Tuesday July 9, 2013 Hon. Mr.

Hector Balderas New Mexico State Auditor 2540 Camino Edward Ortiz, Suite A Santa Fe, NM 87507 RE: HSD contract with Public Consulting Group for Medicaid provider audits Mr. Balderas, Multiple New Mexico news outlets recently reported that, as a result of audits conducted by the Boston-based Public Consulting Group (PCG) through a sole-source contract with the Human Services Department (HSD), fifteen of our states behavioral health providers have had their Medicaid payments suspended. Allegations of fraud and abuse discovered by the vendor PCG were the ostensible reasons HSD suspended the payments; however, HSD declined to provide legislators with copies of the full findings and allegations during a recent hearing. However, previous PCG audits in other states were found to be deeply flawed and a review by a legislative committee of the circumstances surrounding the issuance of the contract raise serious questions about the contract details itself. After we became aware of HSDs decision to suspend Medicaid payments to behavioral health providers in New Mexico, we undertook research that found a number of discrepancies with PCGs audit processes in other states. Among those items publicly reported: Similar to New Mexicos arrangement with PCG, in North Carolina PCG was paid $3.2 million and identified about $38 million in questionable billing that could be recouped, auditors said, but DHHS has only been able to collect $3.7 million.1 The companys rate of reliability appears to be less than 10%. PCG accused one company of $1.34 million in fraudulent payments that required the company to invest significant resources to defend itself. A subsequent independent review by the state, however, found the company owed just 1.6% of PCGs claim $22,000 but the damage to their reputation and public confidence in the system was irreversible.2 Additionally, North Carolinas State Auditor concluded, PCG was paid a percentage of its inflated estimate of $1.34 million yet there was no evidence that an adjustment was made to the payment made to PCG.2 A 2012 audit of PCGs contract and findings conducted by North Carolinas State

Daliseo, Emery, Associated Press NC Auditor: Catching Medicaid cheats fall short: http://finance.yahoo.com/news/ncauditor-catching-medicaid-cheats-141508604.html, July 27, 2012 2 WRAL, http://www.wral.com/news/state/nccapitol/story/11432128/, August 15, 2012
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625 Silver Ave SW Ste. 320, Abq., NM 87102 | 505-312-8509 | ProgressNowNM.org

Auditor concluded that, recoupments identified by PCG have not proven to be reliable, so the actual benefit being derived from the contract is unclear.3 In New Mexico, HSDs awarding of such a large state contract $3 million to a no-bid vendor (PCG) is highly suspect and while HSD has the ability to award sole-source contracts to health providers, that procurement code exemption does not appear to apply to administrative contracts like this. Additionally, we question whether PCGs contract with HSD contains provisions similar to those in North Carolina which incentivized allegations of misconduct without due process for providers and adjudication of such claims. Given that other public auditing agencies have questioned the validity of PCGs findings using similar or identical processes in other states and the imminent danger to thousands of Medicaid-dependent residents of losing or disrupting critical behavioral health services, and the irreversible negative impact to the reputation and financial stability of New Mexicos non-profit service providers, we believe immediate action by your office is necessary and appropriate. We are respectfully requesting that your office (1) investigate the awarding of the PCG contract to ensure that the process was conducted in accordance with purchase code requirements, (2) investigate PCGs original audit of Medicaid payments to New Mexico behavioral health providers so as to determine the validity of their original audit (in light of the demonstrated discrepancies of PCGs North Carolina audits) and (3) determine whether any monetary discrepancy between any revised audit amounts and the fee paid to PCG must be returned to tax payers. Respectfully,

Pat Davis Executive Director

Audit: Selected Contracts with Vendors to Identify Improper Payments, http://www.ncauditor.net/EPSWeb/Reports/FiscalControl/FCA-2012-4445.pdf, July 2012
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625 Silver Ave SW Ste. 320, Abq., NM 87102 | 505-312-8509 | ProgressNowNM.org