Chief medical officer for Arizona's AHCCCS program has expired medical license

PHOENIX — The chief medical officer of the state’s health care program for the needy is practicing without a license.

Records from the Arizona Medical Board show that Theresa L. Costales, first licensed in 2018, last renewed her license in 2023.

Those records also show that the license was supposed to be renewed by April 9 of this year. And they show that since it was not renewed, it expired on Aug. 9.

But Costales, a psychiatrist, has continued to serve as chief medical officer for the Arizona Health Care Cost Containment System, the state’s Medicaid program, which provides care in various forms to more than 1.9 million state residents.

In a news release Friday, Republican lawmakers questioned how no one noticed.

“A lapse like this should never happen in a healthcare agency responsible for millions of people,’’ said Speaker Steve Montenegro in a prepared statement. “The public deserves accountability when even the most basic standards aren’t met.

And Rep. Neal Carter, R-San Tan Valley, the speaker pro-tem, said the fact Costales has been allowed to continue in a job that reportedly pays $325,000 a year shows that Gov. Hobbs “has failed once again to ensure competence and accountability in state government.’’

The governor’s office, however, referred all inquiries to AHCCCS. And it issued a prepared statement saying it is “aware of Dr. Costales’ current medical status.’’

The agency said a renewal notice was sent to a former employer’s address, delaying her receipt of the information. The agency said Costales “has been in contact with the State Medical Board and is actively pursuing an expedited renewal and approval.’’

But the records of the medical board show that it has the AHCCCS office as her address.

Reasons for the delay aside, House Majority Whip Julie Willoughby said the fact the agency was operating for months with a medical director without a license raises serious questions.

The Chandler Republican pointed out all this comes as AHCCCS has been implementing changes in programs that determine whether children with developmental disabilities will lose state-provided care.

All that comes because the state is implementing new assessment tools to determine how much skilled care can be considered medically necessary. Home and community-based services are now provided for children through the Arizona Long-Term Care System, part of AHCCCS. In some cases, the method of evaluation has been changed, focusing on physical abilities versus a child’s ability to communicate or control behavior.

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“With the controversial HCBS system tool rolled out, we must ask: Were those reviews overseen by a CMO whose license had already expired?’’ Willoughby asked.

“If so, how can families trust the integrity of the data or the decisions that came from it?’’ she continued. “The developmental disabilities community has already been harmed, and it is outrageous that those decisions may have been shaped by someone without a current medical license.’’

AHCCCS did not provide any answers to those questions, either in its prepared response or to follow-up questions.

Less clear is what is the effect, if any, of having an unlicensed person in that position.

There apparently is no statutory requirement stating the agency’s chief medical officer must be a licensed physician. By contrast, the GOP lawmakers said, the Arizona Department of Corrections, Rehabilitation and Reentry requires applicants to be its chief medical officer to “possess a valid, unrestricted Arizona medical license.’’

The discovery of Costales’ lack of a license comes just days after Hobbs named Virginia Rountree to head AHCCCS.

Carmen Heredia, who had been the governor’s original pick, resigned earlier this year after it became clear she was going to have trouble getting confirmed by the Republican-controlled Senate.

Sen. Jake Hoffman, who chairs the Committee on Director Nominations, said Heredia had overseen “failures, mismanagement and fraud’’ at the agency. And the Queen Creek Republican specifically cited the finding by a judge earlier this year that AHCCCS had improperly issued contracts to health care companies that provide services to 26,000 older adults and people with disabilities.

All this also comes as the new federal budget affects funding for health care.

House Majority Leader Michael Carbone questioned why no one at AHCCCS caught the fact that its medical director was operating without a license.

“Any citizen can look this up in minutes,’’ said the Buckeye Republican, with the medical board operating a web site where individuals can insert the name of anyone and determine if that person is licensed. “That it slipped through the cracks at the highest level of medical leadership is completely unacceptable.’’