Testimony Shock: Texas MCOs Recover Only $2 Million in Alleged Fraud from $20 Billion Budget in 2015

In testimony before the Senate Committee on Health and Human Services in September, Inspector General Stuart Bowen shocked committee chairman Sen. Charles Schwertner with the revelation that the 22 MCOs (managed care organizations) operating in Texas had only found and recovered $2 million in alleged fraudulent payments in 2015 out of a $20 billion budget.

Sen. Schwertner then questioned Bowen further and found that many of the “special investigative units” (SIUs) of the MCOs are relatively inactive, some having only one person in the unit.

IG published a report in February on SIU activity

Bowen and his agency published a little-known audit in February of this year that looked more specifically at the overall performance of the special investigative units of the MCOs.

The executive summary of that report states (the full report can be downloaded here):

WHY IG IS CONDUCTING THIS AUDIT

At approximately $27 billion a year, the Medicaid and CHIP programs constitute over 26 percent of the total Texas budget. Approximately 84 percent of individuals enrolled in Medicaid or CHIP are members of a managed care organization (MCO).

MCOs are required to establish a special investigative unit (SIU) to investigate fraudulent claims and other program waste and abuse by members and service providers. Effective SIUs are essential to ensuring that state and federal funds spent on managed care are used appropriately.

The Texas Health and Human Services Commission is responsible for oversight of MCO contracts. IG is responsible for approving SIU annual plans and evaluating and sometimes investigating SIU referrals. The IG Audit Division is currently conducting a performance audit to determine how effective the MCO SIUs are at (a) preventing, detecting, and investigating fraud, waste, and abuse and (b) reporting reliable information on SIU activities, results, and recoveries

WHAT IG FOUND

MCOs produce limited results in their SIU fraud, waste, and abuse detection, investigation, recovery, and referral efforts. MCOs in Texas received over $17 billion in Medicaid and CHIP capitation payments in 2015, and their health care providers submitted approximately $12.5 billion in medical claims for services provided in 2015. In the same year, MCO SIUs reported a total of only $2.5 million in recoveries, about two-hundredths of one percent of total aggregate medical claims dollars. This was down from three-hundredths of one percent in the previous year.

National studies indicate that fraud represents at least 3 percent of medical costs in the United States, while fraud, waste, and abuse collectively represent at least 20 percent of medical costs.

Though SIU results varied in 2015, each one of the 22 MCO SIUs recovered far less than one percent of medical claims dollars. Most MCOs reported less than $20,000 in recoveries per full-time equivalent (FTE) personnel assigned to the SIU and most reported less than $40,000 in total referrals to IG Investigations in 2015. Three MCOs did not recover or refer any dollars in 2015.

The highest performing SIU in 2015, through its efforts to combat fraud, waste, and abuse, recovered or referred to IG Investigations less than one-half of one percent of the MCO’s Medicaid and CHIP medical claims dollars.

There is a wide variation in MCO personnel resources committed to the SIU function. For example, MCOs reported a range from less than one FTE allocated to
SIU activities to a single MCO that reported over 11 SIU FTEs. MCOs ranged from one SIU FTE for every $6.3 million in capitation payments to one FTE for every $1.5 billion, with an average of one SIU FTE for every $266 million.

MCO reported information indicates no apparent correlation between the referral and recovery results produced by SIUs and the personnel resources committed to the SIU function.

The IG Audit Division will publish audit reports during its ongoing audit of Medicaid and CHIP SIUs once it enters fieldwork and completes audit testing and validation for selected MCOs.

DMO mentions in the report

There is only one mention each relating to dental managed care organizations MCNA and Dentaquest.

Dentaquest is mentioned as the largest MCO in the state with some 1.7 million members.

MCNA’s claim to fame is that it has the highest number of full-time equivalent SIU employees of any MCO in Texas with 11.  The poor reputation of recoveries for MCOs and this fact may be prime factors in the number of payment holds that MCNA has placed against dental providers this year.