New Mexico’s Human Services Department chief says the relationship between Tucson-based Providence Service Corp. and nonprofit providers appears to be fraught with conflicts of interest, according to the Albuquerque Journal News.
The Albuquerque Journal News reports that “the top executives of six New Mexico nonprofits, receiving almost $30 million a year in Medicaid payments to deliver behavioral health services, were on the payroll of a publicly traded Arizona company until they were forced out earlier this summer by the state Human Services Department.”
The New Mexico nonprofits, which along with nine other providers, had their state Medicaid payments suspended after an audit allegedly turned up credible evidence of fraud and abuse, according to the Journal.
According to one Tucson expert, the practice might have been acceptable under Medicaid rules but noted that the HSD audit and the replacement of the management teams do raise serious concerns.
The amount in question could total up to $36 million.
According to HSD officials, Providence initially provided the state with information about its role in New Mexico but cut off communications when state officials asked to see specific contracts with CEOs of the New Mexico nonprofits.
The HSD ordered the PCG audit after behavioral health overseer, OptumHealth, reported irregularities in claims data, according to the Journal. HSD used “the Optum data, other findings and reports, an analysis of the PCG audit and whistleblower complaints against several nonprofits that included allegations that workers were told to intentionally up-code services as a means of siphoning extra money out of the Medicaid system.” The PCG audit identified $36 million in alleged overpayments to the providers during a three-year period – a number Balderas said was extrapolated from a much smaller dollar amount identified in the audit.
HSD spokesman Matt Kennicott told the Journal that the agency is “very confident” of the accuracy of the $36 million figure because of the large number of randomly sampled claims: 150 per provider.
In November 2012, the Providence founder, chairman and CEO was forced out and replaced by Providence’s lead director and former CEO of Rural/Metro Corp, Warren Rustand, according to documents revealed by Tucson radio show host, James T. Harris, of 104.1FM “The Truth.”
Christopher Shackelton, managing partner at Coliseum Capital Management and a current Providence Director, replaced McCusker as Chairman of the Board. Coliseum Capital is one of the company’s largest shareholders.
The Memorandum of Agreement constituted a “Notice of Termination.” According to the documents, McCusker would “irrevocably resign” as an employee of Providence effective December 31. McCusker agreed to immediately and irrevocably resign as a Director and Chairman of the Board of Directors. The Agreement provided that McCusker would, “effective immediately,” transition his responsibility as Chief Executive Officer to Mr. Rustand and instructed McCusker to “focus primarily on transitioning his roles and duties to Mr. Rustand.” According to the document, McCusker’s “cessation of employment would be treated as a termination without cause.”
Providence issued a release on November 19, 2012 that Rustand’s appointment would be effective immediately. In the release, the company said they wished him “all the best.”
In August, the company reported $287.6 million in revenue for the second quarter of 2013, an increase of 3.1% in the comparable period of 2012. Revenue from Providence’s non-emergency transportation (NET) services segment grew 4.8% to $197.9 million in the second quarter from $188.8 million in the prior year period. Revenue from the social services segment declined 0.4% to $89.8 million from $90.1 million in the second quarter of 2012.