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Audit: Md mishandled contract for mental health service payments


Maryland state health officials botched oversight of a vendor they hired to pay mental health providers, causing accounting nightmares for clinicians and delays in care for patients in crisis, according to an audit released Friday by the state Department of Legislative Services.

Auditors found the state’s health department did not adequately vet Optum before hiring the UnitedHealth Group affiliate to process claims for Medicaid or government-funded behavioral health care. State health officials also chose not to assess damages as allowed in the contract, in part because they feared litigation.

The mismanaged payments and delays meant health workers spent hours on administrative tasks instead of helping patients amid a pandemic-era surge in demand for mental health services. Some were unable to take on new clients while others lost staff to less financially precarious jobs.

When it became clear early in 2020 that Optum could not process claims quickly and accurately, providers were paid estimated fees based on 2019 invoices. Many were overpaid for their 2020 work after the pandemic forced them to cut back, and had to repay the difference. The discrepancy left some in debt even as more claims went unprocessed.

State Sen. Clarence K. Lam (D-Howard), a physician and Senate chair of the Joint Audit and Evaluation Committee, in a statement called the episode reminiscent of the state’s purchase of 500,000 flawed coronavirus tests from South Korea, and its troubled procurement of masks and ventilators from the firm Blue Flame Medical.

“The level of waste and ineptitude uncovered by this audit is disgusting and an indictment of the current broken leadership at the Department,” he said.

Optum spokesman Aaron Albright said in a statement that the company has improved: “While we recognize that the system did not live up to expectations in January 2020, we have worked closely with the state and provider community to address those issues.”

State Health Secretary Dennis R. Schrader referred questions Friday to health department spokesman Chase Cook, who said in an email that the department “has already made significant changes to our internal procurement process and is moving forward with additional organizational changes.”

A spokesman for Gov. Larry Hogan (R) declined an interview request.

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Health department officials said they agreed with most of the auditors’ findings and recommendations and plan to act on some now and some in two years when Optum’s contract ends.

State officials awarded the contract in 2019 despite concerns about Optum’s record after the company underbid the incumbent contractor, Beacon Health Options, by $72.1 million.

“I’m not … seeing a lot of places where [Optum provides] this type of administrative service, organization services on behalf of governments,” state Comptroller Peter Franchot (D) said, before ultimately voting to approve the contract at a July 2019 Board of Public Works meeting.

Schrader, then the health department’s chief operating officer, said his agency had done “a lot of due diligence on this.” He said Optum was not only the low bidder, but its proposal had been evaluated as best on technical aspects.

The audit said the state’s evaluation of the proposals did not include an adequate review of Optum’s prior experience, qualifications and subcontractors. Auditors found state officials also failed to adequately scrutinize a key subcontractor, InfoMC, that would be responsible for the most critical aspect of the contract, the claims processing system. In 2018, a county mental health board in Ohio withdrew from its contract with InfoMC, for failing to process claims satisfactorily. The audit report said health departments in California and Washington also faced serious issues with InfoMC. A company employee on Friday said she would pass a request for comment to company officials, but they did not immediately respond.

State officials did not ensure the claims processing system worked before its January 2020 launch, the audit said. The system couldn’t process health-care service authorizations, improperly denied valid claims and was unable to generate payment information using health-care industry standard reporting forms, auditors said.

The deficiencies led Optum to make $1.06 billion in payments during 2020 based on estimates from the prior year. Since then, doctors, counselors and hospitals have had to reconcile estimated payments with actual claims and settle the difference.

Lori Doyle, public policy director for the Community Behavioral Health Association of Maryland, which represents 105 organizations, said the audit confirms alarms service providers have been sounding for two years. At every turn, she said, the state and Optum blamed providers who have decades of experience filing electronic claims.

“It feels like we’ve been crying into the darkness,” she said in a phone interview Friday. “This has been a disaster from the onset.”

Providers hired office workers to navigate Optum’s faulty systems using money that otherwise would have been spent on clinical staff, she said. The providers serve low-income adults and children who receive Medicaid and don’t have many options for mental illness and substance abuse treatment; clients often endure poverty and food insecurity.

Doyle said the problems with Optum hit just as the pandemic began, shutting down many providers and making it impossible for many patients to access services.

“It was a one-two punch: the pandemic and Optum,” she said.

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Sondra Tranen, executive vice president at Partnership Development Group Rehabilitation Services, a community behavioral health-care company serving Baltimore city and county and Montgomery and Prince George’s counties, said in an interview Friday that delayed reimbursements made it impossible for clinicians to assume the financial risk of taking on new patients.

PDG serves about 1,200 people a year for psychiatric rehabilitation, targeted case management and therapy. Many are adults with serious mental illness who have often been in the public mental health system for their entire lives and are at high risk for hospitalization.

As Optum has failed to live up to the contract, auditors said, the state has not collected the full damages it’s entitled to because officials have feared it would trigger litigation or cause Optum’s performance to further suffer.

In late 2020, state health officials informed Optum that it still had not provided a functional system, auditors said. The contract allows the state to collect $25,000 per day for Optum’s failure to be operational. These and other damages would add up to $20.5 million, but the state declined to collect it, the audit said.

Karen Carloni, executive director of Southern Maryland Community Network, which provides community behavioral health services in Calvert, Charles and St. Mary’s counties, said the payment debacle made her mission-driven employees feel undervalued.

“I do hope a new administration will take the time … to look backward and understand what happened so we don’t make the same kind of mistake again,” she said.

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