State investigators in Arizona are examining $3.4 million in possible Medicaid fraud at the parent company of a Phoenix nursing center where a woman in a vegetative state was raped and gave birth to a boy in December, according to court records.
The inquiry into the company, Hacienda HealthCare, began in 2016, when investigators at the health agency that manages the state’s Medicaid program started asking questions about Hacienda’s organizational and accounting structure. Investigators wanted to know whether Hacienda executives improperly shifted overhead expenses in the company to a subsidiary at the same location that then overcharged the state’s Medicaid program.
Investigators with the inspector general’s office of the state health agency, the Arizona Health Care Cost Containment System, have told Hacienda that $3.4 million in Medicaid payments to the company, for expenses from July 2013 to June 2014, appears suspicious and potentially fraudulent.
Nearly three years after the inquiry began, the state and the company are still locked in a legal battle. Hacienda officials have refused to turn over thousands of pages of internal financial documents sought by the state in multiple subpoenas, arguing that the requests are burdensome and beyond the state’s investigative scope. The state has said the investigation cannot be completed without them.
In an effort to force Hacienda to comply with the subpoenas, the state health agency sued the company in 2017 in Maricopa County Superior Court. A judge ruled in the state’s favor but Hacienda appealed, which is where the case stands today in the Arizona Court of Appeals.
“We can confirm that the office does have an open investigation into Hacienda related to fraud, waste and abuse,” Heidi Capriotti, a spokeswoman for the Arizona Health Care Cost Containment System, said. “As part of that investigation, A.H.C.C.C.S. requested a variety of Hacienda’s financial records, and sought enforcement of its administrative subpoena when Hacienda refused to comply with the request.”
Hacienda said in a statement on Friday: “At every step in the process, Hacienda has strenuously denied any and all allegations of overpayment. The company has produced a voluminous set of records to the investigating agency meant to prove that no such overpayments occurred. Most importantly, this lawsuit has nothing to do with quality of care issues.”
In earlier court filings, the company said that it had used the same “cost-effective management structure” since 2001 and that this structure had been approved by independent auditors and was not questioned by state regulators until the 2016 investigation. The company said it had turned over more than 16,000 pages of documents to the Arizona Health Care Cost Containment System but had resisted the agency’s other requests.
“A.H.C.C.C.S. exceeded its authority, and the superior court’s order enforcing the subpoena should be vacated,” lawyers for the company wrote in the appeal.
While that investigation continues, detectives with the Phoenix Police Department recently opened a criminal investigation at a nursing home operated by Hacienda HealthCare after a 29-year-old woman who has been in a coma nearly her entire life gave birth to a boy there on Dec. 29. The two investigations have brought intense national scrutiny on Hacienda, Arizona’s largest privately operated long-term nursing company for people with developmental disabilities. People in its care have a range of intellectual and physical disabilities.
In recent years, Hacienda has also been investigated by the Arizona Department of Health Services over the treatment of its patients. In 2013, the agency found that a male employee at the nursing home being investigated, the Hacienda Skilled Nursing Facility, had made sexually explicit remarks to patients, including telling a resident that his penis was erect. In 2017, investigators reported that employees freely walked in on patients while they were naked and showering.
The woman at the center of the police investigation has been at Hacienda since she was 3. She cannot move on her own, cannot communicate and requires total supervision, according to health records obtained by The New York Times.
The San Carlos Apache Tribe, whose reservation is about 100 miles east of Phoenix, said the woman was an “enrolled member” of the tribe. The tribe’s chairman and her mother, who was granted permanent guardianship in 2009, have not returned calls seeking comment.
On Friday, the police released a frantic 911 call from the Hacienda nursing center when the woman went into labor on Dec. 29. The caller said no one knew that the woman had been pregnant. Both the mother and the baby were recovering at a Phoenix hospital, the police said this week.
“She was not in a position to give consent to any of this,” Sgt. Tommy Thompson, a police spokesman, said on Wednesday. “This was a helpless victim who was sexually assaulted.”
Since the Phoenix police announced their investigation a week ago, detectives have collected the DNA of male employees at Hacienda; the state dispatched health inspectors to check on the other patients there; and the company’s longtime chief executive, Bill Timmons, resigned. Over nearly three decades, Mr. Timmons had built Hacienda into a major player in long-term health care in Arizona.
The company says it operates more than 40 programs through its subsidiaries, which provide services to more than 2,000 people every year. The Hacienda Skilled Nursing Facility, which is one of those subsidiaries, has at least 74 patient beds, according to federal records. Most of the subsidiaries operate out of the same property, about six miles south of downtown Phoenix, and share the same directors and executives.
From 2009 to last October, Hacienda received at least $6.7 million from the state in Medicaid funding and other money, according to public records. In his position at Hacienda, Mr. Timmons was well compensated over the past decade, according to the company’s financial filings. His total pay doubled from 2008 to 2017, when he received $674,212 in salary and other compensation.
But he resigned abruptly on Monday after reports of the police investigation became public, the company announced. Mr. Timmons had been at the center of the legal wrangling between Hacienda and the state, and he had fiercely defended the company’s corporate structure as legal and above board.
When Mr. Timmons resigned, Gary Orman, the executive vice president of the company’s board, said Hacienda would “accept nothing less than a full accounting of this absolutely horrifying situation.”