United States. v. United Behavioral Health, Inc.
| Decision Date | 08 February 2023 |
| Docket Number | 1:15-cv-01164-KWR-JHR |
| Parties | UNITED STATES OF AMERICA and THE STATE OF NEW MEXICO; ex rel., LA FRONTERA CENTER, INC., an Arizona Nonprofit Corporation, RELATOR Plaintiffs, v. UNITED BEHAVIORAL HEALTH, INC., a Foreign Corporation; UNITED HEALTHCARE INSURANCE, INC., a foreign corporation; OPTUMHEALTH NEW MEXICO operating as a d/b/a of UNITED BEHAVIORAL HEALTH, INC., UNITED HEALTHCARE INS. CO.; BLACK and WHITE Corporation and JOHN and JANE DOES I-X, Defendants. |
| Court | U.S. District Court — District of New Mexico |
UNITED STATES OF AMERICA and THE STATE OF NEW MEXICO; ex rel., LA FRONTERA CENTER, INC., an Arizona Nonprofit Corporation, RELATOR Plaintiffs,
v.
UNITED BEHAVIORAL HEALTH, INC., a Foreign Corporation; UNITED HEALTHCARE INSURANCE, INC., a foreign corporation; OPTUMHEALTH NEW MEXICO operating as a d/b/a of UNITED BEHAVIORAL HEALTH, INC., UNITED HEALTHCARE INS. CO.; BLACK and WHITE Corporation and JOHN and JANE DOES I-X, Defendants.
No. 1:15-cv-01164-KWR-JHR
United States District Court, D. New Mexico
February 8, 2023
MEMORANDUM OPINION AND ORDER
KEA W. RIGGS UNITED STATES DISTRICT JUDGE
THIS MATTER comes before the Court upon Defendants', OptumHealth New Mexico, United Behavioral Health, Inc, United Healthcare Ins. Co, and United Healthcare Insurance, Inc., Motion to Dismiss (Doc. 124) and Request for Judicial Notice in Support of Motion to Dismiss (Doc. 125). Having reviewed the parties' pleadings and the relevant law, the Court finds that the motion is well taken, and is therefore GRANTED IN PART and DENIED IN PART. Counts I and Count IV are dismissed with prejudice. Count V is dismissed in part with prejudice.
BACKGROUND
La Frontera Center, Inc, an Arizona nonprofit corporation, brings this qui tam suit under the False Claims Act (FCA), 31 U.S.C. § 3730, New Mexico Medicaid False Claims Act
(MFCA), N.M. Stat. Ann. § 27-14-7, the New Mexico Fraud Against Taxpayers Act (FATA), N.M Stat. Ann. § 44-9-7, against United Behavioral Health, Inc., a foreign corporation, United Healthcare Insurance, Inc., a foreign corporation, Optumhealth New Mexico operating as a d/b/a of United Behavioral Health Inc., United Healthcare Insurance Corporation, Black and White Corporation, and Defendants John and Jane Does I-X.
Relator filed this suit under seal on December 23, 2015 (Doc. 1), and amended their complaint, under seal, on February 9, 2017 (Doc. 77). On February 2, 2022, the United States of America and the State of New Mexico filed their notice of election to decline intervention in this case. Doc. 114. The Amended Complaint for Damages Under the False Claims Act subsequently was served on Defendants on February 18, 2022.
On August 8, 2008, New Mexico Human Services Department (“HSD”) and fourteen New Mexico agencies (“Collaborative”) published a 2008 Request for Proposal (“RFP”) for qualified Managed Care Organizations (“MCO”) to submit proposal to become New Mexico's Medicaid and non-Medicaid statewide entity to administer behavioral health and substance abuse services. Doc. 77 at ¶ 34-36. On January 22, 2009, Defendants (“United”) executed a contract to become the sole Medicaid and non-Medicaid behavioral health service MCO for New Mexico. Id. at ¶ 36.
Relator alleges that United falsely represented that United had substantial national experience in implementing and operating successful Medicaid programs on a statewide basis and possessed essential expertise in behavioral health managed care. Id. at ¶ 38. Relator alleges that United represented that it had a functional system to ensure timely claim adjudication and compliances with billing obligations and policies to address and prevent fraud and abuse. Id. at ¶ 42-43. Relator alleges that United did not have a claims adjudication system tailored to the RFP
requirements. Id. at ¶ 45. Relator alleges that United's claims adjudication system was incapable of adjudicating provider claims, and on October 2009 and February 16, 2011, the New Mexico HSD sanctioned United for its failure to have a functioning claims processing system. Id. at ¶ 5051. Relator further alleges that United's system did not detect fraud from 2009-2013. Id. at ¶ 52.
On April 12, 2012, the New Mexico HSD and the Collaborative proposed replacing United with Centennial Care on January 1, 2014. Id. at ¶ 53. United agreed to enter into a Transitional Agreement to transfer membership and services to Centennial Care. Id. at ¶ 53. The Transitional Agreement, Amendment 11, stated that United would:
develop and provide to the Collaborative written policies and procedures that addresses the clinical transition issues and transfer of potentially large number of members into or out of its organization and shall be submitted to HSD for review and approval. These policies and procedures shall include how the SE [United] proposes to identify members currently receiving services, within ninety (90) days of the effective date of Amendment No. 11 develop and provide to the Collaborative a detailed plan for the transition of an individual member, which includes member and provider education about the SE and the SE's process to assure any existing courses of treatment are revised as necessary
identify members and provide necessary data and clinical information to the Centennial Care MCOs for members switching plans, either individually or in larger numbers to avoid unnecessary delays in treatment that could be detrimental to the member
Id. at ¶ 54. The 2009 MCO Contract stated that, “[u]nder no circumstances shall this Contract exceed a total of four (4) years in duration,” which was set to end on June 30, 2013. Id. at ¶ 57. Amendment No. 11 extended the 2009 MCO Contract to December 31, 2013. Id. Relator alleges that Amendment No. 11 was a substantive and material revision to the 2009 MCO Contract. Id. at ¶ 58. Relator alleges that Amendment No. 11 added contract language that United could hold funding it owed providers for services already rendered by United subcontracted providers. Id. at ¶ 59.
Relator alleges that United data management system produced inaccurate, incomplete, and false data. Id. at ¶ 62 In December 2012 and January 2013, United conducted pre-audit
summaries on 15 subcontractor providers and determined fraudulent billing practices. Id. at ¶ 64. New Mexico HSD hired a third-party auditor, Public Consulting Group, Inc. (PSG). Id. at ¶ 66. Relator alleges that United had a major role with the PSG audit. Id. Relator alleges that a confidential final audit report dated June 21, 2013, confirmed that United did not implement best practices for claims processing, the payment management system was not capable of timely and accurately adjudicating providers claims, and the failure lead to United knowingly overpaying 15 of its subcontracted providers. Id. at ¶ 69. On June 24, 2013, New Mexico HSD announced that they received credible allegations that 15 United subcontracted providers had defrauded the Medicaid program. Id. at ¶ 70. Relator alleges that the original PCG Audit Report contained a statement that “PCG's Case File Audit did not uncover what it would consider to be credible allegations of fraud, nor significant concerns related to consumer safety.” Id. at ¶ 71.
On May 13, 2013, United, New Mexico HSD, and Collaborative agreed to the Professional Services Contract, Contact Amendment No. 15 to the 2009 MCO Contract. Id. at ¶ 75. Relator alleges that Amendment No. 15 absolved United of responsibility for its defective provider claims systems. Relator alleges that Amendment No. 15 designated United as the Recovery Audit Contractor under § 6411 of the Patient Protection and Accountable Care Act, which United would receive a percentage of any funds recovered from United's alleged overpayments. Relator further alleges that Amendment No. 15 allowed United to retain 40 percent of all state Medicaid funds recovered from United subcontracted providers accused of fraud. Id.
On June 24, 2013, Relator alleges that United used its authority under Amendment No. 15 to cut funding to the 15 subcontractor providers. United allegedly kept approximately $18 million for services already delivered by the 15 subcontracted providers. Id. at ¶ 86.
On June 27, 2013, Relator and New Mexico HSD entered into an emergency, no-bid Professional Services Contract. Id. at ¶ 85 Relator alleges that the contract provided for Relator to temporarily, over a six-month period, assume responsibilities for delivering services in place of United's terminated subcontracted providers. Id. New Mexico HSD would provide the funds to United, which would in turn disburse the funds to Relator. Id. Four other Arizona Providers executed identical emergency procurement contracts. Id.
From June - December 2013, Relator alleges that United received $538,263,082 in Medicaid funds. Id. at ¶ 73 Relator alleges that United withheld the funds from subcontracted providers and refused to spend money to create and implement the Transition Plan in Amendment No. 11. Id. at ¶ 74. Relator alleges that United underpaid or denied the Relator's and other Arizona providers' claims and that United did not report to CMS or HSD that the Medicaid and non-Medicaid money United received was not used to pay provider claims. Id. at ¶ 91.
On August 12, 2013, HSD and United executed Amendment No. 17, which increased the amount of State and Federal Medicaid and non-Medicaid funds paid to United. Relator alleges 87 percent of this new money was earmarked to pay providers for supplying services, but United failed to pay the providers' claims. Id. at ¶ 93, 98. Relator alleges United made no reasonable effort to enable its claims processing system to pay Relator and other Arizona providers and United did not supply HSD with useful management and reporting data. Id. at ¶ 97.
As a result, Relator alleges the following claims:
Count I: Violation of 31 U.S.C. § 3729(a)(1) - False Representation, Certification, Omission of Material Facts and Fraudulent Inducement/Promissory Fraud
Count II: Violation of the Federal False Claims Act, 31 U.S.C. § 3729 (a)(1)
Count III: Violation of the New Mexico Fraud Against Taxpayers Act, N.M. Stat. Ann. § 44-9-1
Count IV: Violation of the New Mexico Medicaid False Claims Act, N.M. Stat. Ann. § 27-14-1
Count V: Violation of N.M. Stat. Ann. § 44-9-5; N.M. Stat. Ann. § 30-44-7(A)(3), 30-444; and N.M. Stat. Ann §...
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