DHS Audit: $1 billion in Medicaid funding vulnerable to fraud

MINNEAPOLIS (FOX 9) - A third-party audit of the Minnesota Department of Human Services (DHS) identified more than $1.7-billion in Medicaid funding that may be vulnerable to waste, fraud and abuse.

What we know:

DHS released the initial findings from an ongoing external audit of how the state is processing Medicaid claims.

The audit is being conducted by Optum, a subsidiary of United Healthcare.

Optum reviewed four years worth of data from DHS in 14 areas of Medicaid service that have been identified as vulnerable to waste, fraud and abuse.

The audit found: 

• More than $52 million in funding that should be recouped because it was distributed despite clearly identified policy violations.
• More than $1 billion in claims that may require additional review of records to determine if they were medically necessary.
• Denied claims of inappropriate billing that saved the state $165 million as part of an ongoing effort to improve "cost avoidance."

What they're saying:

Optum says DHS has implemented a one-year "program integrity" plan that will further enhance the state’s ability to detect and prevent waste, fraud and abuse before Medicaid claims are paid.

 AI data analytics and an automated claims editing system will aid in those efforts, according to Optum.

The backstory:

Gov. Tim Walz ordered the third-party audit of Medicaid billing last fall as concerns about widespread fraud in Minnesota grew.

Optum was tasked with finding improper claims, missing documentation, high billing patterns, and other inconsistencies.

The audit focused on fee for service billing, which is when Medicaid claims are paid directly by DHS.

Most Medicaid claims in the state are funneled through Managed Care Organizations like Medica or Blue Cross Blue Shield.

Dig deeper:

In January, the Centers for Medicare and Medicaid Services (CMS) announced it would conduct its own audit of Medicaid programs in Minnesota that have been deemed vulnerable to fraud.

The Trump Administration is trying to withhold $2-billion in Medicaid funding to Minnesota while that audit is conducted. 

Minnesota is appealing the funding cut.

What's next:

However, DHS has frozen funding to those programs and announced it is re-assigning state employees who will be tasked with re-validating thousands of Medicaid providers in the state.

The state says claims flagged by Optum will be checked by DHS and suspected improper claims will be referred to the Office of Inspector General for an investigation.

Correction::

An earlier version of this story stated Optum identified $1.7 billion in funding that was vulnerable to fraud. An addendum to the audit reduced that projection to just over $1 billion.