In a complaint filed in state District Court last week, Jeffreys said she went to the attorney general and state auditor on Feb. 26 to report "irregularities in the arrangements for audits of behavioral health providers on behalf of OptumHealth," the company under contract with the state to oversee New Mexico's managed care system for behavioral health.
A department spokesman said Friday that he couldn't comment on the lawsuit because it is pending litigation.
In June, the department froze payments to 15 nonprofits that provide mental health and substance abuse services after an audit by Public Consulting Group, a Boston company, found what the agency said was a high rate of billing problems and possible mismanagement.
Some of the 15 nonprofits are currently being transitioned to management by outside companies, a move that has drawn fire from advocates.
"According to OptumHealth's contract, it was required to conduct audits of the behavioral health providers," Jeffreys' lawsuit states. "OptumHealth had not conducted audits as it was required to do. (Human Services) had undertaken to contract with an independent auditor, (Public Consulting Group), to conduct audits that OptumHealth was supposed to have conducted."
The contract with Public Consulting Group wasn't submitted to the Behavioral Health Collaborative or the Department of Finance and Administration as was required, Jeffreys' lawsuit says. It also says that the Human Services Department did not seek return of contract money paid to OptumHealth for audits of the providers.
"Jeffreys reasonably believed these actions constituted violations of the Procurement Code," the lawsuit says.
The Human Services Department has maintained that the Public Consulting Group audit was prompted late last year after OptumHealth conducted a review of the providers' Medicaid claims. The review was completed using new software tools aimed at enhancing the detection of fraud, waste and abuse. The review determined that "aberrant billing practices had occurred" among the behavioral health providers.
The Attorney General's Office has taken no action against Human Services in connection with any of Jeffreys' allegations.
Attorney General Gary King has supported the department's actions in suspending Medicare payments to the 15 mental health providers who are under investigation for possible fraud, and keeping secret the findings of Public Consultant Group's audit until the investigation is complete.
An attorney general spokeswoman said Friday that the investigation is "on track," but a decision on whether criminal charges are warranted might not be made until late September.