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An Audit Report on
The Health and Human Services Commission's
Monitoring of Managed Care Contracts
SAO Report No. 04-011
November 2003
Overall Conclusion
The Health and Human Services Commission (Commission) does not adequately monitor and
enforce its contracts with managed care organizations (MCO) that administer Medicaid
managed care and the Children's Health Insurance Program (CHIP). The Commission did
not critically assess the systems and controls used to
oversee MCOs after Medicaid programs were
transferred from the Department of Health to the Background Information
Commission in September 2001, and it did not Managed care programs are considered
develop a comprehensive plan to integrate the a cost-effective way to provide quality
oversight functions for Medicaid and CHIP MCOs. As health care services. The concept of
a result, it has not effectively monitored or managed care is based on (1) an MCO
enforced key MCO contract provisions, and its providing health care services to
individuals for a specific payment rate
contract management function lacks clear direction per person and (2) the MCO accepting
and focus. most, if not all, of the business and
financial risk associated with providing
Our audit identified more than $13 million in funds health care services.
due to the State that the Commission was not The Commission administers managed
actively attempting to collect or recoup from MCOs care programs through its contracts
with 16 MCOs that participate in
(this includes $10.2 million in CHIP experience Medicaid and CHIP managed care.
rebates, $1.7 million in Medicaid experience MCO contracts for both Medicaid and
rebates, and $1.5 million in improper audit fee CHIP exceeded $1.4 billion in fiscal
payments). The following examples illustrate year 2002.
weaknesses in the Commission's monitoring of MCO
contracts:
> The Commission did not ensure the timely collection of $21.6 million in experience
rebates that MCOs owed the State under statutorily and contractually required profit-
sharing provisions, including $10.2 million in experience rebates that the Commission did
not collect from one CHIP MCO. Late payments of experience rebates resulted in lost
interest earnings totaling $112,186. As of June 2003, an additional $1.7 million in
Medicaid experience rebates remained uncollected. The Commission also agreed to
reduce total experience rebates MCOs owed by $4.2 million without adequately verifying
the underlying data supporting those reductions or monitoring MCOs' use of the rebate
funds they were permitted to retain.
> The Commission has not audited or verified key financial and performance-related data
that MCOs are required to provide and that is used to negotiate rates and calculate
experience rebates. Audits of Medicaid MCOs previously conducted by the Department
of Health identified significant concerns such as (1) $1.5 million in additional experience
rebates that could be due to the State because of inaccurate financial reporting and (2)
MCOs' failure to process claims in a timely manner. In addition, the Department of
Health and the Commission paid $1.5 million in audit fees that the MCOs were
contractually obligated to pay.
> The Commission did not adequately define key processes, roles and responsibilities, and
policies and procedures for monitoring and amending MCOs' contracts. Delays in
jtate
hdior's
This audit was conducted in accordance with Texas Government Code, Sections 321.0131 and 321.0133.
Lawrence F. Alwin, CPA For more information regarding this report, please contact Joanna B. Peavy, Audit Manager, at (512) 936-9500.
State Auditor
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Texas. Office of the State Auditor. An Audit Report on The Health and Human Services Commission's Monitoring of Managed Care Contracts, report, November 2003; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth517445/m1/2/: accessed April 30, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.