HSD) froze Medicaid payments to mental health providers in the state due to a "credible allegation of fraud."

The allegation stems, in large part, from an audit conducted by an out-of-state company called PCG. Since then:

• a dozen behavioral health agencies have been taken over by five Arizona companies

• those accused of fraud have still not been able to see evidence against them

• widespread service disruptions have been reported

• PCG admitted to vetting out-of-state companies for the takeover prior to even starting their audit work

• a partial release of the PCG audit revealed that the company found the "case file audit did not uncover what it would consider to be credible allegations of fraud"

• and now, New Mexico State Auditor Hector Balderas says HSD altered the PCG audit that came to his office for court ordered review by removing the statement that PCG "did not uncover what it would consider to be credible allegations of fraud."

"I had requested the original PCG report that was a basis for the behavioral health suspension controversies, and a court ruled in my favor that not only under law we were allowed to review that report, but we came to an agreement with the attorney general, HSD officials, and our office that HSD would provide the original report that was being used as the basis for the suspension of funding," Balderas said. "We soon realized accidentally that we did not receive the accurate and original version of the report and we immediately filed a subpoena and a motion to compel the production of that original report. So we're back in court."

In other words, the only reason Balderas' office found the discrepancy was because the Attorney General released certain pages of that report due to lawsuits filed by media outlets New Mexico In Depth and Las Cruces Sun-News. When those pages were released, the State Auditor identified discrepancies.

"You have to have special authorities to alter public records, I mean, members of the press corps, citizens, bureaucrats, everyone should be concerned if there's not integrity and accuracy in public records," said Balderas. "So as a matter of public policy, it's well vested in law that only people with significant or special authorities can alter documents."

But according to HSD, there's a reason for the alteration.

"Under the federal law and regulations, HSD is the only entity that can determine credible allegations of fraud against a Medicaid provider. A response has been supplied to the State Auditor and was not included in his latest filing. As a federal judge has ruled, and as the federal government has said, HSD has acted properly under the law in protecting Medicaid dollars," said HSD spokesman Matt Kennicott. "The audit found more than $36 million in overpayments and potential fraud in the behavioral health system. These are precious resources that could have gone to serve more of our most vulnerable citizens."

And according to a memo generated by HSD for Balderas' office, "Representatives from PCG and HSD had several telephone conversations in which HSD's comments to the draft audit were discussed, including HSD's request (for the reasons noted below) to remove PCG's statement that it "did not uncover what it would consider to be credible allegations of fraud."

The "reasons below" refers to HSD being the only entity that can determine fraud. According to Kennicott, data in the audit was not changed, only PCG's analysis.

"New Mexico spent several million dollars on this audit report, so it could be a very dangerous, slippery slope if we start having officials freely alter documents without any type of authority and in violation of court order," said Balderas. "It's very important to get to the bottom of why there's alterations, why we were never notified, and more importantly, why there's been a delay in providing us the report that was used as a basis to make very important policy decisions."

Big picture, from Balderas' perspective, is this: Every agency in New Mexico is required to submit an annual financial audit in December. When an audit conducted by the state is incorrect, it can impact federal tax dollars and how they flow to New Mexico.

"So the federal government, as they approve these billions and billions of dollars, they only do it with certain contingencies that certain federal and state regulations are followed, and one of the direct regulations that's in controversy whether it was violated or complied with is how they identified, detected and referred medicaid fraud," Balderas said. "The Federal Government is as anxious to figure out what the auditors opinions are on their operations as new mexicans are. So yes, they do directly correlate and they do directly, potentially impact future budget appropriations for New Mexico citizens."

Balderas' office has filed court requests for more information from HSD. HSD maintains it has not acted improperly and has followed all regulations. A majority of the PCG audit remains secret — for the time being.