All This Talk About Provider Medicaid Fraud…What about MCO Fraud?

Everyday in the Medicaid world, we hear accusations or stories about health care providers committing fraud. But what about MCO fraud? Who or what is monitoring the MCOs for potential fraud? And what would MCO fraud look like?

First, what is an MCO?

Managed Care Organizations (MCOs) are the healthcare organizations that manage state’s Medicaid, including the finance, implementation of health services, and health care provider eligibility in the Medicaid contract.

MCO fraud looks different from provider fraud. Provider Medicaid fraud could be providing excessive services, double-billing for services, etc.  MCO fraud could be the implementation of cost-savings procedures that lead to underutilization or denial of medically necessary services.

Specific examples of MCO fraud: (These examples are all make-believe. Any similarity to an example and real-life is unintentional):

  • MCO denies medically necessary ACTT services and discharged Medicaid recipient is sent to Outpatient Behavioral Therapy as a “step-down.” Recipient does not receive necessary services and commits crimes, ultimately leading to incarceration.
  • MCO denies enrollment of a health care provider who provides residential services to teenagers with severe mental illnesses, some with violent tendencies.  Provider (because of lack of Medicaid contract) is no longer allowed to care for the residential teenagers.  Residential facility closes and teenagers are on the streets.
  • MCO denies so many health care providers in a certain county that Medicaid recipients have multi-month waiting periods before receiving services.  During the multi-month wait, another Connecticut slaughter occurs, but in North Carolina.

These are serious repercussions.  These serious repercussions (although the exact results would be unknown) are being sent into action by MCOs’ underutilization of quality health care providers and denials of medically necessary services.

Why would an MCO commit fraud? (Which is what I am calling underutilization of providers and denials of medically necessary services)?

MCOs are Prepaid Inpatient Health Plan entities (PIHPs). Meaning that each fiscal year, the MCOs are given a lump sum from the Department of Health and Human Services (DHHS), in a combination of federal and state money.  That lump sum is used throughout the year to fund all Medicaid services (the services managed by the MCOs) for all Medicaid recipients in that particular MCO’s jurisdiction, sometimes 10+ counties.

It is in the best interest of an MCO, as a business in the business to be profitable, to refuse to enroll providers and deny services in order to save expenses.

Furthermore, MCO contribute a percentage to a “risk account” throughout the contract period.  When the contract is fulfilled and DHHS determines that the MCO fulfilled the agreement, the MCO  is entitled to keep all the money in the risk account.

So, in essence, I agree that we, as a state, need to discover, and then prosecute, provider Medicaid fraud.  Medicaid fraud costs taxpayers an exhorbitant amount of money.

But, my question is, who is discovering the MCO fraud? MCO fraud may not cost taxpayers money directly, but, even worse, MCO fraud causes health care providers to NOT be able to provide medically necessary services to those most in need.  MCO fraud causes Medicaid recipients to NOT receive needed services.  Which fraud is worse?

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on April 10, 2013, in DHHS, Division of Medical Assistance, Health Care Providers and Services, MCO, Medicaid, Medicaid Audits, Medicaid Contracts, Medicaid Fraud, Medicaid Recipients, Mental Health, North Carolina, Outpatient Behavioral Health, Provider Medicaid Contracts, Taxpayers, Termination of Medicaid Contract and tagged , , , , , , , , . Bookmark the permalink. 4 Comments.

  1. To quote PBH..’..your son is too medically needy, he does not meet the waver. The only thing we are required to do is assist in locating a nursing home, and placing him there. It may or may not be in the State of North Carolina..’ There are no service definitions specific to brain injury..and if it is combined with medical needs, you are left out in the cold. We are working to change this, but there are many changes to make.. Without being on a ventilator, or having a trach, individuals are not eligible for private duty nursing at home..

  2. Where is your son now?

    • He lives here at home. Happily. Healthily. Which would certainly not be the case were he in a long term care facility “somewhere”. Thanks to our health insurance (don’t ask me about my opinions and concerns regarding health care changes, lol). The reason I worry..and work as hard as I do trying to repair the ‘system’? Because His future depends on home health care, and to keep it, his Dad cannot retire. Ever.One day his siblings will assume his care (we have a large, loving family). But they also have jobs and families of their own, and I don’t want them to either become indebted, or grow old at a young age caring for their youngest brother.

      There are some huge gaps in our healthcare systems in North Carolina..and the most affected are those with multiple health issues, complicated health problems, and combinations of medical/mental health care needs.

      Several years ago I found myself in the position of appealing denials from insurance and Medicaid concurrently. I was scheduled to appear in a hearing against Medicaid, and felt completely out of my element. This was not helped by the fact I was exhausted from caring for my adult son 24 hrs a day. Fortunately, our insurance company overturned their denial..and has maintained their level of home nursing hours over the years. But the threats of cutting or stopping hours is always there, even more so in the past couple of years.

      I was shocked to find that PBH (Cardinal Healthcare) could simply refuse to enroll a Medicaid recipient in their catchment area. The thought of removing a sentient (or not, for that matter) human being, with feelings and opinions, from those who love and care for him..to an unfamiliar place to be cared for by strangers is abhorrent. He is reliant on others for every need..no matter how small. It takes time, effort, and love. I bet the people running PBH take more care with their house pets..

  1. Pingback: Protecting Seniors from Medicaid Fraud - Federal Hill Gazette

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