Category Archives: Performance audit
Happy New Year, readers!!! A whole new year means a whole new investigation plan for the government…
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) publishes what is called a “Work Plan” every year, usually around November of each year. 2017 was no different. These Work Plans offer rare insight into the upcoming plans of Medicare investigations, which is important to all health care providers who accept Medicare and Medicaid.
For those of you who do not know, OIG is an agency of the federal government that is charged with protecting the integrity of HHS, basically, investigating Medicare and Medicaid fraud, waste, and abuse.
So let me look into my crystal ball and let you know which health care professionals may be audited by the federal government…
The 2017 Work Plan contains a multitude of new and revised topics related to durable medical equipment (DME), hospitals, nursing homes, hospice, laboratories.
For providers who accept Medicare Parts A and B, the following are areas of interest for 2017:
- Hyperbaric oxygen therapy services: provider reimbursement
- Inpatient psychiatric facilities: outlier payments
- Skilled nursing facilities: reimbursements
- Inpatient rehabilitation hospital patients not suited for intensive therapy
- Skilled nursing facilities: adverse event planning
- Skilled nursing facilities: unreported incidents of abuse and neglect
- Hospice: Medicare compliance
- DME at nursing facilities
- Hospice home care: frequency of on-site nurse visits to assess quality of care and services
- Clinical Diagnostic Laboratories: Medicare payments
- Chronic pain management: Medicare payments
- Ambulance services: Compliance with Medicare
For providers who accept Medicare Parts C and D, the following are areas of interest for 2017:
- Medicare Part C payments for individuals after the date of death
- Denied care in Medicare Advantage
- Compounded topical drugs: questionable billing
- Rebates related to drugs dispensed by 340B pharmacies
For providers who accept Medicaid, the following are areas of interest for 2017:
- States’ MCO Medicaid drug claims
- Personal Care Services: compliance with Medicaid
- Medicaid managed care organizations (MCO): compliance with hold harmless requirement
- Hospice: compliance with Medicaid
- Medicaid overpayment reporting and collections: all providers
- Medicaid-only provider types: states’ risk assignments
- Accountable care
Caveat: The above-referenced areas of interest represent the published list. Do not think that if your service type is not included on the list that you are safe from government audits. If we have learned nothing else over the past years, we do know that the government can audit anyone anytime.
If you are audited, contact an attorney as soon as you receive notice of the audit. Because regardless the outcome of an audit – you have appeal rights!!! And remember, government auditors are more wrong than right (in my experience).
A recent State Auditor report found that DHHS “had approximately 2,500 non-competitively bid contracts with a value of approximately $2.4 billion between state fiscal year 2012 through 2014. The value of the no-bid contracts accounts for more than 32% of all contracts during the same period.”
No bid contracts are exactly that – the company awarded the contract received the contract without competition, or a bid process. Think of a no bid contract as a try out for a professional football team, but only one person is trying out. Generally, competition breeds better results because people try harder when they compete, rather than a solo act.
In contract bidding, rivalry also breeds a lower contract price. It’s only logical. If you know that other companies are submitting bids, you are going to submit the lowest number possible.
So how is DHHS allowed to award no bid contracts?
NC Statute dictates that the AG or the AG’s attorney shall review “all proposed contracts for supplies, materials, printing, equipment, and contractual services that exceed one million dollars…” as of June 27, 2011. See NCGS 114-8.3 as amended by Session Law 2011-326 and Session Law 2013-234.
But – Per 09 NCAC 06B .0901, “…competition may be limited or waived where a factual basis demonstrates support of one or more of the conditions set forth in Paragraph (b) of this Rule. If the procurement is within a purchasing agency’s general delegation, then the purchasing agency may waive competition in conformance with this Rule. If the procurement is greater than the agency’s delegation, requests for limited or waived competition shall be submitted to the State CIO for approval.”
Here are the exceptions found in 09 NCAC 06B.0901(b):
(b) Competition may be limited or waived under the following conditions:
- Competition is not available;
- A needed product or service is available from only one source of supply;
- Emergency action is indicated;
- Competition has been solicited but no responsive offers have been received;
- Standardization or compatibility is the overriding consideration;
- A donation stipulates the source of supply;
- Personal or particular professional services are required;
- A product or service is needed for a person with disabilities and there are overriding considerations for its use;
- Additional products or services are needed to complete an ongoing job or task;
- A particular product or service is desired for educational, training, experimental, developmental or research work;
- Equipment is already installed, connected and in service, and it is determined advantageous to purchase it;
- Items are subject to rapid price fluctuation or immediate acceptance;
- There is evidence of resale price maintenance or other control of prices or collusion on the part of persons or entities that thwarts normal competitive procedures unless otherwise prohibited by law;
- A purchase is being made and a price is available from a previous contract;
- The requirement is for an authorized cooperative project with another governmental unit(s) or a charitable non-profit organization(s); or
- A used item is available on short notice and subject to prior sale.
Did all the no bid contracts that DHHS procured between state fiscal year 2012 through 2014 to equal approximately $2.4 billion fit within 1 or more of the above referenced exceptions?
At least, according to the State Auditor – No.
Here are the key findings of the State Auditor’s Report:
- Many no-bid contracts lacked required review and approval to protect state interests
- Many no-bid contracts lacked documentation of negotiations to improve pricing or terms
- Many no-bid contracts lacked adequate written justification to waive competition, which increases the risk of favoritism, unfavorable terms, and poor performance
It appears that DHHS failed this audit. Should we extrapolate?
The Yates memo? Sadly, we aren’t talking about William Butler Yates, who is one of my favorite poets:
TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand…Part of The Second Coming
Ok, so maybe it is a little melodramatic to compare the Yates memo from the Office of the Deputy Attorney General to the end of the world, the drowning of innocence, and The Second Coming, but I made analogies in past blogs that had stretched and, dare I say, hyberbolized the situation.
What is the Yates memo?
The Yates memo is a memorandum written by Sally Quillian Yates, Deputy Attorney General for the U.S. Dept. of Justice, dated September 9, 2015.
It basically outlines how federal investigations for corporate fraud or misconduct should be conducted and what will be expected from the corporation getting investigated. It was not written specifically about health care providers; it is a general memo outlining the investigations of corporate wrongdoing across the board. But it is germane to health care providers.
By far the most scary and daunting item discussed within the Yates memo is the DOJ’s interest in indicting individuals within corporations as well as the corporate entities itself, i.e., the executives…the management. Individual accountability.
No more Lehman Brothers fallout with former CEO Dick Fuld leaving the catastrophe with a mansion in Greenwich, Conn., a 40+ acre ranch in Sun Valley, Idaho, as well as a five-bedroom home in Jupiter Island, Fla. Fuld may have or may not have been a player in the downfall of Lehman Brothers. But the Yates Memo was not published back in 2008.
The Yates Memo outlines 6 steps to strengthen audits for corporate compliance:
- To be eligible for any cooperation credit, corporations must provide to the DOJ all relevant facts about individuals involved in corporate misconduct.
- Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
- Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.
- Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.
So why write about now – over 6 months after it was disseminated?
First, since its dissemination, a few points have been clarified that were otherwise in question.
About a month after its publication, U.S. Assistant Attorney General Leslie Caldwell emphasized the Yates memo’s requirement that corporations must disclose all relevant facts regarding misconduct to receive cooperation credit. Caldwell went so far to say that companies must affirmatively seek relevant facts regarding misconduct.
For example, Hospital X is accused of Medicare fraud, waste, and abuse (FWA) in the amount of $15 million. The Yates memo dictates that management at the hospital proactively investigate the allegations and report its findings to the federal government. The memo mandates that the hospital “show all its cards” and turn itself in prior to making any defense.
The problem here is that FWA is such a subjective determination.
What if a hospital bills Medicare for inplantable cardioverter defibrillator, or ICD, for patients that had coronary bypass surgery or angioplasty within 90 days or a heart attack within 40 days? What if the heart attack was never documented? What if the heart attack was so minor that it lasted under 100 milliseconds?
The Medicare National Coverage Determinations are so esoteric that your average Medicare auditor could very well cite a hospital for billing for an ICD even when the patient’s heart attack lasted under 100 milliseconds.
Yet, according to the Yates memo, the hospital is required to present all relevant facts before any defense. What if the hospital’s billing person is over zealous in detecting mis-billings? The hospital could very well have a legal defense as to why the alleged mis-billing is actually compliant. What about a company’s right to seek counsel and defend itself? The Yates memo may require the company to turn over attorney-client privilege.
The second point that has been clarified since the Yates’ memo’s publication came from Yates herself.
Yates remarks that there will be a presumption that the company has access to identify culpable individuals unless they can make an affirmative showing that the company does not have access to it or are legally prohibited from producing it.
Why should this matter? It’s only a memo, right?
Since its publication, the DOJ codified it into the revised U.S. Attorneys’ Manual, including the two clarifying remarks. Since its inception, the heads of companies have been targeted.
A case was brought against David Bostwick, the founder, owner and chief executive officer of Bostwick Laboratories for allegedly provided incentives to treating physicians in exchange for referrals of patients who would then be subjected to these tests.
When the pharmaceutical company Warner Chilcott was investigated for health care fraud prosecutors also went after W. Carl Reichel, the former president, for his alleged involvement in the company’s kickback scheme.
Prior to the Yates’ memo, it was uncommon for health care fraud investigations to involve criminal charges or civil resolutions against individual executives.
The Second Coming?
It may feel that way to executives of health care companies accused of fraud, waste, and abuse.
Our State Auditor Beth Wood’s most recent audit finds that The Public Schools of Robeson County failed to spend approximately $1 million in Medicaid dollars intended for special needs children in schools!!
See audit report.
“The Public Schools of Robeson County (School District) did not use approximately $1 million per year in Medicaid administrative reimbursements to provide required services to students with disabilities. The School District missed this opportunity to better serve students with disabilities because it was unaware of a contractual requirement to use the Medicaid reimbursements to provide required services.
Over the last three years, the School District reported that it used $26,780 out of $3.16 million in Medicaid administrative reimbursements to provide services to students with disabilities.
The amounts reportedly spent each year are as follows:
• $ 8,969 out of $1,010,397 (0.89%) in 2013
• $12,043 out of $872,299 (1.38%) in 2012
• $ 5,768 out of $1,278,519 (0.45%) in 2011”
The question that I have after reading the audit report is…WHERE IS THE MONEY?
Was this $1 million given to the school system and spent on items other than services for children? Is the school district sitting on a surplus of money that was unspent? Or was this amount budgeted to the school system and the remainder or unspent money is sitting in our state checking account?
To me, it is relatively unclear from the audit report which of the above scenarios is an accurate depiction of the facts. If anyone knows, let me know.
OIG Finds Questionable Billing! California Medicaid Dentists: Expect Withholdings or Other Penalties!
Currently, dentists who accept Medicaid are ripe for pickings as targets for regulatory audits from both the federal and state governments. Actually, this is true for any provider that accepts Medicaid. It just happens that, recently, I have noticed an uptick in dental audits both in North Carolina and nationwide. Some dentists, who accept pregnancy Medicaid, may even bear the burden of determining pregnancy prior to a teeth cleaning…however, that is a topic for another day. Although, I tell you what, if my dentist asked whether I were pregnant prior to cleaning my teeth, he may have an abnormally red cheek the remainder of the day and I may join Crossfit.
Generally, dentists tend to not accept Medicaid. The reimbursement rates barely cover overhead. Add high regulatory compliance requirements, the likelihood of undergoing audits, and the government’s robust and zealous desire to tackle fraud, waste, and abuse (FWA), and it is no wonder why most dentists opt to not accept Medicaid. See blog. And blog.
Those dentists (and other providers) that do make the decision to accept Medicaid, these brave and noble souls, are subject to onerous audits; the result of a recent California audit is probably sending shock waves through the California dental community.
335 dental providers in California have been targeted by OIG as having questionable billing issues. Sadly, this is only the beginning for these 335 providers. Now the state will audit the providers, and these 335 providers may very well become the subject of a payment withhold in the near future.
What will happen next?
I will look into my crystal ball, otherwise known as experience, and let you know.
First, the Office of Inspector General (OIG) recently published a report called: “QUESTIONABLE BILLING FOR MEDICAID PEDIATRIC DENTAL SERVICES IN CALIFORNIA.”
One can only imagine by the title that OIG found alleged questionable billing. Otherwise the title may have been, “A Study into Medicaid Billing for Medicaid Pediatric Dental Services,” instead of “Questionable Billing.” With such a leading title, a reader knows the contents before reading one word.
What is questionable billing?
Importantly, before addressing what IS questionable billing, what is NOT questionable billing? Questionable billing is not abhorrent billing practices. Questionable billing is not wasteful billing or abusive billing. And questionable billing is certainly not fraudulent billing. That is not to say that some of these questionable billing will be investigated and, perhaps, fall into one the aforementioned categories. But not yet. Again, these dentists have a long journey ahead of them.
In this context, questionable billing seems to mean that the OIG report identifies dentists who perform a higher number of services per day. OIG analyzed rendering dental providers’ NPI numbers to determine how many services each rendering provider was providing per day. Then OIG compared the average Medicaid payment per kid, number of services per day, and number of services provided per child per visit. OIG determined a “threshold” number for each category and cited questionable billing practices for those dentists that fell egregiously outside the thresholds. Now, obviously, this is a simplistic explanation for a more esoteric procedure, but the explanation is illustrative.
This study of California Medicaid dentists is not first dental study OIG has undertaken. Recently, OIG studied Medicaid dentists in New York, Louisiana, and Indiana. What stands out in the California Medicaid dental study is the volume of dentists involved in the study. In Indiana, OIG reviewed claims for 787 dentists; in New York it reviewed claims for 719 dentists, and in Louisiana, OIG studied 512 dentists’ claims, all of whom rendered services to over 50 Medicaid children.
In California, OIG studied 3,921 dentists.
Why such a difference?
Apparently, California has more dentists than the other three states and more dentists who accept Medicaid. So, if you are Medicaid dentists, apparently, there is more competition in California.
Juxtapose that, in California, in 2012, only 3 periodontists, 3 prosthodontists, 2 endodontists, and 1 oral pathologist provided services to 50 or more children with Medicaid in California.
Going back to the audit findings…
OIG considered dentists who exceeded its identified threshold for one or more of the seven measures to have questionable billing.
OIG identified 329 general dentists and 6 orthodontists out of 3,921 providers as having with questionable billing. But these findings are only the beginning of what will, most likely, become a long and tedious legal battle for these 335 providers. Lumping together so many dentists and claiming questionable billing practices will inevitably include many dentists who have done nothing irregular. Many other dentists, will have engaged in unintentional billing errors and may owe recoupments. But I foresee a very small number of these dentists to actually have committed fraudulent billing.
Here is an example found in the OIG’s report, OIG identified that 108 dentists provided stainless steel crowns to 18% of the children served by these dentists, compared to an average of only 5% of children receiving stainless steel crowns by those served by all general dentists (non-Medicaid).
Another example is that 98 dentists provided pulpotomies to 18% of the children, while the statewide percentage is 5% to undergo pulpotomies.
Do these examples show that 108 dentists providing stainless steel crowns and that 98 dentists providing pulpotomies are improperly billing?
Of course not.
It is only logical that dentists who accept Medicaid would have a significantly higher number of pulpotomies compared to dentists who service the privately insured. Usually, although not always, a Medicaid recipient will have more issues with their teeth than those privately insureds. In order to qualify for Medicaid, the family must live in poverty (some more than others with the expansion of Medicaid in some states). Some of kids in this population will have parents who do not harp on the importance of dental hygiene, thus allowing many kids in this population to have decay in their teeth. Obviously, this is a generalization; however, I am confident that many studies exist to back up this generalization.
Therefore, if you accept my generalization, it makes sense that Medicaid dentists perform more pulpotomies than private insurance dentists.
And stainless steel crowns go hand in hand with pulpotomies. Unless you extract the tooth after the removal of the decay, you will need to provide a stainless steel crown to protect the tooth from future damage.
What will happen next?
OIG admits in its report that “our findings do not prove that providers either billed fraudulently or provided medically unnecessary services, providers with extreme billing patterns warrant further scrutiny.”
Which is precisely what will happen next…”further scrutiny”…
The OIG report recommends to California that it:
• Increase its monitoring of dental providers to identify patterns of questionable billing
• Closely monitor billing by providers in dental chains
• Review its payment processes for orthodontic services
• Take appropriate action against dental providers with questionable billing
It is that last recommendation, taking appropriate action, which will determine the future course for these 335 Medicaid providers. Because, as many of you know if you have followed my blog, the California Department of Health Care Services (DHCS) has a large toolbox with a considerable amount of tools for which it may yield its power against these providers…right or wrong. The same goes for all state Medicaid agencies. When it comes to a Medicaid provider and a Medicaid state agency, there is no balance of powers, in fact, there is only one power. Instead the scales of justice have one arm on the ground and the other raised in the air. There is an imbalance of power, unless you arm yourself with the right allies.
Possible future actions by DHCS:
• Payment suspensions
• Withholds of all reimbursements
• Post payment review
• Prepayment review
And combinations thereof.
DCHS stated that “it will review the dental providers referred by OIG and will determine by December 2015 what appropriate action may be warranted. Should there exist any provider cases not previously evaluated by existing program monitoring efforts, DHCS will take appropriate action through the available channels.”
First, December 2015 is a short timeframe for DCHS to audit 335 providers’ records and determine the proper course of action. So, expect a vendor for DCHS to be hired for this task. Also, expect that an audit of 335 providers in 7 months will have flaws.
These California dentists and orthodontists need to arm themselves with defense tools. And, quickly. Because it is amazing how fast 7 months will fly by!!
The report also states that OIG will be undertaking a study in the future to determine access to dental care issues. I will be interested in the result of that study.
These possible penalties that I already enumerated above are not without defenses.
These 335 CA Medicaid dental providers have administrative remedies to prevent these possible penalties. In other words, these 335 CA Medicaid dental providers do not have to take this lying down. Even though it appears that an imbalance of power exists between the state agency and the providers, these providers have appeal rights.
The second that any of these providers receive correspondence from DCHS, it is imperative that the provider contact its attorney.
Remember, some appeals have very short windows for which to appeal. Do not miss an appeal deadline!!
New State Auditor report investigates the Office of Medicaid Management Information Systems Services (OMMISS) within the North Carolina Department of Health and Human Services (DHHS).
With DHHS’ emphasis on detecting health care providers’ fraud, waste, and abuse (FWA) across the state, it seems ironic that its own agency is deemed guilty of wastefulness by our State Auditor. What’s that about glass houses……??
What exactly does OMMISS do? Well, for one, OMMISS works with Computer Sciences Corporation (CSC) regarding NCTracks. We all know how wonderfully NCTracks has operated since inception….See blog. And blog.
State Auditor Beth Wood finds:
At least $1.6 million wasted through excessive wages and commissions, unjustified overtime, and
holiday pay to ineligible employees
OMMISS Director engaged in or allowed nepotism
OMMISS Director received unauthorized compensatory time that may result in inflated retirement
Reports to General Assembly omitted at least $260,000 of overtime and compensatory time
Lack of adequate oversight of OMMISS despite findings in prior audit reports
Ok, so it took me a couple of days to free up some time to discuss the most recent Performance Audit by our State Auditor. This time of year is CRAZY! We had to get our daughter ready for the 4th grade, which entails buying an absurd amount of school supplies. Thank goodness we don’t have to do “back to school” clothes shopping, because she wears uniforms. Yesterday was her first day of school and, apparently, everything went well.
Now, I want to discuss the recent Performance Audit published by Beth Wood, our NC State Auditor, regarding provider eligibility. Prior to going any further, let me voice my opinion that Beth Wood as our State Auditor rocks. She is smart, courageous, and a force of nature. Any comment that may be negative in nature as to the most recent audit is NOT negative as to the audit itself, but to the possible consequences of such an audit. In other words, I do not believe that the Performance Audit as to Medicaid Provider Eligibility is incorrect; I am only concerned as to the possible consequences of such an audit on the Department of Health and Human Services (DHHS) and health care providers.
The Medicaid Provider Eligibility Performance Audit found that “deficiencies in the enrollment process increase the risk of unqualified providers participating in the Medicaid Program.”
And DHHS’ “enrollment review procedures do not provide reasonable assurance that only qualified providers are approved to participate in the NC Medicaid program.”
And “quality assurance reviews were not conducted or were ineffective.”
Basically, the Performance Audit (in layman’s terms) says that DHHS, again, has little to no oversight, lacks supervision over providers, has program deficiencies, and lacks the ability to manage Medicaid provider eligibility requirements adequately. Considering that DHHS is the single agency charged with managing Medicaid in North Carolina, the Performance Audit is yet another blow to the ability of DHHS to do its job.
Gov. McCrory appointed Sec. Aldona Wos as the head of DHHS, effective January 5, 2013. With Sec. Wos at its helm, DHHS has been riddled by the media with stories of management difficulties, high-level resignations, and mismanaged tax dollars. With the amount of media attention shining on DHHS, it is amazing that Sec. Wos has only been there almost a year and a half. Oh, how time flies.
While, again, I do not discount the accuracy of the Medicaid Provider Eligibility Performance Audit, I am fearful that it will spur DHHS to almost another “Salem witch hunt” extravaganza by pushing the already far-swung pendulum of attacks on providers, in the direction of more attacks. DHHS, through its contractors, agents and vendors, has increased its regulatory audits and heightened its standards to be compliant as a provider for a number of reasons:
1. The U. S. Supreme Court’s Olmstead case;
2. The DOJ settlement as to ACTT providers;
3. More oversight by CMS;
4. The ACA’s push for recovery audit contractors (RACs);
5. General need to decrease the Medicaid budget;
6. Increased fraud, waste, and abuse detection standards in the ACA;
7. Monetary incentives on managed care organizations (MCOs) to decrease the number of providers;
Imagine a pendulum swinging…or, better yet, imagine a child swinging on a swing. Before the child reaches the highest point of the swing, an adult runs behind the child and pushes the child even higher, in order to get a little more “umphf” on the swing. And the child goes even higher and squeals even more in excitement. But that’s not always a great idea. Sometimes the child goes flying off.
I am afraid that the Performance Audit will be that adult pushing the child on the swing. The extra little push…the extra little “umphf” to make the pendulum swing even higher.
As with any Performance Audit, DHHS is allowed to respond to Ms. Wood’s findings. One response is as follows:
“In September 2013, DMA established and implemented Management Monitoring Quality Controls (Monitoring Plan) for reviewing approval and denial decisions related to provider applications referred to it by the Contractor due to a potential concern. The Monitoring Plan established standardized policies and procedures and ensures that staff adheres to them in making enrollment determinations.”
In other words, recently DHHS has put forth a more aggressive oversight program as to health care providers and it will only get more aggressive.
In the last year or so, we have seen more aggressive oversight measures on health care provider that accept Medicaid. More audits, more desk reviews, more fraud investigation…and most (that I have seen) are overzealous and incorrect.
Believe me, I would be fine with increased oversight on health care providers, if the increased oversight was conducted correctly and in compliance with federal and state rules and regulations. But the audits and oversight to which I have been privy are over-bearing on providers, incorrect in the findings, and lacking much of due process for, much less respect to the providers.
I am concerned that the extra little “umphf” by this Performance Audit will impact health care providers’ decisions to accept or not to accept Medicaid patients. See my past blogs on the shortage of health care providers accepting Medicaid. “Shortage of Dentists Who Accept Medicaid: The Shortage Continues.” “Provider Shortage for Medicaid Recipients.” And “Prisons and Emergency Rooms: Our New Medicaid Mental Health Care Providers.”
Instead of increasing overzealous audits on health care providers, maybe we should require DHHS, through its contractors, agents, and vendors, to conduct compliant, considerate, and constitutionally-correct audits and oversight. Maybe the “umphf” should be applied more toward DHHS.
Here is an interesting article…
Article from Carolina Journal Online by Dan Way:
RALEIGH — With $2 billion in cost overruns the past four years, Medicaid continues to be North Carolina’s most volatile political conundrum, and now unanswered questions about its spending and growth threaten to delay passage of 2014-15 state budget adjustments before next Monday’s deadline.
Things got nasty in a Senate Appropriations Committee meeting last week, and one is left to wonder whether Gov. Pat McCrory and the state Department of Health and Human Services squandered political capital by snubbing budget writers struggling with alarming lapses in vital Medicaid data.
Medicaid “is the linchpin” to writing the 2014-15 budget, said an irritated Sen. Bob Rucho, R-Mecklenburg. “Would someone explain to me why we don’t have [Office of State Budget and Management] or staff people from DHHS here to help us get to an answer so that we can move this budget forward?”
If not a prairie fire, the meeting at least exposed the slow burn of senators handcuffed by a dearth of crucial budget numbers from DHHS. Capital press corps reporters instinctively asked one of their most oft-repeated questions: Is DHHS Secretary Aldona Wos to blame for yet another major Medicaid predicament?
Due to significant backlogs, DHHS cannot provide accurate Medicaid enrollment numbers, valid claims data, and categories into which new enrollees are entered. Without precise, up-to-date information for this fiscal year, drafting an accurate budget for 2014-15 is impossible.
That’s a tough corner to be backed into for McCrory and Wos, who have made Medicaid budget predictability a holy grail.
The exasperation of Sen. Tom Apodaca, R-Henderson, typified the level of lawmaker frustration.
“If push comes to shove,” he said, “we can always issue subpoenas and have the numbers come to us. So let’s not take that off the table.”
The irritability in Senate Appropriations was bipartisan.
“Will we ever know what we need to know?” Sen. Angela Bryant, D-Nash, asked incredulously. “Do we have to be completely at the mercy of executive branch agencies on an issue like this that is so critical to what we do?”
Senate leader Phil Berger, R-Rockingham, explained, in measured but heart-attack serious tones, why there is an elevated sense of urgency, and why he had wanted someone from the budget office at the Appropriations Committee meeting to explain Medicaid numbers that have swung from wildly varying to unaccounted for.
“Our feeling is we need to reach some understanding on the Medicaid number before we can realistically start talking about most of the other things,” including teacher pay raises and pay hikes for state workers, Berger said.
And then there was this jaw-dropping exchange between Sen. Joel Ford, D-Mecklenburg, and Susan Jacobs of the legislative Fiscal Research Division.
“Based upon the uncertainty and the lack of data, how can we say for certain that people are not being overpaid or underpaid?” Ford asked.
“We probably can’t say that,” responded Jacobs. She also dropped a bombshell that it could be “probably late next year” before all necessary numbers are completely and accurately obtained.
“To me that is a very disturbing scenario where we are taking taxpayer money with good intentions, but with no verification that we’re doing the right thing because of a broken system,” Ford said.
Whether he realized it, Ford’s characterization of Medicaid as a broken system oozed irony.
In one of their first official acts upon assuming office in January 2013, McCrory and Health and Human Services Secretary Aldona Wos lambasted the state’s Medicaid program as a chaotic, broken system. Eighteen months later and holding Swiss-cheese Medicaid reports, state senators are grumbling that the agency’s disarray persists.
Pressed by reporters, Berger stopped short of saying he has lost confidence in Wos’ leadership.
“I’ll leave it to others as to why they’re not able to provide that information,” he said, but he insisted this budgeting fiasco shows the need to remove Medicaid from Wos’ control and make it a standalone agency.
The Senate budget calls for $88 million more in Medicaid spending in 2014-15 than the House version. Berger said the Senate used higher, worst-case-scenario numbers.
Berger and his counterparts rightly expressed no appetite for once again using rosy projections only to find out halfway through the budget year that there is a whopping shortfall.
To make matters worse, Senate Majority Leader Harry Brown, R-Onslow, said Fiscal Research staff isn’t even confident the worst-case numbers are sufficiently high. “I think that’s important to make sure everyone understands it.”
Sen. Louis Pate, R-Wayne, co-chairman of the Senate Health and Human Services Appropriations Subcommittee, agreed with frustrated Fiscal Research staff that much of the problem with missing data stems from NC Tracks, the new but deeply flawed Medicaid billing system.
But he was quick to note that Republicans inherited the woefully underperforming computer system that was in development for years under Democratic administrations.
“I don’t know if they made up-to-date adjustments as they went along, and we don’t know if it was tested properly before it went live,” Pate said. Others, including State Auditor Beth Wood, warned last year that the nearly half-billion-dollar system was not ready to launch.
Wos lost control and never regained the upper hand in messaging after she defiantly promised she was going to drag the long-beleaguered NC Tracks over the July 1 finish line, and declared it sound when she did.
The bravado and exuberant can-do proclamations might have seemed politically appropriate for a new administration seeking to position itself as an intrepid change agent.
But Wos would have been wise to have tempered her rookie remarks with caveats about the huge challenges left behind by previous Democratic administrations, downplayed expectations, and more candidly acknowledged what IT skeptics already knew — the system was going to encounter plenty of rollout problems that would require a long time to correct.
Pate was among those declaring that the current Medicaid budgeting calamity further demonstrates the “critical necessity for reorganization” of the agency. But restructuring has been hampered by the unsteadiness of tectonic policy shifts.
Pate is among senators who continue to oppose the latest reform plan favored by McCrory and Wos, and now in bill form in the House. He said the proposal only tinkers around the edges of budget predictability and restraint.
This latest iteration is an accountable care model comprising networks of doctors and hospitals. It was rolled out after the administration’s stunning U-turn from months of championing full-risk managed care, and scoring a coup in recruiting Carol Steckel, a highly sought, nationally renowned expert on Medicaid managed care.
Steckel, former head of the National Association of State Medicaid Directors, left her $210,000-a-year job in North Carolina last September after only eight months working for Wos.
Whether there was a back-story to the swift departure of a highly heralded Medicaid reformer, much like what this year’s Medicaid numbers are, remains a guessing game.
“The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown” H.P. Lovecraft, “Supernatural Horror in Literature.” I completely agree. The unknown scares me way more than the known.
The unknown is what creates fear, right? For example, my husband is scared of heights. It is not the “heights” per se that scare him. He says that when he is high up, he gets an abnormal and understandably disturbing sense to throw himself off the ledge. He is scared, not of heights, but of his reaction to heights. Similarly, remember when I had an anxiety attack while I repelled (fell without any control) down the 22-story Wells Fargo building to raise money for the Special Olympics? To see my disastrous descend off of the Wells Fargo building, see my blog: “The Future of Managed Care in Medicaid and the Fear of the Unknown.”
But unknowns to a Medicaid budget can be disastrous.
For those of you who live in North Carolina, you probably got some snow last Wednesday. I live in Raleigh, and we got about 3 inches. My law firm was actually closed Wednesday. While I have to say that it takes a lot of snow to close a law firm (I mean, come on, think of how much money we lost by having a non-productive day. Luckily, I work for a firm that cares more about the safety of its employees than the bottom line), I do live in the South. And snow scares us (actually, not snow per se (we aren’t actually scared of the little white flakes), but the fear of the unknown…what can happen because of snow?)
A few weeks ago snow was in the forecast (not on the ground) and my daughter’s school closed. Seriously, there was no snow, yet my daughter’s school was cancelled.. And Tuesday evening, the night before the Great Blizzard of 2014, the grocery store was slammed with people buying milk and bread (just in case we are stuck in our homes for weeks and could be on the brink of starvation due to the 3 inches of snow). My husband, being the good southerner that he is, keeps our water running all night to prevent freezing pipes. He also covers the vents outside with towels.
Needless to say our house was prepared for the snow.
But there are always unknowns. Especially when it comes to Medicaid budgets.
Our unknowns regarding the Great Blizzard of 2014? (1) No sled; and (2) Skinny, unpadded sleds = a bruised body.
We woke up Wednesday to 3 inches of snow and no sled. And our 8-year-old was aching to sled. How do we not have a sled? Hello…we are from the south. It snows here maybe every 3 years. So we run to Ace Hardware, because, according to my husband, it is family owned and run. Ace had 4 sleds left (obviously other southerners were quicker to think of sleds than we). Three of the sleds were very thin. Almost like a towel, but more stiff and made of plastic. One of the remaining sleds was thicker…a tad thicker than a boogey board with two yellow handles on each side. Of course, my daughter chose the thicker one, leaving me with the skinny, unpadded sled.
We drove to Shelley Lake at which there is a VERY steep, almost, straight-down hill. Seriously, I had to climb up on my knees because I couldn’t stand without sliding backward. And, due to the skinny, unpadded sled, as I shot down the hill, I felt every bump…every jolt…every drop….on my knees, elbows and belly. But it was fun, so we kept at it! My daughter yelled, “Best day ever!” (Which made me smile ear to ear).
My other unknown? Skinny, unpadded sleds equal a sore body with black and blue knees and elbows after 4-5 hours of sledding (and climbing up the steep hill). Again, chalk it up to me being a southerner. Literally, the last time I sledded was when Madison was 4…the Great Blizzard of 2010….and I didn’t have a skinny, unpadded sled then.
So here I am today, writing this, but unable to cross my legs or wear skirts above my knees or people would think that….hmmmm…..what would people think if they saw my swollen, bruised knees? That I jumped up and down on my knees? That something fell on my knees? That I fell on my knees? That someone beat me up…but only my knees? It is an odd thing to have bruised knees. They are very difficult to explain.
So too are Medicaid budgets. And Medicaid expenditures. Something always comes up. There is always grey (or black and blue). And they are very difficult to explain.
Think about it…we expect our legislature to come up with how much we will spend the future year based on the past. The General Assembly does not have a crystal ball (that I know of). Yet we expect the budget to be correct, and we expect to not exceed the budget. Otherwise we are over the budget. And bruised.
Last year, 2013, State Auditor Beth Wood stated that we had exceeded the State Medicaid budget by hundreds of millions of dollars for at least three years running. She estimated that going over the Medicaid budget by so much money cost the tax payers $1.2 billion. But how can you budget medical necessity for Medicaid recipients?
Well, NC is asking the feds for permission to decrease Medicaid spending by freezing Medicaid reimbursement rates. We have approximately 10 or more requests to the Center for Medicare and Medicaid Services (CMS) to freeze the Medicaid reimbursement rates for a range of Medicaid services.
How else do we try to decrease Medicaid spending? By hiring some managed care organizations (MCOs) to manage behavioral health and placing the risk of going over budget on the MCOs. Hello, people, rationally, how do you think that the risk-based model will be implemented by the MCOs. Surely the MCOs will be happy to have lots of providers in their catchment areas and happy to have lots of recipients so the MCO can pay out lots of money and receive little-to-no profit. And we live in Disneyland, and all the animals help us clean our homes!
The concept of MCOs managing behavioral health is not inherently bad. The WAY in which NC implemented MCOs and the pay-structure IS inherently bad. Even CMS agrees with me. See my blog: “CMS Declares the Payment Structure for the MCOs Violates A-87…”So what Happens Now?”
So, besides freezing reimbursement rates and outsourcing risk, how else could we manage Medicaid costs?
DECREASE ADMINISTRATIVE COSTS.
Medically necessary Medicaid services should not be decreased. Reimbursement rates should be raised, not slashed. Medicaid providers should have the incentive to accept Medicaid, not the converse.
Decreasing administrative costs accomplishes decreasing Medicaid expenditures without harming the medically necessary Medicaid services to Medicaid recipients.
On the national level, between 2010 and 2011, total Medicaid expenditures increased by 6.4%. However, in 2012, the federal Health and Human Services Department (HHS) estimates that Medicaid expenditures will increase only 1.1%. HHS opines that the slower growth of Medicaid expenditures is because of States’ efforts to limit growth in light of budget constraints and the knowledge that the States will be liable for more Medicaid recipients (if such state expands) after the temporary federal matching reimbursement under the Affordable Care Act (ACA). In other words, we are spending less on Medicaid services.
Just to get perspective on how important Medicaid is to our overall budget and tax dollars, total Medicaid spending in 2011 was $432.4 billion with the feds paying $275.1 billion or 64% and the states paying $157.3 billion or 36%. That is a lot of tax dollars!
In 2011, nationally, administration costs increased from 2010 by 8.7%. This increase in the highest percentage increase in administrative costs since 2003.
And North Carolina’s administrative spending is abnormally high.
Back in October 2013, our State Auditor Beth Wood was quoted saying, “The administrative spending for the state’s Medicaid program is 38 percent higher than the average of nine states with similarly sized Medicaid programs,” Wood maintained. “While those states on average have administrative costs of 4.5 percent, the state of North Carolina spent over 6 percent of its total budget on administrative cost. In real dollars that means that the state is spending $180 million more than the average of our peer states.”
$180 million more than peer states spent on administrative costs…not services to Medicaid recipients…not reimbusements to providers accepting Medicaid….just for administrative costs.
On a national level, Medicaid administrative costs are only expected to increase.
Over the next 10 years, Medicaid expenditures are projected to increase at an average annual rate of 6.4% and to reach $795.0 billion by 2021. Average enrollment is projected to increase at an average annual rate of 3.4% over the next 10 years and to reach 77.9 million in 2021. See CMS report.
Because of the ACA , Medicaid expenditures are expected to increase by a total of $514 billion from 2012 through 2021. See id.
Nationally, Medicaid spending on program administration totaled $20.2 billion in 2011—$11.4 billion in Federal expenditures and $8.9 billion in State spending. See id.
Total Medicaid expenditures grew slightly faster in 2011 than in 2010, at a rate of 6.4 percent. Expenditures on benefits grew somewhat more slowly (6.3 percent) than in 2010, but administration expenditures increased at the fastest rate since 2003 (8.7 percent). See id.
Each year we have more citizens who qualify for Medicaid. Because of the ACA, we have the largest increase in the number of Medicaid recipients, quite possibly, ever in the history of Medicaid, except maybe during its inception.
Yet, the number of providers willing to accept Medicaid is not rising. “The average rate of acceptance among family physicians, dermatologists, cardiologists, orthopedic surgeons and obstetrician/gynecologists in all 15 markets surveyed was 45.7 percent last year, according to data gathered from nearly 1,400 medical offices last year.” “The 2014 survey showed a drop from 55.4 percent acceptance in 2009.” See 2014 Survey by Merritt Hawkins.
Here is the formula:
More Medicaid recipients + Higher administrative costs + Fewer providers accepting Medicaid = Catastrophe? Medicaid recipients not receiving the medically necessary services? The cost of administrating Medicaid takes away from medically necessary services to Medicaid recipients?
Black and blue Medicaid budgets?
Here in NC, we have opted to not expand Medicaid. However, not expanding does not equal less Medicaid recipients (obviously it means less than had we expanded), but regardless of expansion, the number of Medicaid recipients increase every year. Just like our general population grows.
While NC has not expanded, NC has not cut Medicaid administrative costs. Instead, we are freezing reimbursement rates and allowing the MCOs to cut mental health services and terminate providers. Yet, our Medicaid population continues to grow, despite not expanding Medicaid. More and more providers are opting to not accept Medicaid.
“North Carolina spent over 6 percent of its total budget on administrative cost. In real dollars that means that the state is spending $180 million more than the average of our peer states.” Beth Wood.
“We exceeded the State Medicaid budget by hundreds of millions of dollars for at least three years running.”
So what will become of our Medicaid state budget? Will our budget get black and blue from unexpected bumps in the road? Do we have a sled that is too skinny and unpadded?
The worst fear is the fear of the unknown.