Federal Audit Finds Problems with NJ’s Medicaid Billing System, Wants $95M Refund

Lilo H. Stainton | January 4, 2017 | Health Care
State officials and local providers contest findings, say they are based mainly on ‘unreasonable’ requirements for documentation of treatments

A federal audit claims New Jersey officials have not done enough to monitor the billing practices of community-based organizations that treat outpatients with serious mental illness. It’s calling for the the state to refund nearly $95 million for federally funded Medicaid services it says were not properly documented.

The U.S. Department of Health and Human Services’ Office of Inspector General said the review was prompted in part by earlier findings, published in 2012, that suggested the state needed to beef up oversight of its Medicaid claims process and clarify the guidance it gives providers. The latest report, announced in late December, included an analysis of 100 claims randomly selected from the nearly 3.9 million bills submitted from 2009 through 2011. The OIG found only eight of these 100 claims met all state and federal requirements.

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Officials with the state’s Department of Human Services, which oversees Medicaid, have strongly contested the findings, noting that the “significant recoupment recommendation” – calling for the $94.8 million refund — is based on just a handful of paperwork-related problems, not allegations of overbilling or improper care. Rigid federal standards for documentation don’t enable the “dynamic and fluid” treatment that is essential for these patients, the DHS added, and suggested the system diverts staff resources from more critical functions.

“The OIG is holding providers to unreasonable standards of compliance with respect to these documentation requirements,” acting DHS commissioner Elizabeth Connelly wrote in her formal response, submitted in August. State reviews have not found the same level of problems, she noted.

Leaders with the non-profit organizations that provide outpatient, or “partial care” services — a range of group therapy and other daytime programs for seriously ill patients, many of whom have been institutionalized in the past — agreed some the federal paperwork requirements have become counterproductive. They say inspectors rely on different interpretations of state and federal rules and have focused increasingly on detecting fraud, instead of protecting quality, and that staff must spend more time documenting patient information, care plans, and treatment results.

“The documentation requirements are really onerous. They’re just way, way overboard,” said Joe Masciandaro, president and CEO of CarePlus New Jersey, which provides behavioral care at some two dozen sites in Northern New Jersey. “And it’s only going to get worse.”

Masciandaro and many of his colleagues are concerned that keeping up with such documentation requirements will become more challenging under a new Medicaid reimbursement system the state is currently implementing. Providers like CarePlus traditionally have been paid through annual contracts negotiated with the state, but are now transitioning to a fee-for-service system in which Medicaid will pay a set rate for each patient treatment.

The reform is being phased in over nearly 18 months, with the final deadline for organizations to make the change now set for July 2017. While some nonprofits have made the switch without incident others, including CarePlus, fear the change could leave them millions of dollars short in the coming year — and might leave some 20,000 patients without appropriate care.

Nicole Brossioe, a DHS spokesperson, said the documentation process for partial care services is the same under the fee-for-service system and the new reimbursement rates, developed as part of the transition, take into account training, administrative responsibilities, and other tasks beyond client interaction. The DHS has worked closely with providers to create the new system, she said, and staff continue to hold webinars and in-person training to help organizations manage the change.

Lawmakers have also responded to the providers’ pleas for help with the transition to the new system; committees in both the Assembly and Senate have backed a plan calling on the state to carefully monitor the fee-for-service transition and report back on any problems. The measure (A-4146/S-2521) awaits further action in both houses. (Some 300,000 patients receive behavioral healthcare through Medicaid, according to budget figures, including roughly 6,500 who are in partial care programs.)

Regardless of changes on the state level, federal regulators continue to conduct regular compliance checks as part of their national system of ongoing audits of federal insurance programs. The new report is one of a half dozen the OIG issued in 2016 that questioned New Jersey’s oversight of certain hospital reimbursements, medical transportation, and other healthcare related billing practices — several of which also called for reimbursements to the government.

Brossioe said the new report is a starting point for a discussion between state officials and federal regulators about the claims process, proper protocol and any refund — or potential withholding of future Medicaid dollars. It may take several years before the process is concluded. “The report is just the first of many steps in the process of a federal audit,” she said. Others confirmed this process.

In the December release of its report, the auditors noted that a previous review of New Jersey services, published in May 2012, determined a “significant number” of Medicaid claims for mental health services were improperly submitted, and called for a $30.6 million refund. Those findings prompted the latest review of outpatient services, the OIG wrote.

The auditors pulled a random sample of 100 claims from nearly 3.9 million bills, totaling $272 million, for partial care services. In this sample, 92 claims failed to meet state or federal requirements and 19 contained more than one deficiency.

The vast majority — 84 claims — lacked proper documentation of the services provided, the OIG said. Twenty claims lacked verification of an affiliated psychiatrist; others didn’t indicate that service plans were met, or they lacked weekly progress notes. The auditors blamed the DHS for failing to ensure proper oversight and said providers were confused by inconsistent guidance they received from multiple state agencies.

Connolly responded to the OIG with a strongly worded letter that took issue with their refund call and she underscored the need for flexibility in treating patients with serious needs — even if that care might deviate from a written plan. Connolly also noted that some of the missing documentation requested dated back more than six years and it was unreasonable to assume providers would still have this information on file.

“The OIG has not alleged that the State was overbilled, or that inappropriate services were provided to patients, or that services were provided to ineligible individuals. Instead, the overwhelming majority of the OIG’s findings concern allegations that providers failed to include sufficient detail in their paperwork,” Connolly wrote, claiming the OIG was taking a “hyper-technical approach to analyzing compliance.”

While the state already has a “robust auditing program” in place, Connolly said it would continue to improve how it monitors Medicaid claims. The DHS now reviews each partial care provider quarterly, she said, noting: “In the course of these audits, the State has not found the widespread noncompliance with documentation requirements that the OIG now alleges.”