For Immediate Release - December 10, 2014

Audit Finds $35 Million in Questionable and Unallowable MassHealth Payments

BOSTON, MA — State Auditor Suzanne Bump today issued an audit of MassHealth, which found the healthcare agency paid more than $35 million in questionable and unallowable medical claims. The report centers on a disagreement between the Office of the State Auditor and MassHealth on an interpretation of federal and state rules and MassHealth’s discretionary practices. 

MassHealth, the state’s Medicaid agency, with annual payments to healthcare providers of more than $10.8 billion, provides access to healthcare services for approximately 1.4 million eligible low- and moderate-income individuals. MassHealth is the state’s largest program and accounts for approximately one third of the state budget. Today’s audit report examined MassHealth’s Limited Program, a tier of MassHealth coverage that provides medical services to eligible non-citizens. The audit findings reflect serious weaknesses in MassHealth’s claim processing system.

Both state and federal law restrict coverage under the MassHealth Limited Program to emergency medical services. MassHealth requires healthcare providers to identify whether a medical service is for an emergency condition. According to the audit, MassHealth routinely allows Limited Program claims to be paid even when the treatment provider has indicated that that the service was not emergency in nature.  

“In the course of the audit we saw that MassHealth regularly substituted its own judgment for that of the medical professional in determining whether to cover a service. Based on our understanding of the plain language in the regulations, MassHealth Limited is paying for ineligible services, and the tab is costly,” said Auditor Bump.

Auditors reviewing Limited Program payments from July 2011 through December 2012 identified $35,137,347 in questionable or unallowable non-emergency claims. Those claims represent 45 percent of the total $77,627,854 spent within the Limited Program for the period of review. The 270,167 questionable or unallowable claims were identified based on the information that health providers themselves submitted to MassHealth.

Identified claims ranged across a spectrum of service categories illustrated in the chart below:

OSA’s auditors did not question any claim that a provider characterized as an emergency, only claims that providers identified as non-emergency urgent care or elective services. Examples of non-emergency claims paid by MassHealth include; speech therapy, fluoride treatments, family therapy, physical therapy, office visits, and many non-emergency services that were delivered in an emergency room setting.

Agreeing with some of the audit findings, MassHealth has implemented cost-saving changes within its claims system to identify and deny payment for non-emergency dental and rehabilitation and therapy services for the Limited Program. Since April 2013, payments for non-emergency dental services have decreased from a monthly average of $103,191 to an average of $4,621, a 96 percent decrease. Payments for non-emergency rehabilitation and therapy services decreased from a monthly average of $105,796 to $3,617, a 97 percent decrease. These changes should result in savings to the Commonwealth of $2.4 million annually.

Despite these changes, MassHealth largely disagrees with the remaining audit findings, stating its opinion that federal regulations allow MassHealth discretionary authority to consider what medical services constitute emergencies. However, the audit finds that MassHealth’s polices are flawed in that they allow MassHealth Limited to pay for non-emergency services, such as those that are elective and those used to treat chronic conditions.

“While it is clear that some discretion is allowable, MassHealth still has to make sure that its payment system has integrity and operates in accordance with federal requirements,” said Bump.

Auditor Bump recommends that MassHealth should improve its controls over the Limited Program by modifying its claim processing system to ensure that payment is made only for emergency services, and by developing risk-based monitoring activities to ensure that claims are processed and paid in accordance with its regulations.

Limited Program members who require non-emergency medical services have access to community-based free or low-cost clinics that provide urgent and elective healthcare, including primary and preventative care, dental and vision services, behavioral-health treatment, medications, and other health-related services. Also, hospitals who provide non-emergency services to members may obtain funding assistance through the state’s Health Safety Net payment program. This network of community-based medical clinics and available funding gives members a bridge between Limited Program coverage for emergency services and other non-emergency services.

The Office of the State Auditor conducts performance audits of state government’s programs, departments, agencies, authorities, contracts, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency.