Texas Did Not Report Excess Contractor Profits In Accordance With Federal Regulations

THHSC buildingIn an unheralded August 2012 audit report that is available online, the federal Health and Human Services Office of Inspector General found that the Texas Health and Human Services Commission had not returned  $2.6 million in Medicaid funding back to the federal government.

Made a calculation mistake
The money was owed because the state’s private Medicaid contractor, TMHP/ACS, had returned some $26 million in excess profits owed to Texas under its contract but that HHSC had not properly calculated and reimbursed CMS their full fair share.   The audit covered the period from October 1, 2007 to September 30, 2009.

Why didn’t HHSC give back the full amount?  Per the audit, “the State agency did not refund to CMS $2,634,568 (Federal share) of excess profits because it made errors in calculating the Federal share of those profits.”

Didn’t know they had to ask
The audit also found that Texas had initiated certain Medicaid Management Information System (MMIS) projects worth $59 million without first getting pre-approval from CMS as is required under federal regulations. The audit goes so far as to say that CMS should not have reimbursed any of the funds.  It specifically states: “Because the State agency did not obtain CMS’s prior approval for contract amendments with cost increases that exceeded threshold amounts, the State agency should not have claimed these costs.”

So why did HHSC not get pre-approval?  The audit says “according to State agency officials, the State agency did not obtain prior approval from CMS for these project costs because the State agency misinterpreted the prior-approval requirements.”

Oddly enough, HHS-OIG did not recommend that Texas reimburse CMS for the costs even though there was no obligation to have paid them.

The executive summary of the report states:

A Medicaid Management Information System (MMIS) is a system of software and hardware used to process Medicaid claims and manage information about Medicaid beneficiaries, services, and providers. The Texas Health and Human Services Commission (State agency) contracts with a fiscal agent, Affiliated Computer Services/Texas Medicaid Health Partnership (ACS/TMHP), to process claims through the MMIS. The contract between the State agency and ACS/TMHP requires a prospective price redetermination (PPR) audit to establish whether ACS/TMHP earned profit in excess of the 11 percent allowed by the contract.

We found that the State agency did not refund $2.6 million (Federal share) of the $26.7 million in excess profits identified through the PPR audit in accordance with Federal requirements. During fiscal year 2009, the State agency claimed expenditures for 20 MMIS projects with total costs of $71.3 million. All of these expenditures were allowable and claimed at the appropriate reimbursement rate; however, the State agency did not obtain prior approval for 2 of the 20 projects. Also, the State agency did not obtain prior approval for 16 additional projects. The total budgets for the 18 projects for which the State agency did not obtain prior approval totaled $59 million ($32.9 million Federal share).

We recommended that the State agency (1) refund to the Federal Government $2.6 million for excess profits related to the PPR audit, (2) ensure that prior approval is obtained on future projects as required by Federal regulations, and (3) obtain retroactive approval for the 18 projects that did not have the required prior approval from the Centers for Medicare & Medicaid Services (CMS). The State agency agreed with our first and third recommendations and described corrective actions it had taken or planned to take. Regarding our second recommendation, the State agency described the process by which it seeks CMS approval for certain projects.

No repercussions to Texas
Numerous federal program violations.  Miscalculating $2.6 million owed.  “Uh, we didn’t know.  We made mistakes.”

No Medicaid payment holds to Texas or no credible allegations of fraud despite the high error rate.  Don’t even have to repay costs they for which they shouldn’t have claimed.

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