- Associated Press - Tuesday, April 5, 2016

ALBUQUERQUE, N.M. (AP) - The last two mental health providers under investigation for possible Medicaid fraud have been cleared by New Mexico’s top prosecutor.

Attorney General Hector Balderas sent a letter Tuesday to state lawmakers informing them of the outcome.

“As with the previous 10 investigations, although the investigation identified some regulatory violations, we were unable to substantiate a deliberate or intentional pattern of fraud,” Balderas wrote.

New Mexico’s behavioral health system was upended in 2013 when Republican Gov. Susana Martinez’s administration froze payments to 15 nonprofits that provided services to the state’s most needy residents after an audit raised questions about fraud and abuse.

The audit by Boston-based Public Consulting Group showed $36 million in Medicaid overpayments, widespread mismanagement and possible fraud.

The attorney general’s office launched an investigation, and the Human Services Department eventually replaced the nonprofits with companies from Arizona.

Many of the nonprofits have since filed lawsuits against the department, saying their due-process rights were violated because they were denied hearings. Three of the five Arizona companies also are pulling out of New Mexico.

Balderas’ office said the investigations determined there was about $1.16 million in overbilling among the providers.

“It now falls to the Human Services Department 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,” Balderas said in a statement.

The Human Services Department and the governor fired back Tuesday, saying Medicaid dollars should be used to help people who need it most.

“I will never turn a blind eye to wealthy CEOs who break the public’s trust and do things like funnel public money to family members and squander tax dollars on private planes,” Martinez said in a statement, pointing to allegations that had been leveled in the wake of the audit.

The agency defended its decisions, vowing to recoup what it classified as millions of dollars in misspent funds.

The shake-up caught the attention of state lawmakers and Democrats within New Mexico’s congressional delegation, prompting them to call for federal legislation that would establish guidelines for investigating allegations of Medicaid fraud while still providing care.

In announcing the push last month, Sens. Tom Udall and Martin Heinrich and Reps. Michelle Lujan Grisham and Ben Ray Lujan suggested that the Human Services Department manufactured a crisis by withholding payments and forced some providers to close their doors.

State Senate President Pro Tem Mary Kay Papen, D-Las Cruces, called the allegations against the providers baseless.

“The state’s accusations caused chaos in the lives of many of our most vulnerable residents with serious mental health issues,” she said in a statement. “I think they - and the providers whose reputations and businesses were ruined - are owed an apology.”

Some state officials have called the move by the Democrats a political stunt, saying federal officials found the state acted in accordance with anti-fraud regulations under the Affordable Care Act.

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