Auditors warn Utah Medicaid is likely wasting millions of taxpayer dollars

Audit » Suspect approvals, lack of oversight targeted.
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Millions of tax dollars are likely being wasted in Utah's Medicaid program on procedures -- including a breast augmentation and nose jobs -- that aren't covered by the government insurance program, according to a scathing legislative audit released Tuesday.

Millions more are lost because the Medicaid department isn't adequately going after providers who submit fraudulent bills. And while there are three sets of internal auditors charged with overseeing the department and its $1.7 billion budget, none are independent enough to do their jobs appropriately, the report says.

"I don't know that I've read a more damning report," said House Speaker Dave Clark, R-Santa Clara, during a Tuesday legislative meeting. He called leaders of Medicaid and the health department "somewhat lazy and sloppy."

"Every single page of this audit talks about lack of leadership, lack of management, lack of organization, lack of follow up," he said. "Lack of, lack of, lack of. ... I'm concerned."

The audit reviewed Medicaid's Bureau of Program Integrity, which is responsible for protecting Medicaid from provider fraud, waste and abuse through avoiding unnecessary costs and recovering wrongly paid bills. It was reorganized in 2008 in response to "growing concerns" by the federal government about "Utah's commitment to Medicaid integrity," according to the audit, which nevertheless found the bureau lacking.

"We believe there is significant room for improvement in BPI's operations, which can result in significant savings over time for the Medicaid program," Tuesday's audit states.

David Sundwall, the executive director of the Utah Department of Health, and Michael Hales, its Medicaid director, did not dispute the audit's findings.

"We accept all the recommendations of the audit and have begun the work required to implement them," they said in a written response, adding that some changes may require additional funding.

While auditors said they couldn't pinpoint exact dollar figures of potential savings with reform, they estimated at least $20 million savings in federal and state dollars.

One problem is the prior authorization process. The audit found that nurses charged with authorizing payment before certain surgeries and sleep studies have OK'd them even when they aren't covered. The audit blames an ambiguous state policy, lack of training and nurses who ignored the rules.

That led to the approval of 106 non-covered surgeries last year, including 65 circumcisions, 15 face reconstructions and three rhinoplasties. The surgeries may have been medically necessary, and thus allowable, but a committee should have reviewed them first, according to the audit.

The nurses also unilaterally approved 127 complex sleep studies, costing $1,200 each, without committee approval.

The committee, comprised of doctors and nurses, is less likely to approve noncovered surgeries than the nurses.

For example, the committee denied a request for a woman with breast cancer to have her non-affected breast reconstructed. But a nurse OK'd a similar procedure for another patient. Hales defended the decision, noting "we just don't pay for breast augmentation because somebody says, 'Hey, I need to look a little more augmented.' There are cases in which those do get approved [by the committee]."

Medicaid's unclear policies, and the lack of training and monitoring of nurses, can also harm patients: Auditors cited one patient who was required to go through eight weeks of unnecessary physical therapy, even though the therapist said it wouldn't work, before she could get knee surgery.

"The delay in services likely cost the Medicaid program unnecessary medical expenses because the case was not presented to the...committee for an exception," the audit states.

National estimates show at least 3 percent of health care claims are fraudulent, yet Utah's Medicaid program only recovers half that, auditors noted. They believe an extra $20 million in state and federal dollars could be saved by examining outpatient bills, as required by the federal government, as well as claims for managed care, mental health services and long-term care. Overall, BPI only examines 5 percent of Medicaid dollars.

But Medicaid is hamstrung by a software system meant to look for abuse; it hasn't been updated since 1987.

"Utah's Medicaid recovery system has been an uncoordinated effort that is ineffective and inefficient," the report says.

A new system would cost up to $2 million and will take a couple of years to create and implement, said Hales, who believes that saving an additional $20 million would be a stretch. "I don't think, even if we implement all of the auditors recommendations, we will end up with $20 million of additional savings."

In addition, Medicaid allows providers to continue to work with Medicaid patients even though they have been disciplined for fraudulent activities, including filing false insurance claims, unwarranted dental procedures and "multiple instances" of prescribing controlled substances for non-medical purposes.

The audit also criticized the oversight of Medicaid, noting that the Bureau of Program Integrity, internal auditors within the Department of Health and Medicaid auditors "all lack the level of independence necessary to appropriately address their missions and functions."

The Office of the Legislative Auditor General cited two examples where those auditors were thwarted by their bosses:

» In 2006, the Medicaid department recovered $370,000 from a provider who didn't comply with a medical records request quickly enough. The provider complained to Medicaid director Hales, who ordered its return without probing whether the care was medically necessary, according to the audit. More than two years later, after legislative auditors questioned the payment, Medicaid did investigate and determined the claim was necessary. Hales told lawmakers this wasn't an instance of fraud and that he was being "reasonable."

» An undocumented resident has received $2.3 million in care since July 2000, and continues to receive care at a long-term facility costing $25,000 a month. Internal auditors questioned his eligibility since Medicaid covers only emergency-related care for the undocumented.

Hales said the man is hooked up to several devices and if they were removed, he would need to return to a hospital, where Medicaid would have to pick up the tab. It's less expensive to care for him at the facility, he said.

Auditors question Utah Medicaid practices

Auditors suspect millions of dollars are likely being wasted in Utah's Medicaid program:

» Nurses approved payment for 106 surgeries that are not covered by Medicaid, including 65 circumcisions, 15 facial reconstructions, 3 rhinoplasties and one breast reconstruction surgery on a healthy breast.

» Nurses approved payment for 127 sleep studies, costing $1,200 each, without proper review by a committee.

» At least $20 million could be saved if Medicaid more aggressively looked for provider fraud.

» Only 1 percent of hospital claims were reviewed to determine if they were medically necessary. If all 40,600 claims were reviewed, $6.1 million to $31.3 million could be saved.

» Utah Medicaid doesn't systematically review outpatient, pharmacy, or dental claims, even though that is required by the federal government.

Source: "A Performance Audit of Fraud, Waste, and Abuse Controls in Utah's Medicaid Program" by the Office of the Legislative Auditor General.

About Medicaid

Medicaid is funded by the state and federal government to provide medical services to low-income families and individuals. In March, a record 184,300 Utahns qualified for the services. Nearly $1 out of every $5 spent by the state goes toward Medicaid.