Speech  Testimony of State Auditor Suzanne M. Bump Before the Joint Committee on Ways and Means

Boston — Good afternoon Chairwoman Spilka, Chairman Dempsey, members of the Committee. Thank you for the opportunity to testify today regarding the FY16 budget for the Office of the State Auditor.

When we assembled and submitted our FY16 plan in October, the fiscal outlook was considerably rosier than our current circumstances. Our request to the administration then and even the maintenance budget we presented to you a few weeks ago were made in a different environment and were based on accelerating the natural evolution of the work of our office.

Times have changed. Implementing the section 9C reductions in appropriations has required that we review our office priorities. They have led us to modify our expectations for future funding.  So although I can provide ample justification for the expansion we were seeking in four of our six line items, it makes more sense to focus my request and your attention on the single investment that will reap the greatest operational and fiscal benefit to the Commonwealth.

That is in our auditing of the MassHealth program and expenditures for Medicaid reimbursable services. To this end, I am requesting an additional $300,000 for our Medicaid Audit Unit appropriation (0710-0225). This is larger than the $66,000 increase we had sought in our maintenance request, but it is now the only line item for which we are seeking an increase in funding. As for the remainder of our operation, we can continue our other operations at FY15 appropriation levels.   

The additional funds in our Medicaid Audit Unit appropriation will support hiring two additional audit teams. Based on our risk assessments and the results we already have produced through our data analytics capabilities, we are confident of our ability to identify tens to hundreds of millions in recoupments and annual savings that will help to check the rate of growth in this program.

Let me tell you why I am so confident.

Later this week, the Committee will receive our annual Medicaid audit report, which details two significant audits completed during the timeframe of March 2014 – March 2015. These two audits alone identified “more than $34 million in unallowable, questionable, duplicative or potentially fraudulent billings and as much as $11.6 million in missed opportunities for federal cost-sharing reimbursements.”   

The report also describes corrective actions being taken by MassHealth and other Medicaid service providers as a result of our findings which will result in operational efficiencies. These two audits alone identified potential savings and reimbursements to the Commonwealth that total well over two times the annual appropriation for my entire office.

And the savings that accrue from our audit work aren’t one-timers. They produce recurring savings. To demonstrate this, let me update you on the impact of an audit I told you about at your budget hearing last year.

In April 2013 we released an audit of MassHealth payments for drug screenings which found $16.5 million in unnecessary, unallowable and questionable expenses related to drug testing as well as questionable billing practices. This excessive spending was attributable to inadequate standards to control the use of drug screens to those circumstances when it was medically necessary.

In response, MassHealth referred $4.5 million worth of improper billings to the Attorney General’s Office. More importantly, MassHealth took steps to address the root cause of the problem by reducing the overuse of drug testing, monitoring providers with unusually large numbers of claims, and detecting potential unallowable billings. Just two sets of system edits – changes in the payment system to reject improper billings – reduced provider payments by one third, $1.3 million and $89,000 respectively, in a six-month period when compared to the same six months prior to these changes.

A more recent review of this issue, illustrated in the chart before you, shows the impact our audit continues to have in terms of cost savings for drug screenings.

On the left side of this chart, you can clearly see the billing practices and related costs of these screenings before our audit concluded and MassHealth implemented their edits. The right side of the chart shows that there continues to be sustained savings, demonstrating that operational savings are not a one-time event but are recurring, and this is only one category of services in a vast and complex system of services.

Another example of these weaknesses is that six audits of just 24 dental providers identified $7.6 million in improper payments. In each case, an effective claims adjudication system should have been able to detect any unallowable billings and disallow payment. For example, we identified 10 providers who billed for – and were paid – over $1.2 million for 19,274 instances of a procedure reserved solely for patients actively receiving chemotherapy, radiation or organ transplant.  These questionable billings went undetected by MassHealth’s adjudication process.

In another example, we identified a school-aged patient without any dental issues who received 27 fluoride treatments in 24 months. National standards call for no more than four treatments in that time period. Although the dollar amount questioned was not significant, this was a clear indication of a larger problem with MassHealth’s policies and procedures around these services as well as a potential public safety issue which MassHealth ultimately addressed as a result of our audit.

One example of how our audits have helped MassHealth establish better controls over its operations was our audit of MassHealth’s Limited Program. The objective of this audit was to determine whether the Limited Program provided members with coverage for only emergency medical services, as required by federal and state laws and regulations.

This audit found that MassHealth paid questionable or unallowable medical claims totaling over $35 million during our audit period for non-emergency services provided to members of the Limited Program. These questionable or unallowable costs represent 45% of the $77.6 million expended for Limited Program members during the 18-month audit period.

MassHealth could have prevented this unnecessary spending had it established internal controls to ensure that payments were made solely for emergency medical services, while elective and other treatment bills were rejected. Our audit made specific recommendations on the types of controls that should be implemented, several of which have been implemented and which will result in several million dollars in annual savings.

Currently, our Medicaid Audit unit is working on an audit that is reviewing   MassHealth’s fee for service payments for healthcare services to its members that should have been paid for by the member’s Managed Care Organization. We anticipate that this audit will reveal that MassHealth’s system edits are again faulty and as such, tens of millions of dollars in duplicate payments are being made by MassHealth.  

I emphasize our strength in auditing of MassHealth because the Governor and legislative leaders have stated their intention to find ways to wring unnecessary costs out of this bulging line-item.  As we have told the Governor, you can find no better partner than the Office of the State Auditor with whom to pursue this goal. Not just because it is our legislative mandate but because there is literally no one else in state government that has the dedicated resources and the technical capability to do the work.

So, as you contemplate this request for an additional $300,000, go ahead and ask, can we afford to do this? But, don’t stop there. Also ask, can we afford not to do this?