Ha­cienda faced fraud probe by DES in 2016

State reg­u­la­tors called for re­mov­ing pa­tients

The Arizona Republic - - Front Page - Robert An­glen and Stephanie Innes

The Phoenix fa­cil­ity where a co­matose pa­tient was raped and gave birth faced a crim­i­nal in­ves­ti­ga­tion two years ago over al­le­ga­tions it billed the state more than $4 mil­lion in bo­gus charges.

Reg­u­la­tors with Ari­zona’s so­cial­wel­fare agency wanted to re­move de­vel­op­men­tally dis­abled pa­tients from Ha­cienda Health­Care in 2016 and ter­mi­nate con­tracts that al­lowed the fa­cil­ity to pro­vide ser­vices for the state.

But the crim­i­nal case was dropped in 2017, and no charges were filed. The state’s Med­i­caid agency later sought

an or­der to force Ha­cienda to turn over fi­nan­cial records – a bat­tle that con­tin­ues in the courts.

The Ari­zona At­tor­ney Gen­eral’s Of­fice ac­cused Ha­cienda’s for­mer chief ex­ec­u­tive of­fi­cer in 2016 of re­fus­ing to turn over fi­nan­cial doc­u­ments re­quired by law even as he de­manded the state pay higher fees for ser­vices.

State paid Ha­cienda de­spite fraud claims

De­spite the court fight, state of­fi­cials did not sever ties with Ha­cienda and con­tin­ued plac­ing pa­tients at the fa­cil­ity. After the rape vic­tim gave birth, they cut off new ad­mis­sions.

“We are con­sid­er­ing al­ter­nate op­tions such as bring­ing in a third party to as­sume re­spon­si­bil­ity for the on­go­ing man­age­ment of Ha­cienda,” Gov. Doug Ducey’s of­fice said in a state­ment Fri­day.

Any ac­tion to cut state fund­ing in 2016 would have stripped Ha­cienda of its key rev­enue stream. The non-profit fa­cil­ity gets more than $20 mil­lion an­nu­ally in tax­payer funds for tak­ing care of ex­tremely ill peo­ple, many of whom are in­ca­pac­i­tated and on ven­ti­la­tors.

Records ob­tained by The Ari­zona Repub­lic show au­di­tors with the Ari­zona Depart­ment of Eco­nomic Se­cu­rity ac­cused Ha­cienda of over­billing the state in 2014 for wages, trans­porta­tion, house­keep­ing, main­te­nance and sup­plies. Depart­ment au­di­tors laid out their find­ings against Ha­cienda in a 2016 pre­sen­ta­tion to the At­tor­ney Gen­eral’s Of­fice.

They con­tended the cost of care at the fa­cil­ity was nearly three times the na­tional av­er­age. Ha­cienda’s an­nual av­er­age cost of care was $386,000 per client in 2012, com­pared with $134,000 per client in sim­i­lar U.S. fa­cil­i­ties, the au­di­tors said.

Their au­dit also high­lighted mileage for ve­hi­cles that “would av­er­age 3,663 miles per (pa­tient), enough to cross the state from east to west 10 times per client.”

Au­di­tors said Ha­cienda claimed 13 ve­hi­cles served about 35 pa­tients in

2014, a ra­tio of one van for ev­ery 2.7 pa­tients.

Ari­zona At­tor­ney Gen­eral Mark Brnovich’s of­fice con­firmed Fri­day it launched a crim­i­nal in­ves­ti­ga­tion in 2016 “fo­cused on fidu­ciary al­le­ga­tions of over-al­lo­cated funds.” But an of­fi­cial said DES au­di­tors could not sub­stan­ti­ate the claims and the case was dropped be­cause of a lack of ev­i­dence.

“What hap­pened at Ha­cienda Health­Care is an in­ex­cus­able tragedy,” spokes­woman Katie Con­ner said. “We can­not com­ment on any pos­si­ble on­go­ing in­ves­ti­ga­tions or any po­ten­tial ac­tions this agency may take.”

“Ha­cienda should have been ter­mi­nated two years ago per my plan.”

Ha­cienda ex­ec­u­tive: Did he use po­lit­i­cal clout?

Wil­liam Tim­mons, who re­signed as Ha­cienda’s chief ex­ec­u­tive of­fi­cer Dec. 31, fre­quently boasted about his ties to Ari­zona Gov. Doug Ducey and threat­ened to use his con­nec­tions with Repub­li­can lead­ers to shut down in­quiries, ac­cord­ing to two for­mer top DES of­fi­cials.

For­mer DES Di­rec­tor Tim­o­thy Jef­fries and chief law en­force­ment of­fi­cer Charles Lof­tus, who were forced out by Ducey in 2016, say their in­ves­ti­ga­tion of Ha­cienda was clouded by pol­i­tics and con­trib­uted to their ousters. Both have filed law­suits against the state.

Jef­fries said if the Ducey ad­min­is­tra­tion had fol­lowed through with his ef­forts to ter­mi­nate Ha­cienda’s state con­tracts and pur­sued crim­i­nal charges against Tim­mons, the rape never would have oc­curred.

“The heinous rape of a vul­ner­a­ble and de­fense­less San Car­los Apache woman at Ha­cienda is ab­so­lutely dis­gust­ing and de­testable,” Jef­fries said Fri­day. “Ha­cienda should have been ter­mi­nated two years ago per my plan ... Ha­cienda should have been crim­i­nally in­ves­ti­gated in 2016, vig­or­ously pros­e­cuted in 2017 and pru­dently ter­mi­nated in 2017.”

Jef­fries said Tim­mons was “in­tem­per­ate, abu­sive of and bel­liger­ent” when ques­tioned about Ha­cienda’s prac­tices or chal­lenged about ex­penses. “He was al­ways bran­dish­ing that he was go­ing to ‘take it to the gover­nor’s of­fice.’” he said.

Tim­mons did not re­spond to in­ter­view re­quests at his home or through a so­cial-net­work­ing site. Phone calls to his num­ber were blocked.

For­mer U.S. Rep. Matt Salmon is a for­mer lob­by­ist for Ha­cienda Health­Care who last worked for the fa­cil­ity in 2011. His wife, Nancy Salmon, is Ha­cienda’s vice pres­i­dent of com­mu­ni­ca­tions. She did not re­spond to re­quests for in­ter­views.

In 2011, Matt Salmon op­posed chang­ing a state law that could have cre­ated more com­pe­ti­tion for Ha­cienda from other providers of care to peo­ple with dis­abil­i­ties.

Salmon told the Ari­zona House Com­mit­tee on Health and Hu­man Ser­vices that DES was at­tempt­ing to put Ha­cienda out of busi­ness be­cause it fa­vors pub­licly run fa­cil­i­ties.

“DES had done ev­ery­thing pos­si­ble to close Ha­cienda Health­Care in the last ten years, in spite of the fact that it re­ceives the high­est marks by far of any en­tity pro­vid­ing this kind of care in the state,” he said.

Ducey: In­ves­ti­ga­tion con­tin­ues

Ducey’s of­fice on Fri­day said it had no al­le­giance to Tim­mons or Ha­cienda.

“There has been no in­flu­ence from Mr. Tim­mons on our ac­tions, which have been ag­gres­sive,” ac­cord­ing to a state­ment from the of­fice.

In 2015, the gover­nor signed leg­is­la­tion strip­ping Ha­cienda of the statu­tory mo­nop­oly it had for pro­vid­ing cer­tain types of gov­ern­ment-funded care.

Ducey spokes­woman El­iz­abeth Berry said Ducey was hor­ri­fied by ac­counts of the rape and de­nied that the state failed to act on con­cerns raised by DES.

“We have and will con­tinue to take this is­sue very se­ri­ously – it’s about pub­lic safety,” Berry said in an email. “Our own state agen­cies are en­gaged in in­ves­ti­gat­ing Ha­cienda on mul­ti­ple fronts, both for fi­nan­cial fraud and in re­la­tion to this re­cent hor­rific in­ci­dent. There will be con­se­quences for any vi­o­la­tions that oc­cur.”

Berry said Ha­cienda played no part in the forced res­ig­na­tions of Jef­fries and Lof­tus. They were pushed out fol­low­ing a con­tro­ver­sial two-year ten­ure

For­mer DES di­rec­tor

that in­cluded al­le­ga­tions of wrong­ful staff fir­ings, ques­tion­able travel ex­penses and stock­pil­ing weapons for the agency’s se­cu­rity force. Both men de­nied any wrong­do­ing.

Records show within 30 days of tak­ing over DES in 2015, Jef­fries iden­ti­fied Ha­cienda as a “threat” and re­ported it to Ducey. He re­peated his con­cerns in up­dates to the gover­nor ev­ery three months un­til 2016, when the crim­i­nal probe was launched.

Jef­fries said his con­cerns were driven by re­ports from case man­agers about pa­tient care and by Tim­mons’ re­fusal to turn over fi­nan­cial records.

When the in­ter­nal au­di­tors re­ported the fi­nan­cial find­ings based on the 2014 ex­penses, Jef­fries said he had to act. He said he be­lieved there could be more ques­tion­able billings.

“Pre­vi­ous years would un­der­score the same type of phe­nom­e­non ... What hap­pened in 2012 and 2013? What hap­pened in 2015, 2016, 2017 and 2018? We don’t know.”

He said the state should have in­ves­ti­gated Ha­cienda’s fi­nances for ev­ery year since it be­came a state ven­dor.

“In one year, there was $4.3 mil­lion in mis­billings,” he said. “When did it start?”

“This dis­pute con­cerns a le­git­i­mate dif­fer­ence of opin­ion be­tween Ha­cienda and the state ...” David Lei­bowitz

Ha­cienda spokesman

Ha­cienda board un­aware of crim­i­nal probe

Ha­cienda’s board of di­rec­tors said Fri­day that un­til be­ing con­tacted by The Repub­lic, it was not aware of any crim­i­nal in­ves­ti­ga­tion or ef­forts by the state to sus­pend its con­tract.

In a state­ment pro­vided by Ha­cienda spokesman David Lei­bowitz, board mem­bers dis­puted the char­ac­ter­i­za­tion of the fa­cil­ity’s le­gal dis­pute as crim­i­nal.

“This dis­pute con­cerns a le­git­i­mate dif­fer­ence of opin­ion be­tween Ha­cienda and the state as to whether Ha­cienda’s al­lo­ca­tions of over­head costs and cer­tain other ex­penses have been done cor­rectly,” the state­ment said.

“Ha­cienda and its at­tor­neys be­lieve the com­pany has fol­lowed the let­ter of the law,” the state­ment said. “The State ap­pears to be­lieve oth­er­wise. No crime was com­mit­ted here. No one has been crim­i­nally charged. No one has been ar­rested. No fraud oc­curred. No un­eth­i­cal or il­le­gal con­duct oc­curred.”

The state­ment said no Ha­cienda leader or board mem­ber im­prop­erly ex­erted in­flu­ence to aid the or­ga­ni­za­tion and never at­tempted to scut­tle any in­ves­ti­ga­tion.

“The Ha­cienda Board of Di­rec­tors, a vol­un­teer group that draws no pay for its ser­vice, would never con­done il­le­gal con­duct by a Ha­cienda staff mem­ber,” the state­ment said.

The rape and preg­nancy has shaken the or­ga­ni­za­tion to its foun­da­tion, the state­ment said.

“There is no ex­cus­ing what hap­pened to a res­i­dent of our fa­cil­ity, even if it has never hap­pened be­fore and even if we pre­vent such an aw­ful thing from hap­pen­ing again,” the state­ment said.

The board is ex­am­in­ing all facets of its busi­ness and pa­tient safety, it said.

“We will con­tinue to co­op­er­ate with Phoenix Po­lice and all other in­ves­tiga­tive agen­cies to un­cover the facts in this hor­rific sit­u­a­tion,” the state­ment said.

‘Fraud, waste and abuse’

State Med­i­caid of­fi­cials said Fri­day they are su­ing Ha­cienda for fi­nan­cial records in or­der to es­tab­lish a fraud case.

“We can con­firm that the of­fice does have an open in­ves­ti­ga­tion into Ha­cienda re­lated to fraud, waste and abuse in the ap­prox­i­mate amount of $3 mil­lion,” said Heidi Capri­otti, spokes­woman for Ari­zona Health Care Cost Con­tain­ment Sys­tem.

Ha­cienda’s re­fusal to com­ply with let­ters and sub­poe­nas from the At­tor­ney Gen­eral’s Of­fice led state of­fi­cials to file a law­suit in Mari­copa County Su­pe­rior Court in 2017.

Capri­otti said AHCCCS re­quested a va­ri­ety of Ha­cienda’s fi­nan­cial records and sought a sub­poena when Ha­cienda did not com­ply.

“The fact that the state agen­cies have re­peat­edly been stymied when at­tempt­ing to un­der­stand the fi­nances of Ha­cienda Health­Care and its sub­sidiaries – pre­sum­ably in fur­ther­ance of other in­ves­ti­ga­tions for po­ten­tial fraud – un­der­scores the need for the court to com­pel Ha­cienda Health­Care’s com­pli­ance,” a lawyer rep­re­sent­ing the agency

said in a court fil­ing in Au­gust 2017.

A judge agreed and last year or­dered Ha­cienda to pro­vide the fi­nan­cial in­for­ma­tion. Ha­cienda ap­pealed to a higher court. The case is on­go­ing.

Lof­tus pressed for the crim­i­nal in­ves­ti­ga­tion of Ha­cienda in 2016. He said he brought the au­dit find­ings to the at­tor­ney gen­eral’s med­i­cal-fraud unit for crim­i­nal pros­e­cu­tion.

“The case clearly had the ap­pear­ance of a fraud­u­lent scheme,” he said last year in a state­ment pre­pared in con­nec­tion with his law­suit against the state.

He said there was “an ex­tra­or­di­nary” level of anx­i­ety among DES em­ploy­ees be­cause they be­lieved Tim­mons was Ducey’s friend.

Cam­paign con­tri­bu­tion records show Tim­mons made a to­tal of $4,000 in do­na­tions to Ducey’s cam­paign in 2014 and 2016. He also do­nated to other can­di­dates, mostly Repub­li­can.

Staff didn’t know pa­tient was preg­nant

Staff mem­bers told po­lice they didn’t know their 29-year-old pa­tient was preg­nant un­til she be­gan giv­ing birth Dec. 29.

The woman, a mem­ber of the San Car­los Apache tribe, had lived at Ha­cienda de los An­ge­les near South Moun­tain for nearly 26 years. She was ad­mit­ted when she was 3.

The 112-pound woman is de­scribed in court doc­u­ments as “in­ca­pac­i­tated” and “un­able to make any de­ci­sions or give con­sent due to her dis­abil­ity.” She is de­scribed as hav­ing a brain in­jury, re­liant on feed­ing and breath­ing tubes and in need of a “max­i­mum level of care.”

On a 911 call re­leased by the Phoenix Po­lice Depart­ment, staff mem­bers said they were shocked when the woman be­gan de­liv­er­ing the in­fant.

“One of the pa­tients just had a baby and we had no idea she was preg­nant,” a nurse told the emer­gency dis­patcher.

She said that the baby wasn’t breath­ing.

“Oh, the baby’s turn­ing blue, baby’s turn­ing blue!” the uniden­ti­fied nurse shouted. “We need an IV!”

More than 4 min­utes into the call, the baby be­gan to cry.

The woman is now in a hos­pi­tal re­cu­per­at­ing with her son.

The Repub­lic typ­i­cally does not name vic­tims of sex­ual as­sault.

Po­lice ob­tained a war­rant al­low­ing in­ves­ti­ga­tors to ob­tain DNA sam­ples from male work­ers at the fa­cil­ity. Au­thor­i­ties said the in­ves­ti­ga­tion could be a “long process” and asked for the com­mu­nity’s as­sis­tance in find­ing a per­pe­tra­tor.

Ari­zona faces few op­tions for care

Ducey’s of­fice said to its knowl­edge, it had not re­ceived any pre­vi­ous al­le­ga­tions about pa­tient safety or care at Ha­cienda. “Provider per­for­mance in re­gard to qual­ity of care has not mer­ited can­cel­la­tion/ter­mi­na­tion of the provider’s con­tract prior to the re­cent in­ci­dent,” the gover­nor’s of­fice said in a state­ment.

State of­fi­cials wor­ried sev­er­ing ties with the fa­cil­ity could leave pa­tients with­out an­other place to go be­cause of the lim­ited num­ber of fa­cil­i­ties pro­vid­ing sim­i­lar care.

“There are a lim­ited num­ber of ICF (in­ter­me­di­ate-care fa­cil­ity) beds in the state, which poses a chal­lenge in re­gard to can­cel­ing the con­tract/clos­ing the doors of the fa­cil­ity and mov­ing mem­bers to an al­ter­nate place­ment,” the gover­nor’s of­fice said.

State of­fi­cials said they are ex­plor­ing op­tions, such as ap­point­ing a third­party to run Ha­cienda, to “en­sure the health and safety of mem­bers placed in the fa­cil­ity with­out dis­rupt­ing care for this med­i­cally com­plex, med­i­cally frag­ile pop­u­la­tion.”

Ha­cienda Inc. was founded in 1967 and has sev­eral fa­cil­i­ties and clin­ics through­out the Val­ley. Ha­cienda de los An­ge­les is de­scribed on the com­pany’s web­site as an all-in­clu­sive res­i­den­tial care, “for long-term, tran­si­tion-to­home and short-term respite.”

The com­pany’s web­site also says it is the only pri­vately owned in­ter­me­di­ate-level care fa­cil­ity for peo­ple with in­tel­lec­tual dis­abil­i­ties in Ari­zona.

In ad­di­tion to stop­ping pay­ments for new ad­mis­sions to Ha­cienda, the state has no­ti­fied the Cen­ters for Med­i­caid and Medi­care Ser­vices of the rape, which could prompt a fed­eral in­ves­ti­ga­tion.

“We will con­tinue to take a very ag­gres­sive ap­proach when it comes to Ha­cienda,” the gover­nor’s of­fice said.

Jef­fries said the state should have acted years ago.

“This hor­rific act, all by it­self, should jus­tify to all that Ha­cienda should be ter­mi­nated,” he said.

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