Lovelace reaches settlement with New Mexico AG over alleged $300M Medicaid fraud scheme

Albuquerque, N.M.-based Lovelace Health System settled allegations it defrauded the state's Medicaid program roughly $300 million in taxes beginning in 1989 and spanning nearly two decades, according to a Santa Fe New Mexican report.

In November 2009, Duke Rodriguez, who previously served as Lovelace's CFO and then as COO before leaving in 1993, filed a whistleblower suit sealed in a New Mexico district court. In his lawsuit, Mr. Rodriguez claimed Lovelace fraudulently collected about $300 million in gross receipts taxes from the state's Medicaid program despite the health system's exemption from paying gross receipts taxes to the state.

New Mexico's Office of the Attorney General contacted Lovelace, its parent company Ardent Health Services in Nashville, Tenn., and Lovelace's former parent Cigna in Bloomfield, Conn., regarding its investigation of Medicaid claims data in June 2015. The office told the three companies it found Lovelace collected at least $142.6 million in fraudulent gross receipts taxes from Medicaid, according to the report.

However, the office reached a settlement with Lovelace within the next year to pay New Mexico $2 million and Mr. Rodriguez $500,000 under the whistleblower lawsuit. Cigna paid the state roughly $39,000 and Mr. Rodriguez approximately $8,000, Santa Fe New Mexican reports. All of the companies denied the allegations in the settlements.

In addition, Lovelace claimed the state's Medicaid program paid gross receipts taxes to Lovelace despite having "full knowledge" the system was excluded from the taxes. Following the June 2015 notification, the AG office received information from Lovelace and the New Mexico Human Services Department indicating Lovelace erroneously retained only $1.6 million of the gross receipts taxes.

"We collected well beyond … the gross receipts tax that were paid" in error to Lovelace, Sharon Pino, deputy attorney general for criminal affairs, told Santa Fe New Mexican. She said Mr. Rodriguez's allegations were unproven.  

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