AG clears final two behavioral health providers of fraud


Attorney General Hector Balderas announced Tuesday that his office has cleared the final two behavioral health providers under investigation for possible fraud.

Hector Balderas

Courtesy photo

Attorney General Hector Balderas

That means all 15 health organizations Gov. Susana Martinez’s Human Services Department (HSD) chose to freeze Medicaid funding for in 2013 have been cleared of any criminal wrongdoing.

“Our thorough investigation of the providers concluded that there was not a pattern of fraud, despite the actions of the Human Services Department in finding credible allegations of fraud and freezing funding to 15 providers across New Mexico in 2013,” Balderas said in a news release.

In a letter informing lawmakers of the conclusion of the wide-ranging investigation, Balderas wrote that his office found some regulatory violations and is forwarding the results to HSD, which could seek repayment if it deems that organizations overbilled Medicaid.

The AG’s investigative reports on each of the 15 organizations can be found here. The two providers Balderas cleared of wrongdoing on Tuesday are TeamBuilders and Pathways.

TeamBuilders’ CEO, Shannon Freedle, said he and his wife Lorraine were “overwhelmed with conflicting emotions by news that TeamBuilders has been exonerated of wrongdoing.”

“We are grateful to Attorney General Hector Balderas for marshaling the resources necessary to complete a thorough investigation of the 15 targeted agencies and to the many legislators who continue the fight to uncover the truth and prevent future tragedies of this nature,” Freedle said. “It has been a long three years since the initial audit. We never doubted the work of our dedicated staff despite the unjust allegations.”

HSD’s 2013 Medicaid freeze sparked a chaotic transition. There were disruptions in service to patients. Many New Mexico-based companies and nonprofits — which had been providing services like drug treatment and suicide counseling to an estimated 30,000 people — went out of business and were replaced by the Arizona companies.


Three of those five Arizona companies have now closed up shop in New Mexico. The state’s behavioral health system remains in disarray. The system is facing regular turnover and bogged down by legal battles.

Freedle referred to the “decimation of the entire New Mexico behavioral health system.”

“We remain saddened by the catastrophic damage resulting from the unsupportable actions of the New Mexico Human Services Department and OptumHealth New Mexico,” Freedle said. “This includes damages to the organization, its 600+ employees, and to the thousands of children and families it served in dozens of communities across the State of New Mexico.”

When HSD froze funding in 2013, OptumHealth was overseeing the reimbursement of hundreds of millions of Medicaid dollars to the 15 organizations whose funding was frozen and other health providers for the State of New Mexico. Three lawsuits blame OptumHealth for the problems caused by the Medicaid freeze.

Freedle said TeamBuilders looks forward “to further resolution and recovery of the millions of dollars owed for services rendered in good faith and inappropriately withheld by HSD and OptumHealth.”

There were issues in the system before HSD froze Medicaid funding three years ago. Overbilling has been identified, and the administration has recovered more than $4 million from two companies. But many believe HSD’s decision to freeze the 15 organizations’ funding was a dramatically disproportionate response that put tens of thousands of New Mexicans at risk unnecessarily.

The four Democratic members of New Mexico’s congressional delegation in Washington — Sens. Tom Udall and Martin Heinrich and Reps. Michelle Lujan Grisham and Ben Ray Luján — have asked for a federal investigation into the situation and introduced legislation that would prevent such funding freezes in the future without first conducting thorough investigation.

After Balderas cleared the remaining providers Tuesday, the four Democrats called the 2013 allegations of fraud that led to the funding freeze “a manufactured crisis that dangerously left patients without the care they deserved and had come to rely on, caused hundreds of New Mexicans to lose their jobs, and wasted $28.8 million in taxpayer dollars.”

They reiterated their call for an investigation “to determine how the decision to upend the behavioral health system was made.”

Meanwhile, State Senate Majority Leader Michael Sanchez, D-Belen, called the Medicaid freeze “one of the worst acts of a governor’s administration in New Mexico’s entire history.” And Mary Kay Papen, D-Las Cruces and the president pro tempore of the state Senate, said affected behavioral health patients and providers who were affected are due an apology from the state.

“What has been done to them is unconscionable,” Papen said. “The state’s entire mental health system of care was wrecked by these baseless allegations. None of the providers defrauded the government. But the damage has been done, wreaking havoc in the lives of patient and their families, and it continues.”

Balderas said it’s now on HSD “to take timely and appropriate administrative action to resolve this regrettable situation to ensure that tens of thousands of vulnerable New Mexicans receive their critical services.”

“The department must find a way to fight fraud that does not put services to the most vulnerable at risk or result in hundreds of New Mexicans losing their jobs,” he said.

This article has been updated with comments from Freedle, the Democratic members of New Mexico’s congressional delegation, Papen and Sanchez.

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