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

MN officials update on anti-fraud systems for Medicaid

Officials at the Minnesota Department of Human Services shared its first report on the anti-fraud systems that have been implemented for Medicaid.  

MINNEAPOLIS (FOX 9) -  A third-party audit of the Minnesota Department of Human Services (DHS) identified more than $1 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.

Optum audited billing to the 14 high-risk social services over a period of nearly four years starting in January 2022.

They used AI and their own data analytics to identify possible fraud, abuse, and waste.

Those analytics turned up soft spots and payments that didn’t match clear policies or procedures in every program, but especially early intensive developmental behavioral intervention services, which includes autism services. Optum’s analytics flagged 90% of EIDBI claims in the four years studied.

The state started requiring licensure for that program this year.

"But it sounds like it's too little too late on a lot of that and for 90% and in a program that has cost us hundreds of millions the dollars, 90% is just, it's a disgusting number," said Rep. Joe Schomacker, (R-Luverne).

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.

Department of Human Services leaders say the year-long audit will put the state in a better position to reduce fraud to a minimum.

"Using Optum and this new technology to be able to respond in a way that's more sophisticated as the fraud schemes become more sophisticated," said deputy DHS commissioner John Connolly. "But the prior kind of tip-based way that we investigated fraud or potential program integrity concerns, it just wasn't up to the task. And we'll still rely on that tool, but now we're adding new tools that are more sophisticated like the sophisticated fraud schemes that we're finding."

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.