States trying to recoup Medicaid money

Washington -- For Idaho physicians, the state's decision to hire a private firm to audit the Medicaid program sends a troubling mixed message.

The state says it wants physicians to serve these patients, but ultimately, auditing doctors will only discourage them from dealing with the program, said Bob Seehusen, CEO of the Idaho Medical Assn.

"It's not good for the patient population. It's not good for the profession," Seehusen said.

Idaho is part of a growing trend. Faced with burgeoning Medicaid budgets, more states are turning to outside auditors to squeeze out savings by scouring claims for overpayments. Oregon and Michigan also have recently hired contractors for this purpose. The work of these private firms supplements the internal audits that most states have been performing for as long as they have had Medicaid programs.

In Idaho, as Medicaid spending grew, so did the state's concern about overpayments, said Ross Mason, a spokesman for the state's Dept. of Health and Welfare.

That's why the department recently signed a two-year contract worth $450,000 with Health Management Systems, a New York-based company that has performed audits for 30 states and the District of Columbia.

HMS has found more than $2.7 billion in overpayments for its clients since it was founded in 1985, although more than half of that money was recovered in just the past five years, according to press statements. HMS offers states the ability to look at a much broader scope of program data than their Medicaid departments have the capacity to review, state officials explained.

"We want to make sure we're not paying for mistakes," Mason said. "The reality is that all of our dollars are tax dollars, and we need to be as careful as possible about how we spend it."

The audits also offer an attractive alternative to other cost-containment options.

"We haven't cut our services, and we are trying to avoid doing that," Mason said.

But the move still could hurt patient access, Seehusen said.

Idaho is a rural state with a very limited number of physicians to serve the population. They don't need to take Medicaid patients to get by. This is just one more reason not to bother with the program, he said.

"We can't afford to lose good doctors," he added.

And that is just what will happen if physicians are turned off by the audits, said Bob Perna, director of health care economics at the Washington State Medical Assn.

Washington hired Portland, Maine-based HealthWatch Technologies three years ago to scrutinize its Medicaid data for possible overpayments. Those audits have produced what physicians consider some troubling results, Perna said.

The only obstetrician-gynecologist in one rural area recently got a refund request for nearly $300,000 over contested payments going back two years. The case is still pending.

"Here you have an ob-gyn willing to go out to the sticks. The Medicaid program is sending a real mixed message," Perna said. " 'Yeah, we want to provide care in these areas,' and then they drop that in the guy's lap."

The audits also turned up a total of $1.1 million in alleged overpayments made to the state's rural health clinics. Out of 100 clinics, 80 received requests for refunds, Perna said.

"Wait a minute, 80% of these rural health clinics are billing wrong," he questioned. "That was our first red flag."

Des Varady, CEO of HealthWatch, defended states' motives. They hire audit firms to ensure that everyone is paid fairly, not to play gotcha with physicians, he said.

"At the end of the day, the Medicaid programs do value their providers very much," he added.

Idaho Dept. of Health and Welfare spokesman Mason agreed. "This is not an issue of not trusting doctors," he said. "We need to make sure we are paying properly."

Audits dig deep

The benefit of these audits for states is also one of the main drawbacks for physicians.

They are deep and thorough, often going back two or three years to find overpayments the states can reclaim. Under federal Medicaid law, states can review payments up to seven years after they were made. But physicians often assume that if Medicaid is paying their claims, they must have been filing them correctly.

As a result, states and physician groups have different views on the consequences the audits should have for doctors.

"We hope that the first go-around is more educational in nature, rather than punitive," said Seehusen, of the Idaho Medical Assn.

States agree that this should be seen as an educational process, but they might not be willing to give up any refunds they are owed under the law.

"Even if this is a matter of an honest mistake, no one is suggesting that they should be able to keep the money," said Michael McCormick, the audit manager for Oregon's Dept. of Human Services, which also recently contracted with HWT to audit its program.

Even if officials wanted to forgo the refund, they might not have that option. Once a state identifies an overpayment, it is then required to repay the federal government its portion of the refund.

That leaves physicians holding the bag.

"You're coming back to us two, three years later asking for your money. It's not here anymore," Perna said. Any reimbursement physicians have received from the state has been spent long ago on providing services.

In that case, states generally withhold payment on future Medicaid claims until the doctors are paid up, officials said.