Report  Annual Report Medicaid Audit Unit for March 13, 2021 - March 1, 2022

The Office of the State Auditor (OSA) receives an annual appropriation for the operation of a Medicaid Audit Unit (the Unit) for the purposes of preventing and identifying fraud, waste, and abuse in the MassHealth system and making recommendations for improved operations. The state’s fiscal year 2022 budget (Chapter 227 of the Acts of 2020) requires that OSA submit a report to the House and Senate Committees on Ways and Means by no later than March 12, 2022 that includes (1) “all findings on activities and payments made through the MassHealth system;” (2) “to the extent available, a review of all post-audit efforts undertaken by MassHealth to recoup payments owed to the commonwealth due to identified fraud and abuse;” (3) “the responses of MassHealth to the most recent post-audit review survey, including the status of recoupment efforts;” and (4) “the unit’s recommendations to enhance recoupment efforts.”

For fiscal year 2022, the appropriation for the Unit was $1,312,862. This amount represents an approximately 3% increase over the Unit’s fiscal year 2021 appropriation of $1,274,449. OSA submits all costs (direct and indirect) associated with running the Unit to the Executive Office of Health and Human Services (EOHHS) to be included in its in quarterly filings with the Centers for Medicare & Medicaid Services for federal cost sharing. In federal fiscal year[1] 2021, OSA submitted a total of $46,103,199 to EOHHS for consideration for the state’s program integrity, allowing the state to obtain a 50%, or $23,051,600, reimbursement of these costs.

This report, which is being submitted by OSA in accordance with the requirements of Chapter 227, provides a summary of a performance audit of MassHealth’s payments for hospice-related services for dual-eligible members. This audit was conducted in conjunction with the US Department of Health and Human Services’ Office of Inspector General, involving the following:

• proper verification of MassHealth Hospice Election Forms for dual-eligible members who chose to receive hospice services
• proper payments for professional services coordinated by hospice providers for dual-eligible members who chose to receive hospice services
• proper payments for durable medical equipment (DME) for dual-eligible members who chose to receive hospice services
• proper payments for ambulance and inpatient services for dual-eligible members who chose to receive hospice services

It also provides a summary of a performance audit of MassHealth’s estate recovery, involving the following:

• review of undue-hardship waiver cases
• review of estate recovery cases and the total cash receipts collected by MassHealth

This report details findings that identify $45,110,697 of improper payments for professional services not coordinated by hospice providers, $789,367 of unnecessary payments for durable medical equipment that should have been paid for by hospice providers, $203,135 of unnecessary payments to ambulance and inpatient services, and potential missed opportunities for $56,640,242 of cost savings in the administration of the hospice program. The report also describes corrective actions that MassHealth is taking as a result of an audit issued at least six months ago for which MassHealth has taken actions and completed follow-up surveys. MassHealth reported action on 100% of our recommendations, which will improve operational efficiency and effectiveness.

EOHHS administers the state’s Medicaid program, known as MassHealth, which provides access to healthcare services annually to approximately 1.9 million eligible low- and moderate-income children, families, seniors, and people with disabilities. In fiscal year 2021, MassHealth paid more than $18.1 billion to healthcare providers, of which approximately 45% was Commonwealth funds. Expenditures, including administration costs, for the Medicaid program represent approximately 40% of the Commonwealth’s total annual budget.

Heightened concerns over the integrity of Medicaid expenditures were raised in January 2003, when the US Government Accountability Office (GAO) placed the US Medicaid program on its list of government programs that are at “high risk” of fraud, waste, abuse, and mismanagement. At that time, GAO estimated that between 3% and 10% of total healthcare costs were lost to fraudulent or abusive practices by unscrupulous healthcare providers. Based on these concerns, OSA began conducting audits of Medicaid-funded programs and, as part of its fiscal year 2007 budget proposal, submitted a request to establish a Medicaid Audit Unit within its Division of Audit Operations dedicated to detecting fraud, waste, and abuse in the MassHealth program. With the support of the state Legislature and the Governor, this proposal was acted upon favorably and has continued in subsequent budgets. Since that time, OSA has maintained ongoing independent oversight of the MassHealth program and its contracted service providers. Audit reports issued by OSA have continued to identify weaknesses in MassHealth’s controls to prevent and detect fraud, waste, abuse, and mismanagement in the Massachusetts Medicaid program as well as improper claims for Medicaid services.

OSA uses data analytics in all audits conducted by the Unit. By so doing, our auditors can identify areas of high risk, isolate outlier providers, and in many cases perform reviews of 100% of the claims under audit, thus significantly improving the efficiency and effectiveness of our audits. Moreover, in many cases, data analytics has enabled the Unit to fully quantify the financial effects of improper payments, whether they involve 1 claim or 10 million. The use of data-analytics techniques has enabled the Unit to (1) identify greater cost recoveries and savings, (2) isolate weaknesses in MassHealth’s claim-processing system, and (3) make meaningful recommendations regarding MassHealth’s system and program regulations to promote future cost savings, improve service delivery, and make government work better.

A PDF copy of the Annual Report of the Medicaid Audit Unit - 2022 is available here.

1. The 2021 federal fiscal year is October 1, 2020 through September 30, 2021.