Federal Report shows HHSC Contractor Miscalculations Cost Texas $57.9 million for Medicaid Supplemental Physician Payment Program

hhsc-building mdThe audit section of the Department of Health and Human Services Office of Inspector General issued a report earlier this month that Texas now owed the federal government some $57.9 million because the state Health and Human Services Commission did not calculate properly a Medicaid supplemental payment program for physicians at University of Texas (UT) health institutions from 2004 to 2007.  The program was discontinued by the state in 2011.

The program  came into being with Texas State plan amendment 04-010 (SPA) which was included in the Texas Administrative Code.  The amendment provided for “quarterly physician supplemental payments for services provided by physicians who were employed by group practices owned or operated by one of three State academic health systems. The State agency provides supplemental payments to encourage physicians to provide health care to more Medicaid patients.”

HHSC hired private contractor to run program

HHSC contracted the Public Consulting Group (PCG), a Boston-based firm,  to develop the program and operate it until 2007 when HHSC took over with their assistance.  The firm determined which physician group practices qualified for supplemental payments and calculated the supplemental payments. 

The HHS-OIG audit determined that the supplemental payments during the time period of the audit were not always in accordance with federal and state requirements.

They found that “HHSC” had:

  • overstated Medicare equivalent fees for claims that included payment modifiers and diagnostic test modifiers,
  • Medicaid services that were performed by ineligible providers, and
  • Medicaid services that did not have Medicare equivalent fees.

Calculations done by contractor over audit time period

While the report states “HHSC,” in fact, the errors were caused by PCG.  In a footnote, the auditors state:

Although PCG performed most of the supplemental payment calculations during our audit period, we use the term “State agency” when discussing supplemental payment calculations. The State agency is ultimately responsible for ensuring that supplemental payments are calculated correctly.

As a result, the UT health institutions received $95,359,841 ($57,884,268 Federal share) in unallowable payments out of a total of $283,239,049 ($171,929,299 Federal share) in total supplemental payments over the audit period.

State response

In a letter to HHS sent April 29, 2016, Chris Traylor, then-Executive Commissioner, states in part:

The Texas Health and Human Services Commission (HHSC) calculated supplementary payments to physician groups affiliated with the University of Texas System institutions in accordance with the methodology approved by the Centers for Medicare and Medicaid Services (CMS) after an extensive. thorough, and transparent review process extending for a period of over two years. During this re-view process. CMS reviewed each component of the proposed supplemental

During this review process. CMS reviewed each component of the proposed supplemental payment methodology developed by HHSC’s contractor, the Public Consulting Group (PCG), including methodologies for (a) supplemental payments related to Medicare equivalent fees, (b) global service fees, and (c) provider eligibility, and approved the resulting state plan amendment.

HHSC will coordinate with the University of Texas health institutions to make a final determination of whether ineligible providers were included in the physician supplemental payment calculation. and the federal share of any physician supplemental payments that did not meet applicable requirements. HHSC will work with CMS to resolve the remaining payment issues. with the goal of reaching a resolution within one year of the final audit report issue date.

The full report can be downloaded here.


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