Audit: the health department of the Md. fails to oversee contractor management allowance payments

“This contract with Optum has been a massive debacle for the state from the beginning to this day,” said Senator Clarence Lam, Senate Chair of the Joint Audit and Evaluation Committee. (The daily record / archive photo)

The Maryland Department of Health failed to adequately supervise a company hired to pay mental health and substance abuse service providers, imposed no penalties for contract violations, and bypassed state procurement laws, according to a new report. of the Office of Legislative Controls.

The report released Friday notes that the state agency failed to monitor Optum and its Minnesota-based United Behavioral Health Inc. company as it handled complaints for approximately 260,000 people receiving Medicaid mental health and treatment benefits. substance abuse. Lack of oversight cost the state hundreds of millions of dollars in potential overpayments and claims denied or insufficiently reimbursed by the federal government, the audit concluded.

“This contract with Optum has been a massive debacle for the state from the beginning to this day,” said Senator Clarence Lam, Senate Chair of the Joint Audit and Evaluation Committee. “When incompetence and mismanagement cost the state hundreds of millions of dollars, someone from the Maryland Department of Health should be held accountable. The level of waste and ineptitude uncovered by this audit is disgusting and an indictment of the current broken leadership at the department.

The auditor’s conclusions should be part of an upcoming legislative hearing.

The department hired Optum in June 2019 for a five-year term that expires in 2024 plus a two-year renewal option for a total cost of $ 198.2 million.

The auditors, who reviewed payments made on behalf of the health department between January 1, 2019 and June 30, 2022, found that Optum paid nearly $ 1.1 billion to suppliers.

During that time, there appears to be little or no independent evaluation of the subcontractors making such payments.

In the report, the auditors found payments totaling nearly $ 224 million for services they could not verify had been provided. They said there was no attempt to recover those payments.

No audits were conducted to ensure that the services provided were medically necessary.

Additionally, auditors found nearly 300,000 complaints that the federal government denied or reimbursed at a lower rate, costing the state more than $ 106 million.

Auditors noted that the agency has not assessed penalties against Optum for breach of contract totaling nearly $ 21 million.

The department could have imposed penalties of approximately $ 30,000 per day, according to a response from health department officials.

Finally, auditors reported that the health department appears to have bypassed state procurement rules by hiring a technology consultant. The agency entered into a $ 20 million contract with no competitive bids.

Lam said the auditor’s findings shouldn’t have come as a surprise as the auditors noted a lack of audit in securing the initial contract.

In July 2019, Dennis Schrader, who was the department’s chief operating officer at the time, told the Board of Public Works that his agency “did a lot of due diligence on this.”

Schrader, now health secretary, made the comments after controller Peter Franchot raised concerns about the cost of the contract – 20% less than the incumbent – and a lawsuit in which a California federal judge found that the company it implemented policies that discriminated “against patients with mental health and substance abuse disorders in order to save money”.

Franchot said the low bid and related issues “raised red flags”.

Schrader, in his comments at that meeting, said the agency had many of the same concerns, but believed Optum would be a good supplier.

“It’s embarrassing for the department to have exercised such poor judgment in reviewing such a significant contract,” Lam said. “The fact that the department misled the Board of Public Works regarding Optum’s control is extremely concerning and is reminiscent of the administration’s purchase of non-functional COVID tests from South Korea and the questionable sourcing of PPE from politically connected as Blue Flame during the pandemic. “

Health department officials, in response, broadly agreed with the auditors’ findings and said they were working to correct the problems.

Those same officials, however, disagreed with the sanctions assessment, stating that “they are not an effective way to ensure that the state receives a working product for a mission-critical health services system. In this case, imposing damages on this supplier would maximize the chances of litigation, contradictory employment relationship and further minimum performance from the supplier. “

Instead, the department withheld about $ 6 million in various payments to Optum

The department told the auditors it continues to work with the contractor to correct the deficiencies.

“All appropriate sanctions will continue to apply throughout the term of the contract,” the department wrote in its response.

Leave a Comment

Your email address will not be published. Required fields are marked *