Audit: Maryland health department fails to monitor contractor benefit payments

“This Optum contract has been a colossal failure for the state from the beginning to today,” said Sen. Clarence Lamm, chairman of the Senate Joint Audit and Evaluation Committee. (The Daily Record/File Photo)

The Maryland Department of Health failed to properly supervise a company hired to pay mental health and substance abuse providers, failed to impose penalties for contract violations and circumvented state procurement laws, according to a new report by the Legislative Audit Office .

The report, released Friday, found that the state agency failed to monitor Optum and Minnesota-based United Behavioral Health Inc. while processing claims for approximately 260,000 people receiving Medicaid benefits for mental health and substance abuse treatment. substances. The lack of oversight has cost the state hundreds of millions of dollars in potential overpayments and denied or underreimbursed claims from the federal government, the audit concluded.

“This Optum contract has been a colossal failure for the state from the beginning to today,” said Sen. Clarence Lamm, chairman of the Senate Joint Audit and Evaluation Committee. “When incompetence and mismanagement cost the state hundreds of millions of dollars, someone at the Maryland Department of Health must be held accountable. The level of waste and incompetence revealed by this audit is appalling and an indictment of the current broken leadership in the department.’

The auditor’s findings are expected to be part of an upcoming legislative hearing.

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

Auditors reviewing payments made on behalf of the health department between Jan. 1, 2019, and June 30, 2022, found that Optum paid nearly $1.1 billion to providers.

During this time, there appears to be little independent evaluation of the subcontractors making these payments.

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

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

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

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

The department could have assessed about $30,000 a day in penalties, according to a response provided by health department officials.

Finally, auditors reported that the health department appears to have circumvented government procurement rules in hiring a technology consultant. The agency awarded the $20 million contract without competitive bids.

Lam said the auditor’s findings should not come as a surprise because auditors noted a lack of review in securing the original contract.

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

Schrader, who is now the health secretary, made the comments after Comptroller Peter Franchot raised concerns about the cost of the contract — 20 percent less than the incumbent — and a lawsuit in which a federal judge in California found that the company implemented policies , who discriminate “against patients with mental health and substance abuse disorders to save money.

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

Schrader, in his comments at that meeting, said the agency has many of the same concerns but believes Optum will be a good supplier.

“It is embarrassing for the department to have exercised such poor judgment in renegotiating such an important contract,” Lam said. “The fact that the department misled the Board of Public Works regarding their inspection of Optum is extremely troubling and reminiscent of the supply of malfunctioning COVID tests from South Korea and the questionable supply of PPE from politically connected companies like Blue Flame during the pandemic.”

Health department officials in response largely agreed with the auditors’ findings and said they were working to fix the problems.

However, those same officials disagreed with the assessment of the penalties, saying they were “not an effective way to ensure that the state gets a working product for a critical health care system. In this case, awarding damages to that supplier would maximize the chances of litigation, adversarial working relationships, and further minimal performance by the seller.”

Instead, the department withheld approximately $6 million in miscellaneous payments to Optum

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

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

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