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Nightmare: Ousted New Mexico CEO answers 'Rio Grande Seven' allegations that broke his agency

September 12, 2013

In a recent hearing before the Behavioral Health Subcommittee of the state legislature, New Mexico Human Services Department attorney Larry Heyeck expanded upon the state's allegations of possible fraud by behavioral health providers.  He called attention to “questionable” CEO/CFO compensation paid by Providence Service Corporation to executives of seven New Mexico behavioral health providers -- a group that he called the “Rio Grande Seven” -- that are at the center of a Medicaid payment freeze that has affected services throughout the state since late June.

Then, Heyeck singled out Roque Garcia, former acting CEO of Southwest Counseling Services (Las Cruces), who was a recipient of the payments and asked legislators, “What does this mean? How can this money be accounted for to ensure that it isn't used for private benefit?"  Heyeck thenasserted that Garcia had abused agency travel funds largely paid for by Medicaid through lavish travel to resort destinations in a private aircraft.

During questions, one legislator asked that Garcia, who was in attendance at the hearing, be allowed to answer Heyeck's accusations. At the hearing, Garcia denied any improper or illegal activity. He defended the "web of relationships" and expenditures as part of an effort by providers to build an cost-efficient regional care network. All of the travel was above-board, he added.

Later, Behavioral Healthcare contacted Garcia and asked him for further information regarding the network and travel expenditures. Garcia told BH that the providers that Heyeck described as "the Rio Grande Seven" initially came together (there were eight then) more than a decade ago, prompted by rising operating costs, the pressures of managed care, and ever-smaller Medicaid payments.

Instead of simply competing with each other for consumers and funding over the vast southern half of the state, the providers, with support from their boards, sought a way to share and leverage key resources — administration and billing, quality assurance and training, employee health benefits, financial and risk management. But they didn't know how to properly structure a network. That's where Providence Services came in, Garcia said.

Initially, through consulting services and then, through a contract relationship, the seven agencies used Providence to purchase group health benefits (saving a combined $500,000 annually), finance major purchases like an expensive financial software package, develop common quality assurance and documentation practices, offer compliance and other online training, and advise on financial and management performance.

As part of the benefits and contract arrangement with Providence, Garcia said that he and other agency principals became Providence/RGM employees. This, he said, accounts for the $288,000 annual expenditure by Southwest Counseling Services to Providence/RGM. He says that this includes his salary, that of his CFO, all costs of quality assurance, as well as all agency costs for online training, and travel expenses.

From this, Garcia said that he received “one salary” of $107,000 and spent approximately $16,000 on agency-related travel in the past year. His work as CEO and "agent" for RGM means nothing more, he said, than that he is legally empowered to negotiate network contracts and conduct business or purchases through it or RGBHS on behalf of network members.

For a time, Garcia said that the Rio Grande network was efficient enough to function as a full-risk HMO with a narrow 4% profit margin across the seven-agency service area. And, while the network of agencies themselves lacked the financial wherewithal to assume the risks involved with this mission, their status as a Providence subsidiary gave them the financial backing they needed to make the approach work for several years. Then, another round of changes to the state’s care system made the approach impractical.  At its peak, the Rio Grande network employed 40 people in network management, benefits, and billing services.

Travel claimed for business purposes

Garcia also answered Heyeck's allegations that he misused travel funds. Travel, he said, is a major expense for rural and frontier providers that "people from Santa Fe just don't understand." Attending regular meetings called by state Medicaid officials, alone or with colleagues, required a 300-mile, one-way drive to Santa Fe, meals, and often overnight stays. The expenses add up, he said.

As a licensed pilot and the owner of a four-seat, single-engine airplane, Garcia said that he sometimes flew himself or colleagues to business meetings, principally in Santa Fe.  (He noted that the 2013 National Council for Behavioral Health Conference was held in Las Vegas.) Garcia said that flying cut travel time, reduced time away from the office for himself and others, and eliminated hotel and meal expenses. He says that all travel expenses were approved and managed by Providence Services under a contract that provided management services and travel expenses for a fixed price.

The relationship of the agencies and network with Providence was good business, Garcia maintains. “Providence offered a lot of expertise and invested a lot in us, often without making a whole lot of money." Garcia said that his agency can document savings of at least $40,000 annually from the decade-long relationship.

"There is no wrongdoing here," he insists. He maintains that he and the "Rio Grande Seven" believe that, with regard to the functions of the Rio Grande behavioral health agency network, the New Mexico Attorney General will agree.

Provider relationships questioned

In speaking with Behavioral Healthcare, Garcia also addressed statements by made by HSD officials in the September 3 hearing that implied that imply a web of related party business relationships are "strange" or that they imply inappropriate or fraudulent behavior on the part of a behavioral health provider. 

Non-profit organizations, he explained, often create multiple corporate structures so that "a problem in one entity won't bring the entire agency down." For this reason, or to comply with the wishes of a funder, grantor, or donor, agencies might segment their operations into multiple parts.

Garcia pointed to the numerous business relationships that Daniel Frontieri, the CEO of LaFrontera - one of the Arizona agencies that set up shop in New Mexico - maintains. According to the New Mexico and Arizona Secretaries of State, Frontieri is listed as CEO, President, or director of some 18 organizations. These include apartment and housing developments, LaFrontera Center (a medical facility), LaFrontera Counseling Services, Kid's First (a local charity), and even a Mariachi music conference and festival, which the LaFrontera organization uses as a major fundraiser.

"I didn't say that so that someone would launch an investigation of him," Garcia quipped.

Why so many different relationships? The answer has to do with the breadth of services typically required by those with mental health and addiction problems. These range from treatment, therapy, recovery support, and medical services to housing, education, employment or skills training, and more. Because the funding sources, regulations, and risks of these ventures are so diverse, behavioral health CEOs and leadership teams are often engaged in what appear to be numerous and complex business relationships.

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