Review finds problems with state system for handling behavioral health claims

Maryland Health Secretary Dennis Schrader addresses the Board of Public Works. File photo by Hannah Gaskill.

The Maryland Department of Health failed to ensure that a contractor-provided complaints-handling system was working properly before it was launched, according to a just-released audit. As a result, more than $220 million in payments for behavioral health services lack proper documentation or have not been recovered.

The review of the Behavioral Health Administration, by the Office of Legislative Audits (OLA) of the General Assembly, also found that the external provider’s complaints handling system was unable to assess whether the services provided to patients were medically necessary, nor to determine whether valid claims were improperly denied. The system also lacked “critical supplier claim payment information” so that reconciliations could be made.

A top lawmaker said the report revealed “a major debacle” at the agency.

Some of the loopholes in the system prevented Maryland from tapping about $28.8 million in federal refunds, the review found. And although the state was able to recover up to $20.5 million from the vendor, the health department did not do so “despite the vendor’s continued failure to provide a working system or to comply certain requirements,” the audit revealed.

The review looked at services provided by Minnesota-based Optum, a subsidiary of healthcare giant United Behavioral Health. The company has a five-year contract with the state that runs until the end of 2024, worth $190 million. The agency told the OLA that the state paid out $1.8 billion in behavioral health claims in fiscal year 2021.

The health department agreed with many of the report’s findings, saying that in many cases efforts to improve the system were already underway. As of June 1, $201.5 million had not been reconciled or recovered, the agency said, although reconciliation still occurs daily, as well as restatement and review of all denials for the estimated payment period.

Officials said the agency is meeting with the vendor “on a daily basis” and that “subject matter experts are engaged in all monitoring activities to get the contractor to correct deficiencies in their system.”

The agency said its next deal will include an expanded system to extract refunds from an underperforming supplier, but it had no plans to do this with Optum as the company is in the middle of a multi-year contract. complex.

“This contract with Optum has been a huge debacle for the state from its inception until today,” said Senator Clarence Lam (D-Howard), Senate Chairman of the Joint Audit and Evaluation Committee. , in a press release. “When incompetence and mismanagement cost the state hundreds of millions of dollars, someone in the Maryland Department of Health should be held accountable. The level of waste and incompetence uncovered by this audit is disgusting and an indictment of the current broken leadership of the ministry. »

Optum issued a statement on Friday acknowledging problems with the system in the early months of the Maryland contract, but suggesting the improvements are now well established.

“Optum was honored to partner with Maryland to support their efforts to provide lifesaving care to those in need,” the company said. “While we recognize that the system fell short of expectations in January 2020, we have worked closely with the state and the vendor community to resolve these issues. As of August 2020, Optum’s Authorization and Claims Platform operates in accordance with industry standards and quickly and accurately authorizes and pays providers for the care they provide to Marylanders.

The Optum contract was approved by the Public Works Board in July 2019 when the company’s bid was significantly lower than the previous contractor, who was the only other company to bid for the state contract. .

At the time, Comptroller Peter Franchot (D), a member of the board of directors, expressed concern about Optum’s balance sheet. He pointed to Health Secretary Dennis Schrader about a California case in which a federal judge ruled the company had “effectively discriminated against patients with mental health and addiction disorders in order to save money.” .

“I don’t see many places where they provide this type of administrative service…” Franchot told Schrader. “I think they used to do it for New York. But are you confident that United will be able to do the job satisfactorily with the financial proposal price they have submitted? »

Schrader acknowledged that agency executives were “a little mystified” that the lowest-priced bidder got the highest procurement score. He assured the three-person panel that the agency was “very confident” in the company’s ability to perform.

“So we have a very good price for the number one technical proposal and we think that’s going to get the job done,” he said. The contract was unanimously approved by Franchot, Governor Larry Hogan (R) and Treasurer Nancy Kopp (D).

Schrader said at the time that Maryland had about 260,000 people receiving “specialized behavioral health.” Some of the care is publicly funded, though most of it — $1.2 billion out of $1.4 billion — is funded by Medicaid.

Editor’s Note: This story has been updated to include comment from Optum.